I understand that this will be somewhat quite annoying. I can’t think of any other way, but it needs to be done. Perhaps, Matt Yglesias can help on the communication front.
Phil Izzo writes
People dropping out of the labor force are making the unemployment rate look smaller, but not as much as some might think.
The jobless rate was reported to be 8.3% in January, marking the fifth consecutive decline. Some greeted the drop with skepticism, noting that the labor force — the number of people working or actively looking for a job — has declined and that is distorting the number.
The unemployment rate is calculated by taking the number of unemployed and dividing it by the labor force. When people stop actively looking for work because they get discouraged, it reduces both the number of unemployed and the size of the labor force.
In the second bolded passage, Phil notes that when people drop out of the labor force it causes the unemployment rate to fall.
In the first bolded Phil says that people dropping out of the labor force makes the unemployment rate look smaller.
In the third bolded passage Phil says that there is fear that there is distortion.
In the post he moves on to provide empirical evidence.
Yet none is needed.
A thing cannot be distorted if it appears faithfully, which is what the bolded passages imply by syntactic construction.
This matters because virtually all of the errors that have been made by economists, analysts and the administration in regards to this recession have been logical errors, not misinterpretation of evidence.
3 comments
Comments feed for this article
Sunday ~ February 12th, 2012 at 10:29 am
rjs
people not working are unemployed, irregardless of the formal definition…even warren buffett recognizes that applies to 90% of the rich…
Sunday ~ February 12th, 2012 at 4:43 pm
RickR
It seems to me that often this argument that unemployment rate understates the actual situation is a political argument; by saying the employment situation is worse that the commonly used number those making it seem to believe that a stronger case for a change in administration is being made.
The question to my mind is whether or not this is a useful index. Does the unemployment data actually misrepresent the economic situation? When this number goes up, is the economy getting worse? When unemployment goes down, is it getting better. If so, it is a useful index.
Anyway, about the “skepticism” about the declining unemployment number – U6, which attempts to add in the discouraged and underemployed workers, has gone down four months in a row, from 16.4 in September 2011 to 15.1 in January 2012. Not too different to my mind.
Sunday ~ February 12th, 2012 at 5:00 pm
theeconomicfractalist
So appropriate a subject….
Saturation Macroeconomics: Gobbledy-Gook or the Real Deal?
Time for a new mathematical model, a new paradigm, for macroeconomics?
Is there a patterned science representing the time dependent evolution of macroeconomics?
The last paragraph of the Economic Fractalist main page http://www.economicfractalist.com/ ….
The ideal growth fractal time sequence is X, 2.5X, 2X and 1.5-1.6X. The first two cycles include a saturation transitional point and decay process in the terminal portion of the cycles. A sudden nonlinear drop in the last 0.5x time period of the 2.5X is the hallmark of a second cycle and characterizes this most recognizable cycle. After the nonlinear gap drop, the third cycle begins. This means that the second cycle can last anywhere in length from 2x to 2.5x. The third cycle 2X is primarily a growth cycle with a lower saturation point and decay process followed by a higher saturation point. The last 1.5-1.6X cycle is primarily a decay cycle interrupted with a mid area growth period. Near ideal fractal cycles can be seen in the trading valuations of many commodities and individual stocks. Most of the cycles are caricatures of the ideal and conform to Gompertz mathematical type saturation and decay curves.
For the Wilshire, the US composite equity index March 09 to October 2011 was a 4 phased Lammert growth and decay fractal series..
x/2.5x/2x/1.5x :: 5/13/10/7 months. That’s an empirical real system observation – available to all – of the time dependent workings of the macroeconomic system.
2005 was the description, the hypothesis – March 2009 to October 2011 was the empirical asset valuation evolution…
The flash crash on 6 May 2010 ….. does that not meet second fractal criteria?
“A sudden nonlinear drop in the last 0.5x time period of the 2.5X is the hallmark of a second cycle and characterizes this most recognizable cycle.”
Maybe this is all occurring by chance alone …. Likely…. Very very very likely ….not.