Lies....Damn lies!.... and statistics (8-9-09)

Taking credit, where credit ain't due


Chapter 1
(Poorly Rated Unemployment)

With the current jobs and unemployment numbers released for July showing a decline in the pace of job losses, the Obama administration, or more specifically, Obama himself, has claimed success. This is a claim not credible to anyone who actually understands the numbers and how they are formulated. But the truth will be known to those who care. All others, can and will, follow in blind ignorance. The claim that the Keynesian economic stimulus plan, which has only spent out about 10-12%, has brought us from the brink of doom, is totally false. Hell, they can't possibly believe it themselves. It's just political b*ll sh*t to try and hold some favor among the masses, at a time when their approval polling is dropping like a rock.

"Employers laid off far fewer workers in July, the jobless rate dipped for the first time in 15 months and workers' hours and pay edged upward."

"A net total of 247,000 jobs were lost last month, the fewest in a year and a drastic improvement from the 443,000 that vanished in June."

"The Labor Department's report Friday showed that the unemployment rate dropped a notch to 9.4 percent in July, from 9.5 percent the previous month."

These are B.S. headlines found in news articles and television reports this week after the jobs and unemployment numbers were released by the Labor Department. Sounds pretty good, but they don't really paint a clear picture, and actually make it more difficult to judge, exactly where we are in this recession.

More Jobs Are Lost. Unemployment Rate Drops. What Gives?
Why did the unemployment rate fall even as more jobs were lost?
LETS LOOK TO THE DATA, AND HOW IT'S PRESENTED.

The "payroll figures" & "jobs lost data" comes from a Labor Department survey of employers.

The "unemployment rate" is measured through a separate survey of individual households.

This survey asks people whether they have a job, whether they want a job and whether they have searched for a job. The labor force includes only those who are either employed or are looking for employment. Hundreds of thousands of people, discouraged by their failed job searches, essentially gave up, moving them out of the category of being "unemployed". When "discouraged" people are dropped out of the labor force, the unemployment rate can decline because fewer people in the labor force are considered jobless.
The labor force participation rate shrank 0.2% in July to 65.5%. The July household survey showed the civilian labor force reduced by 422,000 and employment falling 155,000. That translated into 267,000 people, who are without a job, but are not listed as unemployed.

If you add the discouraged dropouts to the official unemployed, you get an unemployment rate of around 9.8. If all laid-off workers, who have given up looking for new jobs, or have settled for part-time work instead, were included, the July unemployment rate would be 16.3%. All told, 14.5 million were out of work in July. Keep in mind, just to maintain a steady rate of employment, 150,000 more jobs are needed each month for our graduating youth just entering the work force.

So is the economic picture better because less people are "unemployed and looking" for a job? Or is it a sign of a worsening economic climate because more people are "discouraged and have given up" trying to find a job? Job-seekers are finding it harder to get work because there are so few openings. Right now, more than 1/2 the unemployed, have been so for three months or more. This is not only a record, it's double the post WWII average. A record 4.97 million people, roughly three-in-ten unemployed people, had been officially unemployed six months or longer in July. And the average length of unemployment grew to 25.1 weeks, also a record. Prolonged joblessness leads people to lose hope, and to lose heart.

The use of subjective data from household surveys seems to distort the economic picture. Someone may be discouraged from looking for employment and still NEED a job. Why is their mental strength or emotional resolve allowed to skew the numbers? And, could the pollsters manipulate the households into claiming they have given up the search for a job through carefully worded and/or toned questioning? If Obama administration officials don't like the unemployment figures. Couldn't they instruct the Labor Department to muddy the waters a bit? These types of tried and true statistical deception methods have been used for decades by both political parties.

Because the unemployment rate is so subjective, the decline in the unemployment rate doesn't mean unemployment won't soon hit 10 percent – in part because these false signs of improvement in the job market may result in more people restarting their job search, effectively re-entering the workforce, expanding its overall size, and pushing the unemployment rate back up to a more realistic measure.

