Economombo 4: Participation Rate Drops

Back in Economombo 3, I wrote about how the economy with respect to our company had turned out better than expected. It’s true again. [1] Employment in the manufacturing sector is as high as it has ever been, since 2009. During the great drop-off of the Great Recession, manufacturing employment plummeted from over 14 million workers in the US, to its current roughly 12 million.

The “slightly-less-than-great” recovery in manufacturing is a very gently upward trend, amounting to around 10 thousand jobs added in a month. Last month was better than most because about 20 thousand jobs were added. This is good news for my company. And, if you listen to the pundits, good for the country.

The reason this article doesn’t take the experts seriously is because there is other information that screams out exactly the opposite. On the one hand we see that jobs are being added in manufacturing. But on the other hand, well, take a look at this. [2]

This is a graph showing how many people in the USA are participating in the work force. This is a real number. We get it by adding up all the people who are working in the US [3] and dividing it by the total number of people living in the USA [4]. This gives us a percentage.

Of course we can’t have a 100% participation rate, because that would mean everyone is working at an official job. This includes really old people, sick people, babies, and people who flat-out don’t want to work. At the same time, we can’t have 0% either, because someone has to pay taxes to get our government moving.

Best of all, this number shouldn’t move much. During the best of times, when everyone is happy and our society is stable, the number should pretty much stay within a narrow range. During the 1950s and most of the 1960s, the range was firmly in the 57 to 60% area. During the time when many women started exercising their right to enter the workforce, the participation rate grew to a high of 65 to 68% for the 1990s to 2008, almost 20 years. Then came the Great Recession.

Participation dropped, fast. And it’s this number that means something to all of us. It tells us how many people are officially working to support our government and keep our economy rolling along. From a high of 66 in 2008, we now stand at just under 63. In fact, we lost half a percent in the last month alone.

Putting this into perspective means that we have to look at the numbers. If one percent of the USA population is 3 and a half million people, then losing participation of 5 percent means that 5 times 3.5 gives us over 17 million people left the workforce. Seventeen million! In the last month alone, the fact that a half percent left the workforce means that 1 million 700 thousand people are gone.

The government claims that unemployment numbers show this, but they don’t. Look at the fact that unemployment supposedly went up only 0.1% from last month to this. The reason they can claim this is because the unemployment number takes into account people who leave the workforce – they don’t get counted. But that’s my point – we HAVE to count them! They are still people who were working, and now they aren’t!

Now that this rant is almost over, let’s ask a better question. Does it matter that the participation rate is dropping? Perhaps not. It was just over 55% over 50 years ago. So we know that it could drop another 5% without hurting our economy too much. We simply don’t know, because we haven’t been paying attention to the right information all this time.

There is one thing that we can know for sure. The changing participation rate indicates that our society is changing, and that includes the economy. Perhaps all those workers are being replaced by robots or computers. Or perhaps their jobs are being sent overseas. It doesn’t really matter. What matters is that those people had taxable jobs, and now they don’t. Society is changing, and we don’t know enough to know how.

What are your thoughts?

 

[1] Type in bit.ly/MfgEmp, or try the direct link: http://data.bls.gov/timeseries/CES3000000001?data_tool=XGtable

[2] bls participation rate

[3] It’s not good enough to be working, like raising a family or baby-sitting, but you also have to be officially reported to the government through paying taxes and surveys that the company fills out.

[4] This can get complicated, because it may include people who are ‘illegal’ as well as legal. Because the number of illegal people is so small, relative to legal people, we can ignore the number. In fact, to make this easier on ourselves, we can simply assume that the total number of people in the USA has been 350 million for the past 5 years.

 

Halloween Boos

As a fan of the dark side of life, I’ve always found Halloween an opportunity to reveal our hidden psyche. Not only Halloween, but all forms of celebration related to Death. These include All Hallow’s Eve, Day of the Dead, and even the wide variety of funeral and internment rites from around the world. All of them bring us face to face with the fact that our personal reality, everything we know and love, will someday become meaningless.

