This might be an interesting story to follow. CNNMoney remarks on President Trump’s distrust of the Bureau of Labor Statistics’s unemployment figures:
White House press secretary Sean Spicer sidestepped a simple question about the national unemployment rate. Trump’s nominee to run the Labor Department has written that the government should ditch the figure because it’s “misleading.”
And Trump himself has said the unemployment rate is a hoax, even claiming once that he had “heard” it could be as high as 42%. It was a hair over 5% at the time.
Economists find this pattern concerning. For decades, the unemployment rate has been one of the basic barometers by which America’s economy is judged. While no single metric is infallible, economists say, the unemployment rate does a pretty good job.
And they say trying to delegitimize it would be bad news.
“I think it’s very, very dangerous. The Bureau of Labor Statistics does an excellent job,” said Bill Rodgers, a professor at Rutgers’ Center for Workforce Development and chief economist for the Labor Department from 2000 to 2001.
Bob Murphy, a White House economist under former President Bill Clinton who teaches at Boston College, said the process and statistical analysis that go into producing the unemployment rate are “rock solid.”
It might be good economics or good politics but I’d need to be convinced that it’s good science. The headline unemployment rate number reported by the BLS incorporates a number of adjustments, not the least of which is what’s referred to as the “birth/death adjustment”, a fudge factor that’s applied to the actual number of jobs divined from surveys based on the historical experience with businesses that open or close. It has been known for some time that the model the BLS for that needs recalibrating and they appear to have been doing that over time.
The problem that I see is that the adjustment is just too large. I’m suspicious whenever the fudge factors exceed the size of actual measured changes.
Another problem is that the BLS’s numbers just don’t feel right. Based on the BLS’s unemployment calculations we’re at full employment but it doesn’t feel like we’re at full employment. That’s hard to quantify but it’s real just the same.
And, of course, you need to distinguish between the actual issue and the turf war over the issue.
As I say, it will be interesting to follow this story.
First, the claim by Trump and his supporters is that the BLS hides information and only releases the number they like. Not true. The BLS publicizes all of the numbers, including the LFPR. Gotta love the conservative who rants on about the LFPR as if it was some secret number that only he and his team know about.
More importantly, measurements will always be flawed. I don’t especially obsess over that. What I want is consistency in the methods so that comparisons of data are meaningful. If they correct for births I am OK with that if that is what they always do.
Does it not feel as though things are better? Being male, I am pretty insensitive about the feeling stuff. However, on the data side, it is clear that the LFPR is down, and while most of that is demographics, a big chunk is not. Also, wages have been stagnant. Finally, the raw numbers on employment don’t tell us what kinds of jobs we have and what job security is like.
Finally, let us not forget that there was a whole chunk of the media dedicated to trying to make things sound as bad as possible for the last 8 years.
Steve
The Unemployment Rate simply measures how many people are unemployed (and looking). U6 adds the people who are part-time but want full time.
Do we have a rate for people who are working full time at a crappy job that pays less than they were making 3 years ago? Because that rate may be up.
No, I don’t believe that, either. I’m just skeptical about how useful the heavily adjusted UE is in formulating policy.
Gustopher:
Indeed, it’s widely believed that the jobs that have been created over the last eight years pay less than the jobs that were lost. I don’t believe there’s any single index reporting that, though.
Anecdote is not data, but I read articles from Chris Arnade https://www.theguardian.com/society/2016/apr/11/heroin-addiction-epidemic-america-appalachians-overdose-deaths (and he has dozens more if you google it). The anecdotes are pretty convincing to me there is a serious employment problem, which may not show up in the statistics everyone likes to follow. It certainly is a unifying explaination for things like opoids, urban crime, Trump.
My more precise criticism of the unemployment rate is with the birth death model, there is evidence it makes things more accurate when a trend is in place for a long time, but birth death model makes things more inaccurate when trends change, like at the start of a recession or a recovery.
Since one of the main uses of unemployment figures is to detect whether we are in recession or growth, the birth death model is idiotic.
I think the last criticism is the interpretation of the unemployment rate, does the measurement have the same meaning it did 10, 20 years ago. The nature of employment may have changed, so using the same measurement may give misleading intepretations