Is the Government Lying To You?

There are lies, damn lies, and statistics,” said Mark Twain.

Government statistics seems to fall somewhere between the last two. Why?

Partly because of the statistics we focus on. When the unemployment rate comes out, we always focus on U3: the proportion of the civilian labor force that is unemployed but actively seeking a job, which now shows unemployment at around 10 percent. But U6, which the Bureau of Labor Statistics (BLS) publishes at the same time, shows unemployment nearing 18 percent.

The reason for the difference is that U6 includes underemployed, marginally attached workers, and discouraged workers. That’s the number that people feel, not U3. In Michigan, that number is nearing 25 percent.

Job gains or losses are affected in a similar way.

In one month alone, we “lost” 85,000 jobs, but more than 600,000 people left the workforce, according to the BLS. That’s why it feels so much worse on the street than the statistics show.

And, by the way, the unemployment rate actually went down when all those people lost their jobs or left the workforce.

In fact, the statistics on the number of long-term unemployed continue to go down because people are losing their unemployment benefits — NOT because they are no longer unemployed and have found jobs.

Also, government statistics focus very little on hiring, and that’s where the big problems are now. We may be losing fewer jobs than previously, but hiring is still very slow, and that’s what people see when they are job hunting or worried they might lose their jobs.

In addition, monthly government statistics are subject to enormous revisions. These revisions often have little effect on the stock market but have a big effect on how people on the street feel.

In housing the annual revisions are huge. Even the government says its monthly statistics have a margin of error of 15 percent. The annual revisions that can be performed are massive. In addition, statistics like home sales aren’t adjusted for sale cancellations. When almost 35 percent of home sales were being cancelled, that was a big number. That number has since fallen into the 10 percent to 15 percent range, but it’s another example of how government statistics are misleading.

So, Is the Government
Trying to Mislead Us?

It certainly isn’t trying as hard as it could to emphasize statistics that show the real situation. It’s also not clear it is trying hard to be more accurate.

Is there outright manipulation?

I don’t know for sure, but certainly anyone who works in the production of government economic statistics knows which way to swing bias if there are any judgment calls or efforts to improve the statistical methodology.

The old saying may apply — figures never lie, but liars always figure.

Sincerely,

Robert Wiedemer
Author, Aftershock
Member of Newsmax’s Financial Brain Trust

P.S. — We have placed this article along with more important information on our website www.aftershockprofits.com.