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.
This figure 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 recent month alone, we “lost” 85,000 jobs, but more
than 600,000 people left the work force, 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 work force.
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.
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
Editor, Financial Intelligence Report
NOTE:
Read more of Bob Wiedemer’s blogs right now on
www.moneynews.com/blogs