Saturday, March 7, 2015

A closer look at economic numbers

The White House announced that the latest unemployment number is at 5.5 percent, which is the lowest it has been in seven years.  So does this mean that Obama's economic policies are finally working, and the economy has recovered?

If you listen to Christine Romans on CNN you would think so.  She said: "Sometimes a good headline is just a good headline, Carol, and that's what this report shows us. When you look within these pages and pages of tables, you see an American economy that is creating jobs again across the spectrum. The trend here has been good. Jobs added consistently month after month. The unemployment rate, really important milestone here for the unemployment rate, 5.5%. It's been trending down for a year. The lowest since May 2008."

However, when I attended journalism school at Ferris State University school back in 1988, we were told to look deep into statistics to make sure they were completely accurate. If you do otherwise, if you report only the numbers reported without analyzing them, you are letting other people direct the flow of news for you.  Or, in other words, you are just being a pawn, so to speak.

I will give you a quick example.  In 1988 Ferris State University released a statistic showing that 98 percent of their graduates were employed. On the surface this number brought joy to a lot of faces. However, after a deep look into this number, I learned that it included any job, including jobs at McDonalds.  In the end, we learned this number was misleading.  

So, that in mind, is an unemployment number of 5.5 percent really telling us that the economy is improving?   Let us look deeper into the number.  

Labor Force.  This includes all people over the age of 16 who are not in the military or an institution. This number is currently at 249,899,000.  

Labor Force Participation Rate.  This includes the percentage of of the Labor Force that is actively working or actively seeking work. This number currently stands at 62.8 percent, which is a 37 year low.  The last time this number was this low was in 1978, or when Jimmy Carter was president. What this means is that a total of 92,898,000 Americans have given up looking for work, and this number is at a record high. Since Obama was elected in 2008,12,369,000 Americans have left the workforce.  Right now, at the time of this writing, the rate is the lowest it's been in 37 years, as it stands at 62.8%. 

U3 Unemployment Number.  This is an unemployment number that does not include anyone who has looked for a job fore greater than four years and has stopped looking.  That 5.5 percent unemployment rate is the U3 number. Of the 157,002,000 who did participate in the labor force, 148,297,000 had a job, and 8,705,000 did not have a job but were actively seeking one -– making them the nation’s unemployed (5.5%). This is usually the number the White House reports because it is the one that usually makes it look the best.

U6 Unemployment Number.  This includes all working age adults who are capable of working who are not working.  This unemployment number currently resides around 11.5 percent.  This number is considered by economists to be more accurate than the U3 number.

Everybody Eats.  As a nation, we have set up a system where everybody eats, whether you have a job or not.  At present we have 50 million Americans on food stamps, and of course there are many other programs that make sure everyone eats.  As recently as 20 years ago, if you didn't have a job you did not eat.  This was a great incentive for people to search hard to find a job. 

Jobs numbers.  This number includes all the jobs lost over a month, and the number of jobs created. The jobs created also includes part time work.  For example, last July the Obama White House reported that 273,000 jobs were created in June, and this meant the economy was improving.  Of this, I wrote: First of all, the numbers he uses are misleading. While the Bureau of Labor Statistics report that 273,000 jobs were created last month, 800,000 people left the workforce. So while the unemployment rate presently sits at 6.3%, the U-6 unemployment rate sits at 13.6%. This is a more accurate depiction of the 963,630,000 people in America currently not working..
Further reading:

Bottom line.  A good journalist would dig deep into numbers and report the whole story, rather than just letting the White House tell the story with the numbers it releases.