Monday, April 9, 2012

US economy: lies, damn lies and statistics

The unemployment report released last Friday showed a nominal decrease of unemployment from 8.3% to 8.2%. However, the mere 120,000 jobs created created broke the pattern of robust job creation during the last two months that was boosting Obama's reelection chances. The economists were expecting over 200,000 new jobs.  The real numbers reflect a worse reality - in March, the number of unemployed dropped by 133,000, but the overall labor force declined by 164,000. That means the economy shed a total of 31,000 jobs. Meanwhile, the government reports lower unemployment.

There's a saying about the malleability of statistics: there are "lies, damn lies and statistics". Only by discounting a large number of discouraged job-seekers can the government report a statistical reduction of unemployment, in stead of an actual reduction of employment.

The labor non-participation has reached a record 88 million. The issue of how this rate the unemployment rate is officially calculated is becoming a part of the political discourse. A Republican congressman Duncan Hunter (R-Calif.) intends to press GOP leaders to include the number of individuals who gave up looking for work in the percentage of jobless claims.

For example, the most recent unemployment rate released on Friday, at 8.2% unemployment, is the so-called U-3 rate calculated by the Bureau of Labor Statistics (BLS). It also calculates more inclusive measures U-5 and U-6. The more realistic U-5 rate of 9.6% it includes the “total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force."

Thus, the measure proposed by Representative Hunter would not require any additional numbers to be calculated; it would simply elevate the statistic that the BLS already calculates each month. That would add a lot of realism to the discussion, and not allow the statistical unemployment rate to decrease, while the number of actual employed people is falling.

The lack of realism in official statistics is obscuring not clarifying the direction of the economy. The Dow ended below 13,000 and logged its fourth straight daily loss. One of the reasons may be that during the weekend the traders had a chance to  reevaluation the latest unemployment report, which was released last Friday. The stocks tumbled heavily at the open, clawed their way up to recover some ground, then finished near their lows by the end of the day.

Yes, you did, Barry.
The job gains of the last couple of months were helped by unseasonably warm weather, and may have cannibalized job gains of the spring. It has given an entirely unrealistic perception of an accelerating recovery.

Barack Obama has been the undertaker of this economy, but he refuses to accept any responsibility. It's time for him to ask: "Did I do that?" ask Steve Urkel from TV show Family Matters used to do after causing some mishap. He won't. So, I've asked and will now answer:

"Yes, he did."

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