Our religions do their best to restore that meaning, telling us that death is a door leading to another chapter. Perhaps. That’s a discussion for another day. For today, it’s our visit with Death that reveals the most about our behavior, and not only you and me as individuals, but as a society.

Halloween has gone global, and people from all cultures have embraced the role-playing party-going festivities Halloween provides. In the US, we culture children to beg for candy. There was a time when mischief was expected, in the form of toilet paper in trees, soap on windows, and perhaps an errant egg or two. But the fun-loving Death-themed festivities have caught our imagination.

For you and me, Halloween mean different things. There’s a good chance you will use it as a chance to have fun, dressing up as something silly, scary, sexy, or a combination of these. You’ll have fun, act out in some way, preferably with friends watching, and eventually call it a night.

But what does Halloween tell us about behavior? What can the great picture of how our world deals with Dia de los Muertos reveal about our inner soul? A great deal, as we shall soon reveal.

A few decades ago, Halloween was a way to have fun by confronting Death. Blood, corpses, and ghosts were the norm, and a tinge of fear creating thrilling chills was enough to keep young children at bay, and teenagers occupied. The smallest children were kept away as the night’s events were considered too horrific. And the adult population – starting at 18 back then – found the entire episode too childish to care.

Childish? Halloween? To adults back in the 1930s and 40s, Death was real enough. There was a good chance your family knew of someone who had died in war, or of poverty, or in an accident. Our world didn’t have the same safety regulations, medicines, or even the same amount of world peace we enjoy today. To those adults, death was already a neighbor, they didn’t need any reminders.

Skip ahead to today. Death is no longer a neighbor, but seems to be a distant cousin who will visit someday. Someday, but not for a very long time. Not only that, but we will see him coming. Hardly anyone today, relatively speaking, dies unexpectedly any more. When it does happen, we’re surprised, and lament their passing all the more.

With Death so far away, what does an adult do? Forget the Grim Reaper exists. Find another excuse to party. Include the baby, dressed up like a pumpkin. The teenager can be a vampire, and the wife and I will go to a party as superheros, animals, or whatever suits our fancy.

And that, Gentle Reader, is our revelation. We as adults, and as a society, have forgotten that Death still lives nearby. We may treat him as a distant cousin, but he always sits at our elbow. Pretending he’s not there doesn’t make him go away. And the best evidence for this is our changing attitudes towards Halloween.

Is this so bad?” you say. “So what?” you wonder. Why does it matter how we consider Death? It means little to how we live, doesn’t it?

Our attitude towards Death lies at the very root of our culture, and is exactly the center of how we live each day. Our American ancestors came from established countries to a New World, not knowing what to expect. The first frontiersmen pushed West without knowing what lay beyond. Their means were meager, their only incentives were a better life for their family, and they had Death at their heels the whole time. They weren’t afraid to take risks.

Today it’s exactly the opposite. We’ll get arrested for not using seat belts or smoking the wrong kind of leaf. we have to carry identifications almost all the time and tacitly accept surveillance of almost everything we do. Finally, and perhaps most personally, we can’t eat something unless it’s in a cold package with a valid expiration date. And we certainly can’t touch anything without continuously dousing our hands in alcohol.

Halloween was a time when we had a little fun acknowledging and confronting our true fear of Death. We’ve lost that. Death is something we ignore, using this precious day as an excuse to dress up and drink.

We have become a culture, a country, a world of frightened children. Taking risks is what building a better world is all about, and who among us does not want a better world? All those things we do to reduce fear, from seat belts to smoking, are not bad in themselves. This essay should not be seen as arguing against their use in any way. That’s not the point.

What I’m arguing for is that our society has become risk-averse. though we appear to embrace Halloween, we are in fact, more afraid of Death than ever before. That fear translates into less innovation and more resources diverted to our peace of mind. And less innovation and fewer resources for risk means that there’s less to spend on our future.

