Joblessness: Continuing the lies, damned lies, and statistics

Joblessness, the unemployment rate -- these terms are manipulated by politicians who can use them to deceive. Here's how to understand the reality of their reporting. Photo: Associated Press

WASHINGTON, August 13, 2012 – It is said that there three kinds of things you can expect from politicians, and they all wind up being pretty much the same: lies, damned lies, and statistics.

When it comes to talk of the “jobless rate” or “unemployment rate,” all three are employed. They’re not exposed, though, either because of a “great media conspiracy” (possible) or because of a general public that’s ignorant of how these liars can manipulate the truth.

There are columns here in Talking Sense like Inflation: Lies, Damned Lies, and Statistics, a companion to this article. The following is a discussion of GDP statistics and their misunderstanding and misuse, I’ve gone on to the Consumer Price Index (which the ignorant think is “inflation”) and now address the jobless rate.

OK – here’s the part we all hate, and therefore ignore: the US unemployment rate is calculated by assessing the nonfarm, nonmilitary population of adults who have reported they earned nothing in the recent reporting period, but who are looking for work.

Those who have made a dollar in the period (by cutting a neighbor’s lawn or working one day from a jobs bank, for instance), those who have stopped looking for work, or those who simply aren’t interested in working, are not “unemployed.” Neither are the “underemployed” – the taxi driver in Cambridge, with a Master’s in Western Literature from Harvard – counted as “unemployed.”

All these figures are collected and crunched by our government’s bureaucracy, and then “seasonally adjusted” (which is another trick). The final number is then compared to the previous period’s number, to tell us if the unemployment situation is improving.

Understanding what is, and what is not included in these calculations can give us a better picture of the truth.

Recently, the US unemployment rate has been declining. Though this decline is painfully slow, it’s a source of rejoicing among those who claim to be responsible for this decline – our Rulers. There are myriad reasons for this, but first I’d like to mention something else that gets reported along with the unemployment rate: the new claims for unemployment benefits.

When new claims for unemployment compensation drop, that’s seen as a sign that the economy is recovering. Even when the unemployment rate rises, politicians can sometimes point to a decline in new claims, and somehow claim credit for this. The fact is, the nation has been shedding so many jobs for so long, there are simply fewer people left to fire.

Additionally, many of those who lose jobs are losing jobs that do not qualify them for unemployment benefits, so these people, now out of work, don’t even bother to apply for unemployment benefits.

To the unemployment rate:

People who are receiving jobless benefits are required to “look for work” while they receive these benefits. Many are truly looking; but when the benefits run out (and even some of those on 99-week unemployment are starting to run out of time), there is no incentive to report that one is looking for work, and often no one to report a job search to.

Once these job searches aren’t reported, these people are no longer unemployed. It is absolutely no coincidence that the jobless benefits were extended multiple times, and that these extensions of jobless benefits are running out in the last months prior to the election – the reduction in reporting means that a large percent of these unemployed will no longer be officially “unemployed.”

As the economy continues running in its confused state, many people have realized that they won’t be getting jobs in the traditional ways, so they start their own businesses. Whether the business succeeds or fails, these people are no longer “unemployed.”

Others get so discouraged that they just stop looking for work, or they abandon their job searches to attend school, in hope of qualifying for some better job in the future. These folks are no longer “unemployed.”

And others – in record numbers – realize that they won’t be getting a job any time soon, and find ways to become disabled. Our disability rolls are growing faster than ever, and the number of those on disability has more than doubled since 2008. Officially disabled people don’t need to look for work, and they don’t work, so they’re not “unemployed,” either.

Even the aging baby boomers are doing their parts. Even as they reach retirement age and realize that their career futures are bleak, they also realize that Social Security will likely be redefined very soon – so these folks are quitting their jobs and taking SS payments, while they’re still available. These early retirees may actually be opening up a few slots in the workforce, so some younger souls may actually get a piece of this action.

It is not a “net new job;” additional people aren’t employed (since one retired to open the slot), but one more person is presumably no longer looking for work!

So, with discouraged workers’ dropping out of the workforce, with enormous additions to the disability rolls, with some enterprising souls’ starting new businesses or returning to school, with boomers’ grabbing Social Security before it, too, gets gutted; and with unemployment benefits running out and their recipients’ no longer reporting their job searches, the unemployment rate is dropping. Sing halleluia!

Just in time for politicians to claim they’ve turned things around; just in time for the election. What’s not to like?


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Tim Kern

Tim Kern taught economics for fifteen years, and discovered that understanding life is easy; it’s recognizing reality that takes practice. He holds a music degree, and later earned an MBA in finance from Northwestern University. He has lived across the US, and now makes his home in Anderson, Indiana.

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