Jobless rate isn’t politics, just math

  • By James McCusker
  • Friday, March 19, 2010 2:38pm
  • Business

One thing that this recession has not done is staunch the flow of statistics. We are awash in numbers. And where once only economists and similar species spouted statistics, gainfully employed people now routinely know and discuss such things as the box office receipts of films and speak with knowledge about numbers of screens and the factoring in of overseas revenue.

Organized sports aren’t any help, of course. Sports fans are voracious consumers of statistics, and they are compiled, harvested and stored for later use — just like any other valuable crop. Some of the statistics seem pretty close to meaningless, but that doesn’t seem to slow down the production-consumption cycle.

Economics has its own obscure statistical formulas, to be sure. But most of the economic data sloshing around our economy isn’t really complicated. It is more likely to be a bit inconsistent, even messy sometimes, just like life itself.

The unemployment statistics that blow into town on headlines are, in that sense, an accurate reflection of life in our time — a little messy and sometimes stubbornly resistant to being categorized.

This tendency toward untidiness was evident in the recent minor kerfuffle that accompanied the release of our state’s unemployment data for January. The data showed that we added 12,400 new jobs, the first increase since late 2008. That was certainly good news, but the statistics also indicated that the unemployment rate went up — to 9.3 percent from the previous month’s 9.2 percent.

Some people naturally wondered how the jobs number could go up while more people were unemployed. It didn’t seem to make sense. The questions got worse after that, though, as talk radio used this seeming inconsistency to needle the governor, who had expressed her enthusiasm for the good news about jobs.

The fuss over the unemployment data provides an excellent example of how numbers can be politicized. And it is also an even more vivid example of how adding politics to the mix most times isn’t very helpful.

The unemployment rate is a simple thing — if we remember what it is. When we divide the number of people who are unemployed by the total work force, we get the unemployment rate. As long as we remember that the number of unemployed and even the total work force are not fixed, unchanging numbers, we’ll be OK.

It is possible, theoretically, to have a situation where millions of people are without jobs while the unemployment rate is zero. That is because in the government’s statistics, unemployed is defined very specifically to cover only individuals who are able to work and are actively seeking employment. Under certain circumstances this definition can be too narrow to portray the entire jobs situation, but it is important to remember that even then, it provides a reasonably accurate picture of what it claims to show — the number of people without jobs who are actively seeking work … nothing more and nothing less.

What happens in an extended economic downturn is that it takes longer and longer to find a job and people become discouraged and stop looking for work. The U.S. Labor Department recognized this issue long ago and began collecting data and publishing its estimate of discouraged workers.

The monthly data on discouraged workers are very helpful in understanding the dimensions of the jobs program, but it also makes us appreciate the benefits of more specific, rigid definitions used to identify the unemployed. While the government statisticians make a valiant effort, it is actually quite difficult to measure how discouraged people are, and how likely they are to rejoin the work force.

Herald readers were prepared for the jobs numbers because they knew that one of the signs of our economic recovery would be an uptick in unemployment. This is because when the first real job opportunities appear, many discouraged workers begin actively seeking work again. That puts them back into the work force and counts them as unemployed. The unemployed number grows and pushes the rate of unemployment up. No politics, no conspiracies, just numbers. Isn’t it grand?

James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.

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