What do you think?

Happy Halloween! Boo!

 

Stories Must Die

I love a good story. Everyone loves a good story. Story-telling has been a profession for a long time, starting with Homer. [1] It’s one of the defining features of our species. There is good evidence that storytelling and social cohesion are strongly related. [2] So what’s with the title of this essay?

There is a great danger in story-telling. For one, story-telling is designed to appeal to our emotions: love, fear, remorse, regret, hopes, dreams, deep longing, even gratitude, to name only a few. The problem with emotion is that it’s not a good basis for collecting facts. Facts are best for understanding the real world. Emotions are good for feeling the world, without worrying about accuracy. Don’t get me wrong, there’s nothing wrong with feeling the world instead of collecting facts. Like I said, everyone enjoys a good story.

Let’s get back to the danger. In the so-called social sciences there is a tendency to rely on the story as a form of both data collection and justification. This is in addition to having almost no rigor with respect to their definitions or methods. Go to any two social scientists within any specialization, and ask them to define any term. It’s almost certain that you’ll get two different definitions. And there’s almost as good a chance that each of them will have a story to go along with it.

No story, no matter how riveting, can rise to the level of quality we must expect in a true science. No physicist, no chemist, no biologist would rely upon a story to advance their knowledge within the scientific community. Absolutely none.

Now, that’s not to say the story doesn’t have a place within the hard sciences. A hard-nosed hard scientist may use a vignette as a way of following an interesting lead. Perhaps there is a grain of truth that can be tested, verified, repeated, such that it meets the standards of science and can therefore be published to the rest of the scientific community. Perhaps the story makes the research more interesting for her colleagues. But there it ends. So many stories end up being only that, a story designed to entertain for a short time.

What’s the big deal, you say? What exactly is my problem with a good story? Why can’t it be chock-full of fact? Maybe I’m a story-hating geezer with hollywood issues? Perhaps you’re right. However, I can sum up the problems with a single word, muddy. Stories are entertaining, but they are never specific, so that too many things may be going on at one time. And when too many things happen at one time, it becomes impossible to point to any one and say, ah-ha, this factor is important for me to understand what’s going on. This brings us to the second fundamental reason stories shouldn’t be used; nothing is ever that simple.

What’s that you say? Gentle Reader? You would like a story to illustrate my point? Honestly, I’d prefer to not dirty up my argument here with some story. Rather, I’d like to try and convince you using an illustration of stories in general. Lately I’ve been doing research into our society’s attitudes towards hate. How we define hate is rather cloudy because we use the term very loosely nowadays, and the people that claim to be professionals in this area don’t help because it’s not in their best interests to refine the definition or their methods. They make their money writing books or being an expert on the newsy entertainment shows. However, since I’m neck-deep in hate, this could be the best place to find some recent examples about why stories are terrible sources of knowledge.

In the books that I’m reading, the stories they use tend to fall into two general categories. The first category is that of great atrocities perpetrated during wars. Of course there are many wars to choose stories from. You could say that there is always a war going on somewhere, and so there are many atrocious stories going on all the time. True, and sad. So the first example of stories within a whole class of war is the one that has to do with the formation of our great Union, an event that is collectively known as the “Trail of Tears.” In a long-standing confrontation between mostly European settlers and the much longer settled natives of the Eastern North American continent, the stronger European settlers were able to dictate many terms to the natives. Many of these terms revolved around access to land, and the ultimate conclusion was that natives were to leave their ancestral lands of the East for the great unknown of the West – a walk of several thousand kilometers.

