The report from the Bureau of Labor Statistics was just as gloomy as anticipated. Unemployment in January jumped to a l6-year high of 7.6 percent, as 598,000 jobs were slashed from US payrolls in the worst single-month decline since December, 1974. With 1.8 million jobs lost in the last three months, there is urgent desire to boost the economy as quickly as possible. But Washington would do well to take a deep breath before reacting to the grim numbers.
Collectively, we rely on the unemployment figures and other statistics to frame our sense of reality. They are a vital part of an array of data that we use to assess if we’re doing well or doing badly, and that in turn shapes government policies and corporate budgets and personal spending decisions. The problem is that the statistics aren’t an objective measure of reality; they are simply a best approximation. Directionally, they capture the trends, but the idea that we know precisely how many are unemployed is a myth. That makes finding a solution all the more difficult.
First, there is the way the data is assembled. The official unemployment rate is the product of a telephone survey of about 60,000 homes. There is another survey, sometimes referred to as the“payroll survey, that assesses 400,000 businesses based on their reported payrolls. Both surveys have problems. The payroll survey can easily double-count someone: if you are one person with two jobs, you show up as two workers. The payroll survey also doesn’t capture the number of self-employed, and so says little about how many people are generating an independent income.
The household survey has a larger problem. When asked straightforwardly, people tend to lie or shade the truth when the subject is sex, money or employment. If you get a call and are asked if you’re employed, and you say yes, you’re employed. If you say no, however, it may surprise you to learn that you are only unemployed if you’ve been actively looking for work in the past four weeks; otherwise, you are marginally attached to the labor force and not actually unemployed.
The urge to quantify is embedded in our society. But the idea that statisticians can then capture an objective reality isn’t just impossible. It also leads to serious misjudgments. Democrats and Republicans can and will take sides on a number of issues, but a more crucial concern is that both are basing major policy decisions on guesstimates rather than looking at the vast wealth of raw data with a critical eye and an open mind.
