Saturday, June 7, 2014

How the politicization of government statistics encourages mistrust of policy

Is the unemployment rate really 6.3 percent? Or is it 12.2 percent?


The recent Veterans Affairs legislation is not the only time socialist Sen.Bernie Sanders, I-Vt., has found common ground with Republican lawmakers.
He has also backed efforts to revamp the Labor Department's monthly unemployment report. Conservatives like Rep. Duncan Hunter, R-Calif., also back this.
Maybe they should get to work on this too.
They certainly have a point: The Labor Department actually releases six different numbers every month. These are called "U-1" through "U-6" and range from a narrow definition of the unemployed population and to a much broader one.
The department's monthly report always uses the U-3 figure as the "official" number though. Virtually all media outlets take their cue from the department on this. That's why this month's U-3 result – 6.3 percent – dominated the news reports.

Why that figure and not one of the other five? Good question – labor economists have told me the designation is basically arbitrary.
U-3 is officially defined as "total unemployed, as a percent of the civilian labor force." A more precise definition would people who are out of work but still actively looking for a job.
U-4, on the other hand, includes those who are out of work but have given up looking. U-5 is a slightly broader definition of the same. Those numbers this month are 6.7 and 7.6 percent, respectively.
U-6 expands the figure even further to include the under-employed, such as people who are only able to find part-time work. The Labor Department put that figure at 12.2 percent this month.
Those would all seem to be a much more accurate reflection of the workforce and the economy since they include people who would be employed if they could only find full-time work. Ask yourself: Does this feel like an economy at 6.3 percent?
As Washington Examiner economics writer Joseph Lawler noted Friday: "Friday's record high number of jobs does not represent anything like a healthy U.S. labor market. Employment remains well below its pre-financial crisis growth trend."
The liberal Economic Policy Institute points out that the economy would have to generate 7.1 million jobs to keep pace with population growth since the financial crisis.
A spokesman for Sanders told the Examiner that the senator still favors a change – "He thinks the 12.2 percent figure is the real number" – but was not certain if Sanders had backed legislation to that effect.
Hunter has backed a bill, H.R. 484, titled "The Real Unemployment Calculation Act." It would designate U-5 as the official number. It has 21 sponsors but hasn't made it out of committee.
Maybe Sanders and Hunter should have a cup of coffee and talk about this.

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