Now, it’s hard to argue against the feeling that here is evidence for hate on the grandest of scales. An entire society, its government, its armies, and all its citizens were working against the natives of North America. And this newly formed government stood as a single entity attempting to eliminate not one, but many native cultures. They vilified the natives in print, stole from them when they could, cast them as red and inferior, and ultimately moved them from East to West. They even described them with their own words in ways that were meant to hurt. [3] Many thousands perished during the forced marches. [4] One can imagine the old and the young dropping off the side of the trail, or being carried away by raging streams or rivers. Those who were sick or unprepared, starved away. There were those who were wounded, and unable to obtain rest and care, left at the side of the trail, unable to be sustained by their families. Is this not all the product of hate? Who in their right mind would argue that this was not the product of hate? Who?

Well, me. And I should hope, you, as a believer in learning methodically and rigorously. We have to be able to know, beyond a shadow of a doubt, that what we are looking at is a fact, no matter what angle we look at it from. How in the world can the Trail of Tears not be looked upon as a great product of hate? Consider the following.

It is the rare story about the Trail of Tears that reveals the greater changes swirling about all those participants. There was the opposing world view of Europeans and Natives. The European believed they were chosen to take the land, had religious justification, and were motivated by great and omniscient powers. The Natives were weak, fought among themselves, and had not mastered technology to the level of the European. Add to all that these basic facts. Natives could not ‘hold’ their liquor. They were susceptible to strange maladies that often took their lives. They even looked very different, in ways that Europeans could only understand as being related to evil. It was for many of these inherent qualities that Europeans rationalized their own superiority over the native, further justifying the atrocities they perpetrated upon innocent people.

Today we have learned enough to know that because someone looks differently from ourselves, it does not mean that they are necessarily weak or inferior. We also know that someone’s genetic makeup does not mean they are less or better than ourselves. We also realize that most technology is relatively easy to master. The process of centuries of scientific inquiry can be passed to an open mind within a few years, such that it becomes as familiar to them as it is to us. And the reasons the natives couldn’t withstand the evils of alcohol, fell victim to a wide variety of diseases, and even looked differently from the European is because they were of a different genetic heritage. For millennia the peoples of the Americas had lived in biological isolation from the rest of humanity. The scourges that ravaged many in the Old World weren’t known in the New. As a result, the lessons of smallpox, mumps, and other relatively minor ailments to a European proved deadly to the native. The survival of the fittest was in full force, and only those natives who had immune systems robust enough to withstand the European germs survived, hopefully passing those innate talents onto their children.

In addition, each side of this conflict looked at the world very differently. For the native, the land was enjoyed passively; for upon it they hunted and gathered what was needed. For the European, the land was something to work, to harvest from, to change to their needs, and carve away from others in order to protect and pass those assets from one generation to the next. Europeans wanted to own their land to do whatever they pleased. Natives only enjoyed the land, leaving it untouched for their children to do the same. So, not only was their a clash between groups of different technologies, different genetic makeups, but also different ways of looking at the world.

Is there more that we can find to try and understand the conflict between Europeans and Natives? Of course. Technology, genetics, world views, these are great forces, and they are not all there is. There are more, and they are always influencing us. It’s important to realize that though there is great pain and suffering, though there is what we perceive to be great injustice in the world, it is not always something that can be simply categorized as hate. We must be careful in our understanding, otherwise we will not truly know the subject.

And here is the whole point of this story, oops, essay. Stories will entertain you, but they rarely teach rigorously. They are used by expert writers to make a point. Many successful business writers use stories exactly for this purpose, and business-people are quick to consider the writer an expert because of the quality of the story. But even a few questions about all the other great forces involved can shred the best story in minutes. Stories can’t teach the truth.

Only facts teach truth. Facts that you and I can verify independently of each other. Facts that hold up over time. Facts that stay facts for as long as time itself. And that’s the kind of stuff that we as students of behavior should insist upon.

And that’s a fact.

 

[1] http://en.wikipedia.org/wiki/Robert_Fagles I’ve read several versions, and Fagles translations are spectacular. They make modern literature and drama pale in comparison. And the audio versions read by professional actors are riveting. Check them out!

