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Saturday, July 21, 2012

Making Sense of the Numbers

According to the government, the United States is currently (according to the June report) at 8.2% unemployment. That's down from a nearly 10% peak a couple of years ago, so that's good, right? Well, it appears that mostly what we Americans do is accept numbers and go on nodding. Unfortunately, we rarely ask where they come from or what they mean. As a result, we accept, dare I say, lies.

Where do unemployment figures come from? Well, according to the government, there is a process. You might think it's something as simple as "How many people are on unemployment?" divided by "How many people are there?" But that would be naive. There are, for instance, people who are not in the work force who shouldn't be classified as "unemployed". There are farm workers who fall in an entirely different category. There are some fabulously wealthy with no employment and there are children and homemakers and retired people. You have to determine what your labor force is first. On the other hand, there are unemployed people who are not on unemployment. They never applied or their benefits ran out. So the numbers receiving unemployment benefits are not accurate for this. So, what do they do?

First, they don't ask everyone. It's a poll, a survey taken of 60,000 households. A quarter of these are changed out every month to keep the survey random. They ask in some 2,025 geographic areas to keep the survey broad enough. And what do they survey about? Well, they ask about household members over the age of 15 (children under the age of 16 are not classified as part of the labor force). They ask about employment, joblessness, and job-seeking status. A person who is not employed and is not seeking a job is not unemployed. These persons are simply not part of the labor force. Thus, you use "unemployed" (defined as 16 or over and less than retirement age without a job but actively looking for work) divided by "labor force" (defined as "employed" plus "unemployed") (times 100) to get your unemployment percentage.

Perhaps you can see the problem here. People lose their jobs ("unemployed"). They receive unemployment benefits and look for a job. As time goes by and people drop out of unemployment benefits and into no income at all, if they haven't found a job in all that time, they give up. Now they drop off the "unemployed" status and, therefore, off the "labor force" status. They are not employed, but they no longer count toward the unemployment figures.

In June, the employment-to-population ratio (that earlier, naive version) was at 75.6%, down from 80% in January of 2008. So while the unemployment rates continue to fall and new jobs are being created, the hard numbers indicate something different. Less people are employed.

Beyond that, chronic unemployment is peaking. In January of 2008 the average time an individual was unemployed was 17.4 weeks. Currently it's at 39.9 weeks. The longer you're out of work, the harder it is to find a job, and this is becoming more ... average. Indeed, this jobs recession has gone on for 53 months, the longest since the Great Depression.

Another concern is the future. The numbers of startup businesses are plummeting. In 2006 there were 747,278. That number is down 26%. Factor in new taxes, "taxes" (read "healthcare requirements"), and other business-limiting laws, and it's not going in the right direction.

But what about those new jobs? What about the companies hiring people? Well, while some are indeed hiring, others are laying off. That would be net job gains. But in terms of simple gross hiring, the numbers are down, the lowest since a year ago. This indicates cautious companies and simply makes the unemployment problem last longer.

You are being told that things are on the rise. In a spectacularly political move, the president announced a decrease in the unemployment rate in April. As it turned out, the primary reason for that decrease was the removal of a large segment of the chronically unemployed from the labor force. Or, to call it what it is, it was a lie. Unemployment hasn't changed like they say it has. They simply altered the labor force numbers. Let me put it this way. Some 350,000 Americans dropped out of the labor force in April, dropping the unemployment rate from 8.2% to 8.1%. I would guess, however, that those 350,000 still consider themselves unemployed. They aren't working. They don't have incomes. They aren't part of the private sector that is "doing fine". No, we're being lied to -- part of a numbers game. What's the truth? You figure it out.

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