Saturday, February 13, 2010

I don't believe the latest unemployment numbers - and neither should you

I had e-mailed the gist of the following to a couple of friends last Sunday, but I hadn't made a blog post about it until now. Supposedly the U.S. unemployment rate fell from 10.0% in December to 9.7% in January. I didn't and still don't believe it for a second, and anybody who swallowed that guff just doesn't understand how much a monthly drop of 0.3 percentage points really is. It's huge.

I couldn't remember an unemployment drop of that magnitude in recent years. Fortunately, the Bureau of Labor Statistics maintains data going back to 1948. So that you can see how often the U.S. economy sees this kind of drop, I created my own spreadsheet with month-by-month changes on the side, marking drops of 0.3 percentage points or greater.

Such a drop is not unknown, but it hasn't been seen in twelve years (and 1998 was of course right in the middle of red-hot economic expansion). So as much as I'd like to think the U.S. economic situation is improving, I don't buy the feds' final number. The data has been cherry-picked, with the government economists using the household survey while ignoring the payroll survey that shows a net of 20K non-farm jobs lost in December.

Riddle me this, Batman: how can 20K jobs be lost, yet unemployment goes down? Are liberals going to excuse it with the same "people giving up and leaving the labor force" that they used to criticize Bush?

Like I've said before, consider the size of numbers first before accepting them as truth. We're also dealing with the same Obama administration so desperate for good news that it initially projected 3Q 2009 GDP as increasing 3.5% on an annualized basis, only to make an official estimate of 2.8%. And even that was very, very quietly revised to 2.2% for the final number.

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