[2] http://www.capetownpartnership.co.za/storytelling-for-social-cohesion-a-message-from-professor-njabulo-ndebele/ There are so many examples where people claim exactly what I state above. Of course, as a true scientist, you are skeptical – we can’t take someone’s word about a fact, any fact. And that includes me!

[3] http://www.nativeweb.org/pages/legal/squaw.html

[4] http://en.wikipedia.org/wiki/Trail_of_Tears

 

Why Dinosaurs Matter

I’m reading a great book about dinosaurs, and had no intention of sharing this secret passion of mine with you. For that I must apologize. It’s not that I didn’t think you’d be interested in dinosaurs. After all, they are generally extremely cool. They’re mostly big – okay – huge, and, for most people are the kind of thing that make you stop and stare. They’re probably the source of many deep myths – dragons, giants, that sort of thing. The reason I wasn’t going to bring it up was because I was reading this book for pure pleasure. Then I realized two things.

First, this is a darn good book. Buy it. Read it. Thanks. [1]

Second, the study of dinosaurs is something that should be on the syllabus for every behavioral scientist. That’s right, every person who is serious about studying behavior should learn about the dinosaur. Now, why is that?

Yes, again, they are cool; the source of great myths; they’re big, scary, and touch something primal within us. But these aren’t good reasons to study them. The real reason we need to study them is they were incredibly successful life forms. They lived a very long time on this planet, almost 300 million years, and counting. They survived a wide variety of environments, from cold to hot, from dry to wet. They existed on a wide variety of scales, from very small, to extremely large. Whatever it was they were doing, worked. And if we want to be successful, then we should know their secrets.

Wait just a minute, you say. What do you mean, if we want to be successful? Aren’t we successful already? Don’t I have a good job? Doesn’t my family have a big house? Isn’t my country the best in the world? Doesn’t my species have a lock on using up planetary resources until they’re gone?

One narrow way to define success is making money. But money represents a type of behavior; a behavior that allows us to trade with each other using a proxy. That proxy is a piece of paper that says “I’m worth one dollar.” We all agree to this, and pieces of paper go traveling about while goods and services travel in the opposite direction. If your success is collecting more pieces of paper than everyone else, so be it.

As a scientist, we want definitions that are closer to being constants of nature. Biology requires us to think in terms of survival. You are successful if you live, that’s number one. Number two? You have to reproduce.

So the Great Game of Life begins. This is not weekend American football. It is not spying. In this game your genes get a chance to be passed on yet again. Money means little here, for the billionaire without offspring loses to the penniless mother. She has passed on her genes, the billionaire can only pass on his wealth. This is the greatest game of them all. If you can survive long enough to reproduce, you have won the smallest of battles in the Great Game of Life. If your family lives for several generations, they have won their own small battle. For your species to survive multiple generations is the smallest of battles at that scale. And if a particular life form, like dinosaurs, can exist for a million years, then they have only won a single battle in the Great Game.

What, a million years is only a single battle? How can this be? Here we must invoke some numbers, for this is a matter of scale. Life, in any form, has left tracks of its humble beginnings in Australian rocks roughly 3 billion years old. This becomes our base, our standard. Anything alive today has to compare itself to all life. If you’ve been alive 3 billion years, then you can claim to be the king of all life. Unfortunately for you, there’s a good chance a random rock is going to come along and dethrone you. It’s happened at least 5 times as far as we can tell.

As people – well, H sapiens anyway – we’ve been around about 150 thousand years. In percentage terms, that’s only about one half percent of one percent of all life, 0.00005. If we want to claim our primate heritage as being successful, then we can point to roughly 60 million years of success, as long as success includes hanging about in trees and running about like squirrels. In this case we have a good 2% of the entirety of life to cling to, or 0.02. All said, us primates have a shot at winning the Great Game. Or do we? After all, we’ve really only been the dominant species for about 10 thousand years. That’s such a small percentage of the Great Game I’m not even going bother writing out all the zeros.

