October 6, 2012

Magic Math

My favorite commentary on the BLS jobs report thus far is this one:
This morning's Employment Situation report showed 114,000 new jobs, but that number reduced the unemployment rate by 0.3%, from 8.1% to 7.8%. Abracadabra – it is magic.
To give you a sense of how goofy the math is, the Bureau of Labor and Statistics says, in the very same report, "The civilian labor force rose by 418,000 to 155.1 million in September, while the labor force participation rate was little changed at 63.6 percent."
So, if the number of people in the labor force rises – got that, went up – by 418,000 and 114,000 new jobs were created, where did the other 304,000 people go? Additionally, doesn't 0.3% (8.1% - 7.8%) X 155,100,000 = 465,300? Unless somebody reprogrammed my calculator and Excel while I was sleeping, it's the same every single time I try it.
465,300 minus 114,000 leave another mysteriously missing 351,300 people. Where did they go? The answer is that these people fell out of the workforce, either they retired or exhausted their unemployment benefits without finding a job, essentially, they disappeared – poof - and are no longer interested in working. Yeah, right.
 Those that happen by this blog are smart.  We take these reports with a grain of salt, because, no matter how entertaining the magic math might be, we know that the most accurate indicator is the U6 number, illustrated quite clearly on this chart from 2006 to the present:

from hotair.com

Bearing in mind that the BLS employs a survey method to ask people about their jobs and pay to come up with their report, what is bothering me this morning is the fact that I have never been surveyed.  Never, ever, ever.  I don't know anyone that has.  I don't know anyone that knows anyone that has been surveyed.  The BLS samples 60,000 households for each monthly report.  There are, according to the 2010 Census, around 114,236,000 households in the United States.  By now, shouldn't I have stumbled upon someone that knows a guy that once heard about a guy that got a call asking about whether the people in his house have a job?

Earlier this week I was in Kansas when Hallmark announced the closing of their Topeka plant, with a loss of 300 jobs.  Up the street here, Peterbilt just announced an unspecified number of layoffs.  Lord knows those aren't the only two brand-name manufacturers cutting back.

Here's an idea for a great October labor survey...make the survey calls to households in Topeka, Kansas, Denton, Texas, and towns with NHL teams.

Just in case you misread the title and came here looking for a 'Magic Mike' picture...(boys can head on over to GOC for Saturday Boobage).

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