Thursday, April 15, 2010

The Manipulation of Economic Data – Part 1: Unemployment

One of the very few bipartisan efforts that our government has managed in the last couple of decades has been the manipulation of economic data. Starting back in the great old 80s the government began to alter the way data was collected and presented. This ability to alter data was amazingly easy in the over thought and under tested environment of government statistics. Better still, it was effective and useful. The Technocrats could solve problems for the politicians by simply redefining them out of existence. It was a perfect tool to mask reality as we headed down the American meltdown.

This rampant manipulation of data was so useful that it has spread to almost every aspect of current government data. I will run through the highlights of current Unemployment data and how it has been multiplied and massaged to create confusion and delusion. First there was the multiplication of “the unemployment number” into 6 unemployment numbers – U1 through U6.

• U1: Percentage of labor force unemployed 15 weeks or longer.

• U2: Percentage of labor force who lost jobs or completed temporary work.

• U3: Official Unemployment Rate – percent of people unemployed AND actively seeking work

• U4: U3 + "discouraged workers"- those who have stopped looking for work

• U5: U4 + "marginal workers" - those who are working at marginal jobs out of their field

• U6: U5 + Part time workers who want full time, but cannot due to economic reasons

In the great depression when we said unemployment was 24% we were talking U6 type of numbers. Not exactly U6 because in the 1920s and 30s we did not yet have data sets U3 and U6. It is not exactly the same – but close enough. In todays press releases, when the government says unemployment is 9% they are talking U3 numbers. The change from U4 to U3 happened in the Clinton Administration and has been happily followed by every president after. Recent tweaks have defined U3 to be more closely tied to unemployment benefits. That is, you are only counted towards unemployment figures so long as you are drawing unemployment

It is really quite brilliant. How to lower Unemployment? Create jobs or solve economic inequality – invest in real infrastructure? Heck no, just redefine your terms. So, now, you vanish from the unemployment report if you exhaust your benefits, take a crappy underpaid job or take in even one hour of part time employment. Now that is a solution Democrats and Republicans can agree on – and they have.

The official U3 rate for March 2010 is 9.7%. But, now we know this does not include over 11 million who work at low paying jobs they took to put food on the table. Nor does it counts over 2 million people who have lost benefits, have no job and have given up looking for one.

So U6 includes everyone who is dislocated by economic conditions. What is our official U6 rate? Well, that would be around 16.9%. You have to dig through pages of spun sugar to get to it on the Department of Labor reports. But really, aren’t you happier with a 10% unemployment rate? No need to trouble yourself with unpleasant facts. Just listen to the mainstream media and that is all you will ever hear. Rarely if ever do they even mention the existence of more than one unemployment figure. Whether that is a sign of their limited intelligence or an indication of complicity is an unanswered question. What we do know is that hiding more realistic unemployment data is a great convenience to the government and it is part of a larger manipulation of data. It is also a sure sign that the great American meltdown is proceeding apace.

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