The dinosaurs go back about 200 million years, and were easily dominant about 100 million. Let’s see, 100 million into 3 billion, that gets us … 3 percent, or 0.03. And that 3 percent is when they were dominant – not just existing, like us primates.

Which brings us back to why we should study dinosaurs. We want to win the Great Game.

What? You say you’re not interested in winning? You don’t even care about the Great Game? You don’t care if your species lives or dies in the next century? The next millennium? Tomorrow? Then there’s a good chance you’re not interested in behavior in the first place. You probably have your own version of success, most likely collecting those pieces of paper, and will hone your own behaviors so as to maximize that success. If you don’t care, then nothing can change your mind.

If you do care, if you are concerned with the fate of our species, our planet, then we owe it to ourselves and our posterity to learn as much as possible in order to succeed. The best way to succeed is to embrace the study of behavior in all its forms. For behavior is everything that all life does. It’s not only a smile or a handshake, but how we set up our government or blow up our cities. It’s how we adapt as a species over great spans of time, where a century counts as seconds, and millennia are as minutes.

To study behavior, we must look upon its atoms. For instance, a smile is one of the smallest units we have, an instant in time starting with hot neurons touching many facial muscles. We smile, and just as quickly, it’s gone. As scientists, we must be able to take that single smile and use it to understand the Great Game.

This is easier to visualize in the physical world, because we can see how the smallest of objects is connected to great events. Consider the snowflake, a unique combination of water, cold and convection that lasts only as long as the distance between its birthing cloud and the cold hard Earth below. Combine that snowflake with a googol of its brethren and you have a glacier, a glacier that challenges Time. As a glacier, that snowflake carves canyons, moves mountains, and crushes continents. Yes, crushing continents, for if it ever melts away, that continent will spring out of the ocean like a bobbing duck.

To understand that glacier, we must also understand that snowflake. To understand all life, and to have a chance at winning the Great Game, we must understand the smile. We must be able to connect that smile to whatever made the dinosaur so successful. This is why paleontology matters. Paleontologists have barely begun to scratch the surface, and look at what they have learned. We need to find out more if we are to have a chance at winning the Great Game.

One of the things they have already taught us is that dinosaurs are not extinct, they have survived in the form of birds. What does this mean for competing in the Great Game? It means that we should also be listening carefully to those who also study birds, and by extension, those who study all life. The ornithologist, the ecologist, and the biologist are all important players in this competition. They can help us connect the dots between that smile, and what it will take for us to survive a million years.

All life matters, whether it still breaths or not. There is something to learn from every species, and for our species to stand by as many disappear is one of the great tragedies of our time. It’s like being in school and intentionally throwing away the answer pages in the back of your textbook. Each species has something to teach us, each species contains an answer to an unasked question. Competing in the Great Game means that our species is always being put to the test, and when taking an open book test, it’s always helpful to have a handy answer guide. And Mother Nature always gives open book tests – it’s up to us to learn how to use it.

This is why studying the dinosaur matters. They have much to teach us, whether it is through 100 million year old fossils, or by teaching them to do simple math. The Great Game is being played, and I would like to see us succeed.

Do you think we will succeed?

 

[1] The book is called “My beloved Brontosaurus” by Brian Switek.

Read more about it here: http://books.scientificamerican.com/fsg/books/my-beloved-brontosaurus/

and see his website here: http://brianswitek.com/

 

Economombo 3

The last Economombo article reflected on the inadequacies of economists. Certainly, they have gotten quite enough wrong. However, the last statements about how business seemed to be taking a turn for the worse have, in fact, turned out otherwise. Our business has gotten better, and the general outlook has turned positive.

It takes a big man to admit when he’s wrong, and I’m not that big. Taking disparate data and forging a prediction from it is fairly ambiguous at best, and flat out random at worst. I won’t be happy until all our economist friends publish all their predictions in historical format, and line them up with what actually happened. That is, if they can agree on what actually happened.

