Friday, February 5, 2010

9.7%: Just A Number

Continuing our little crusade against bad math, today brings news that the unemployment rate has dipped below 10%, to 9.7%, but it comes with a loss of 20,000 jobs.

Unless a bomb went off and nobody said anything, these numbers don't reconcile with each other. There aren't any fewer people than there were last month, so if the number of jobs went down, logically the unemployment rate should go up, right?

The unemployment rate doesn't work that way. What's more, a fair amount of people know it doesn't work that way- it doesn't take into account the discouraged or underemployed (full-timers forced into being part-timers)- and yet we still use the figure we do, more or less just to save face. We essentially lie to ourselves and tell ourselves that things are better than they actually are. Nobody wants to be the guy that makes the unemployment numbers say what they should be saying, because what would happen then is there would be a gigantic, shocking leap in the unemployment rate, and whoever corrected the data would be punished, probably thrown out of office, essentially for the crime of fixing bad data.

For more on this, head over to the Atlantic; they go into a lot more detail with this month's numbers than I can, plus they have pretty graphs. The key thing to note, though, is that they went and fixed the numbers themselves, and came up with a seasonally-adjusted rate of 11.2% if you add in discouraged workers (which I would), and 16.5% if you also add in the underemployed (which I probably wouldn't, but you might).

No comments: