More lies, damned lies, and statistics

Originally published at The Benfell Blog. You can comment here or there.

Put in proper context, the widely reported drop in unemployment from November to December is much less spectacular.

A significant chunk of the story appears to be a drop of 260,000 in the number of people included in the labor force and an increase of 434,000 in the number of people excluded from the labor force. The increase in the number excluded mostly accounts for the decrease of 556,000 in the number the Bureau of Labor Statistics counts as unemployed. Reductions in labor market size are one way the BLS manipulates the most widely reported measure of unemployment.

So while the BLS headline unemployment number drops from 9.77 percent to 9.42 percent, Admiral Janeway’s variant shows a much smaller drop from 13.27 percent to 13.15 percent. On behalf of my cat, Admiral Janeway, I assume that given stagnant or deteriorating economic conditions for the vast majority of people, the relative proportion of people who would be working or actively seeking work if they perceived a reasonable labor market should increase but never decrease.1 As always, it should be assumed that the United States Government has an interest in minimizing reported unemployment which undermines the reliability of the numbers I rely upon in producing these statistics.

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