Which brings us to the heart of today’s article. Counting. Simply counting. Sounds easy enough, because it’s something you’ve been doing before you can remember. How many fingers? How many toes? There’s a good chance you’ve been counting since kindergarten, and for you math whizzes out there, you may have been counting since you were three. Maybe four.

Here’s two examples of things that look like numbers, but really don’t count anything. The first is the stock market indicators, like the Dow Industrial Average (DIA), or the S&P index. Both are mentioned by news sources throughout the day. Both are something that you might pay attention to occassionally, especially if you have money in the market. But these aren’t numbers – they don’t count anything.

Back in the mists of time, the market indicators started as a simple count of what the stocks were trading. You took their price, added all the stocks that you were interested, and there was your number. Today there are thirty stocks in the DIA. But they don’t simply get added together. As time went by, some of the stocks split. Some companies dropped out of the average, others were put in their place. Not all the values were the same. So what the DIA managers do is multiply every stock by some special number, a ‘weight.’ This weight adjusts the overall numbers so that they supposedly reflect the economy, and don’t change so much every time the DIA basket of stocks is adjusted.

The fundamental fact is that the DIA is a made up number! It doesn’t count anything! You can’t compare the DIA to anything else in the universe and have it make sense! Go ahead and try.

The second example is that of unemployment. An economist may have countered our first example by saying that the DIA is not an accepted economic measure. A much harder number for them to argue against is unemployment. Many many economists use unemployment in their predictions, in fact trying to predict it as well on a regular basis.

The problem with unemployment is that it’s an interpreted number. Interpreted, you say? Yes, interpreted. There is no direct number called unemployment. The way the experts get to a final number, say this month’s 7.6%, is by contacting so many households every month. They ask these households a number of questions. Central to these questions is this; are there household members looking for work, that don’t have a job? If the answer is yes, then they are unemployed!

The bad news is that, just perhaps, that person no longer looks for work because they haven’t worked in a year. Or, perhaps, that person is looking for work, but still also works two other jobs. In any case, there are a number of other factors that have to be taken into account to count someone as unemployed. But wait, there’s more!

We’ve counted people who are unemployed, but what about those that are employed. Turns out that you can use the same households to figure that out, in combination with all the numbers reported by employers throughout the country. Every month, employers get survey questions that they have to fill out. All these numbers, then, are mashed together, or interpreted, so that we come out with a certain number of people who are employed.

Again, like before, there’s some bad news. The number reported by employers can be a bit old. There may be people who are employed by the company that are also working another job. It could be that the employer is slightly under-reporting their numbers so that the government doesn’t come looking too closely. And it may be that things have changed since the employer reported the numbers to when someone at a government desk gets around to reading their survey.

The final interpretation is this. Take the number of people in the household survey and figure out a percentage, and a range of accuracy. That’s statistics. Then take all the people who are working, compare the survey number to what employers report, and make an adjustment. Then take the first percentage and adjust it so that its denomenator matches the numbers of total employed. THEN adjust the whole thing based on any seasonal or other cycles there may be in the time series. That is what I call an interpreted number.

Again, there is no simple item that we can point to and say that this number, unemployment, is counting accurately. It’s impossible because unemployment is an interpreted number. What can we do to improve the situation?

We can count. We can count something that really exists. Something that exists, and doesn’t vary whether or not someone decides to keep looking for work, and doesn’t vary if someone works a ½ job, or 3 jobs. We call this number participation. It counts the actual number of people who work. And if you combine this number with the number of people who can work, everyone between the ages of 18 and 65, for example, you get a very stable number that we call the participation rate.

So, remember, when you hear the stock market report, or hear an unemployment number, don’t fret. It’s meaningless. Take a look at the participation rate instead. [1] And draw your own conclusions.

[1] This link should take you to the US Department of Labor’s Bureau of Labor Statistics. They do a great job of collecting and reporting all the numbers. Now, if they could only tame those economents. http://data.bls.gov/timeseries/LNS11300000