get real

Time for me to take a moment to talk about my favorite topic, theĀ  way we measure our unemployment rate and misinformed reactions. Take this headline from earlier today:

Rally loses steam on Wall Street after early surge fueled by jobs report.

This “rally” was a 148 point rise in the DOW moments after the market opened. And for what? The apparent decline in the unemployment rate from 10.2% to 10% and the smallest amount of job losses (~11k) since the recession began in December 2007.

Take a moment to deconstruct the above statement. The media jumps all over these numbers and makes the following fallacies in their interpretations:

  1. The unemployment rate went down. Good.
  2. The amount of job losses this month was better than last month. Good.

At first glance this all sounds good. However, here is what the thought process should be:

  1. The unemployment rate went down. Why? Was it because more Americans found work? Or, was it because some Americans have been unemployed for more than six months and are no longer considered in the standard measure for unemployment calculations?
  2. The amount of job losses this month was better than last month. However, there were still job losses. Taking this little tid-bit and thinking about the unemployment rate, we can see that it is more likely that Americans are either underemployed or are no longer considered “in the labor pool.”

Is it too much to ask for this type of reporting?

Heading over to the Bureau of Labor Statistics website we can see that the raw data for the U-41 unemployment measure shows no decrease in unemployment.


1 The U-4 measure is the total number of “unemployed” persons plus “discouraged” workers. Discouraged workers are those who have not found work and are no longer considered a part of the labor pool.

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2 Responses to get real

  1. washiscoach says:

    The only other part of the data that I think was actual good news was the downward revision of job losses in the two prior months.

    While still not indicative of strong expansion, a reduction in job loss rates is a prerequisite for a recovery.

  2. britoman says:

    Completely agree, it is a pre-requisite. I’m just frustrated at the way the local-news-style media get so excited over the tid-bit of information with no real understanding of the underlying data. Le sigh…

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