Wednesday, September 12, 2012

When Up is Down and Down is Up

  When the 2009 stimulus bill passed Congress, President Obama and the Democrats said it would cap the unemployment rate at 8 percent. The unemployment rate went to 10.0% in October that year and has steadily gone down since. This year the unemployment rate has been between 8.1 and 8.3 percent and this month the unemployment has gone from 8.3 to 8.1 percent. With unemployment at a 40 month low, I would expect the economy to be no kind of problem for the President’s re-election campaign but it has turned out to be a sore spot and instead of defending his economic record, President Obama has taken to deflecting attention from his economic record by taking on Mitt Romney’s running mate Paul Ryan’s support for overhauling Medicare.

  When is the unemployment rate at 3 and a half year lows not good news? When the unemployment rate is nothing but a phony made up number!! The unemployment rate doesn’t take into account people who are unemployed, only people that are unemployed AND are have actively sought work in the past 4 weeks. In August, the economy added 96,000 jobs, but the number of people employed declined by 119,000 and over twice that number just stopped looking for work. According to the way the unemployment rate is calculated, people who stop looking for work aren’t counted as unemployed anymore and help the employment rate go down. There is a broader unemployment rate mysteriously called U-6 that includes everyone who doesn’t have a job and is looking for one and also includes people who are working part-time but want a full-time job. That rate is around 15 percent, but as much as I’ve tried I can’t find out how a person that is working part-time but wants a full time job is counted. Are they half a worker or a whole worker?

  Not only is the definition of what is and isn’t unemployed a mess, the numbers that are given out are ‘seasonally adjusted’. I think this means that as an example, since the unemployment rate is expected to be lower during Christmas season and higher afterwards the unemployment rate is artificially raised when Christmas season is on and artificially lowered afterwards. So in addition to not counting people as unemployed if they give up looking for work, if an unemployed person happens to get a job in November they may not be counted as employed and when they lose their job in January they still aren’t counted as unemployed! I’ve had 4 jobs in the last 5 years and I haven’t once asked if my job was seasonal, but maybe I should have since there have been days in all of them when I wish they were.

  Americans like things simple and that includes our numbers. Clint Eastwood didn’t become an American movie icon because he stood around talking to an empty chair. He became an icon because when he was young he was in western movies and shot bad guys and then as he got older he made detective movies and shot bad guys with bigger guns. After that he could make movies about whatever he wanted to because he was the Clint Eastwood who shot bad guys and even if he wasn’t shooting anyone in his movies, that’s who people remembered and who they felt good about seeing on the screen. When Clint Eastwood was younger, if he had made movies about an unemployment rate that is bad when it goes down because people aren’t looking for work and is good when it goes up because people are starting to look for jobs and may not matter anyway depending on the season, he wouldn’t have had an empty chair to sit in much less one to talk to.

  How can anyone make sense of an unemployment rate when down is up and up is down? I suppose it makes as much sense as a government that spends a trillion more dollars more than it takes in each year and relies on something called the Federal Reserve Bank to make up fictional money to buy the government’s debt (called Qualitative Easing and here is a simple explanation).

  What if the government just told us how many people had a job? Isn’t that a more important number than trying to figure out who is actively looking for a job and who isn’t. To me, it’s a simple way to see how the job market is going. If someone works 35 or more hours in a week, they count as one person, between 15 and 35 hours they count as half a person, between 10 and 15 as a quarter person, and if you don’t work 10 hours a week – sorry , you don’t count for this survey! Maybe this new number would need a fancy title like the PWJ (People With Jobs) Index and it could even be divided by a million so the pundits could casually mention that 'the PWJ index hit 154.32 this month'. I’d also be interested in knowing how many people are collecting unemployment insurance just so I’d know the ratio of how many people are paying into the unemployment fund against how many people are drawing out of it.

  I wouldn’t seasonally adjust the PWJ Index. People understand seasons well enough to not need their numbers adjusted. When tomatoes go up in price in the winter, the price doesn’t get adjusted downward and the money in my pocket doesn’t get adjusted upward because of it and no one makes that big of a fuss, so why should employment numbers be adjusted for the season? When I was researching this post I found an excellent article on the subject on It says there are 133 million people with jobs but doesn’t disclose how part time workers are counted. The only problem I see with the PWJ is that it’s almost impossible for the political parties to play around with to make it look better or worse, but I’m sure they would surprise me and count people getting social security, welfare, and unemployment checks as 'employed' and having a job just before election time!