Friday, December 4, 2009

"You Must Show Your Work for Full Credit"

Ahh, the admonition of many a college math or science professor. It wasn't good enough just to get a really good or even the dead-on "right" answer. You actually had to show how you got it. Forget to include units? Minus 1 point. Fail to define your variables? Minus 2 points. And many others to which I fell victim...along with my pipedream of ever being confused as "in the running" for valedictorian.

CW posted an excellent admonition for us to applaud the "new job numbers" which I take to mean the "lower unemployment rate numbers" or more precisely, "the lower- than-anticipated unemployment rate numbers".

I actually agree that this is probably good news. At the very least, it is not bad news.

But in the interest of defining variables, and in the wake of Sally's question about what goes into these "numbers", I looked up the definition of "unemployment rate". Here is a lift from derived from Bureau of Labor Statistics:

Unemployment Rate

The official definition of the unemployment rate, given below in a series of four definitions, contains a couple of unavoidable complications. (1) A person who loses a 40 hour per week job, but works for one hour mowing a lawn for pay is classified as employed. (2) A person who simply expresses interest in having a job is classified as unemployed. "Discouraged workers" who have lost a job, but do not make an effort to find a new job in a given week are not classified as unemployed or even as in the labor force. Both possibilities mean that the announced unemployment rate is not as definitive as it might sound.

Nonetheless, the unemployment rate is defined as the number of unemployed persons divided by the labor force, where the labor force is the number of unemployed persons plus the number of employed persons. The official definitions of these figures are as follows.

Employed persons (Current Population Survey). Persons 16 years and over in the civilian noninstitutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees, worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family, and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations.

Unemployed persons. Persons 16 years and over who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.

Labor force (Current Population Survey). The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary

Unemployment rate. The unemployment rate represents the number unemployed as a percent of the labor force.

Source: Bureau of Labor Statistics

So notwithstanding the questions that immediately come to my mind (How in the hell does anyone actually collect these statistics? And even if we do have a means of semi-accurately collecting such data (think census or jobs created/saved inaccuracies of late), by how much must it lag reality?), there is inherently a fair amount of deeper mining that one might want to do (a la Sally's question in CW's prior post) before selecting a Master of Ceremonies for the big parade. This is not meant to be a condemnation of the Administration or a critique that these numbers are meaningless or masking the true economic conditions. I believe every Administration uses these formulae. But I'd like to learn more about the underlying numbers (I'm sure they are accessible, but I just got home and haven't had time to research more fully).

Posting a partially-researched blog article. Minus 5.

There goes Salutatorian as well.


Goldwater's Ghost said...

The Calculated Risk provides a pretty thorough analysis as to why the UR appears to dip even if the economy still loses net jobs ()

CR's bottom line: the UR and the jobs numbers come from from separate and distinct surveys. Month to month is noise, a rolling six month will provide better directional guidance to the UR trend.

Goldwater's Ghost said...

Darn, forgot to provide the link:

The Conservative Wahoo said...

So let me get this straight--all of this wonderful research and citation MUST mean that the definitions of unemployment, underemployment, full employment, etc--have somehow CHANGED in the Obama Administration, right? Because that's really the only way that this needle-dicking makes any sense--as if they were tracking numbers differently than Bush, Clinton, Bush, Reagan et al. But if they're not--if the "unemployment" number is defined the same way--then this whole thing is noise. Put another way--the "unemployment" rate may be imperfect, but it is the same metric that was applied to Republican Presidents, and it is the same gross metric that is wrapped into the panoply of metrics that help a sentient being determine if the economy is heading up, down, or flat.

The Conservative Wahoo said...

GG--I probably should have read your post more closely before my rant--as you seem to have considered in advance my counter-critiques. That said, I think where you've got is in a different place than where Sally went.

Sally said...

You may have fallen short of valedictorian, but you're still number one in our hearts, Mudge. Thanks for the analysis.

The Conservative Wahoo said...

Oh my--I thought this was GG's post. Sorry, Mudge.

Mudge said...

CW - No problem. I'm actually glad you thought it was GG who apparently touched a recent nerve ("future boy?"--that one still makes me laugh) that you reacted without reading closely. Otherwise, you might have given me an admonition for using "admonition" to lead two consecutive paragraphs.

And Sally, you're too kind. Thanks!

NavyAustin said...

One point - despite people having jobs, income is down. Nearly everyone on my block has lost wages - mandatory across the board pay cuts, mandatory unpaid time off, loss of overtime, changed commission schedules, lower sales. So they're all still "employed" - but businesses yanked every lever they had to control costs.

Some people have it worse. A great article in the NYT a few weeks ago profiled a pilot for Express Jet - reclassified from a Captain ($80k) to a first officer ($40k).

Jobs are part of it - but jobs + income is part of it, too. And nothing will replace the "fake income" of all those equity loans.

"The Hammer" said...

There are a lot of way to cook the books with unemployment stats. For example, those who have given up seeking work aren't counted. It doesn't count the under-employed (you know, super-geniuses working the window at Wendy's). Furthermore to get a half-assed number one must make a good few statistical assumptions; assumptions that can skew the numbers dramatically. It's all about methodology.
Point being, take the number with a grain of salt. Just know it's damned high.

Newer Post Older Post Home