The Labor Departments U-6 level of unemployment includes all, so-called, "discouraged" workers and workers who are "employed part time, but wish to have full time positions". This is usually equal to another 5 or 6% of the highly reported U-3 level unemployment rate. Due to a high level of discouragement and/or the use of part time work to get by, the U-6 level is currently 7% higher. The U-6 level is given little notice by most of the media who only report the figure that the Labor Department touts. This U-6 level is a much more realistic measure of this countries employment and it should be used as the primary indicator to avoid any possibility of politics or worker sentiment from entering the mix.
The distortions, half-truths, and statistical sleights of hand need to be eliminated by the department who has a legal responsibility to accurately report the unemployment rate. And by the media, who take their job seriously to report all the news, Good or Bad.



Chapter 2
("Really Gross" Domestic Product)

The economy dipped only slightly in the second quarter of this year, falling at a 1.0 percent annual pace, better than the 1.5% drop many economists had expected. The small drop in gross domestic product, reported Friday by the Commerce Department, followed the 6.4 percent annualized contraction in the first quarter, the largest in almost 30 years. GDP, which is considered the best measure of U.S. economic health, includes the value of all goods and services produced in the United States. Behind the better second-quarter performance were some signs of a fading recession: less drastic spending cuts by businesses, a resumption of federal and local government spending and an improved trade picture. But the American consumer spent less in the second quarter, reducing expenditures by 1.2 percent. This, after having nudged up purchases at a 0.6 percent pace in the first quarter. In large part, that's because wages and salaries have fallen for the past three consecutive quarters. With people spending less, Americans' savings rate rose sharply, to 5.2 percent in the second quarter, the highest since 1998.

President Obama claims, "Economists will tell you that part of the economic progress is directly attributable to the Recovery Act". He states, "This and other difficult, but important steps that we have taken over the last six months have helped us put the brakes on this recession". That's a little bit of bragging there. With little evidence to support it. I've searched for evidence, and the only figures I have found, states government spending in the second quarter increased by 10.9% adding 0.82 percentage points change in GDP. That same source also found a 0.88 percentage point decline in GDP caused from decreased personal spending. And a 0.94 percentage point subtraction from GDP caused from declined business investment. So, whether your goal is countering the negative effects on the G.D.P. caused from consumer and business pull back, or getting the economy to zero contraction, their doing slightly worse than a half-ass job. The, so called, "Recovery Act" stimulus program, to date, remains approximately 90% unspent. The unbelievably poor performance of the Obama administrations economic strategy has signaled the death of timely, targeted and temporary stimulus programs. Truth is, the T.A.R.P. program and acts by the Federal Reserve (cutting the lending rate to an all time low, while at the same time, pumping billions of dollars into the economy) have been responsible for the bulk of stimulus that brought us back from the brink of economic doom. The Recovery Act is purely window dressing for politicians to point to when they claim they're, "Taking action to address your pain". And, when the recession ends (and it always does), they will point to it again, and say, "It worked just as I planned".

Many analysts think the economy is beginning to grow again in this current quarter, setting up, what they believe, is the long-awaited recovery from recession. Even with the recession seemingly over with at this point, the job market will still remain weak for some time. Companies are expected to keep cutting payroll through the rest of the year, and further job losses are sure to restrain any improvement in consumer spending. The Federal Reserve says unemployment, now at a 26-year high of 9.5 percent, will top 10 percent by the end of the year. Stressed by rising unemployment, smaller paychecks, shrunken nest eggs, and the ongoing decline in available credit channels, consumer spending is likely to remain weak into the third quarter. Without the full strength of consumer spending, which supplies more than two-thirds of all U.S. economic activity, businesses would need to deliver more of the firepower for sustained growth. Businesses did cut their stockpiles of goods at a record pace in the second quarter, and with inventories at rock-bottom, they will likely need to ramp up production to meet customer demand. While this very rapid decline in inventories raises hopes for a recovery in industrial production, it also increases chances of a push back later in the year as domestic and global markets remain weak. With unemployment rising and capital spending still falling, neither workers or investors are likely to see strong rewards anytime soon. Businesses won't likely boost hiring until they're certain the recovery has proven staying power.

In the meantime, the damage caused by this recession runs deep and we still have a long way to go to get back all that we have lost. Including the April-to-June period, the economy has now contracted for a record four straight quarters, for the first time on record dating to 1947. Over that period, companies and ordinary Americans have suffered a painful toll, with job losses still exceeding a net total of 400,000 each month. The figures released Friday provide the most compelling evidence to date that the current recession has been the worst since the Great Depression. It has taken a 3.9 percent bite out of economic activity so far. Before this downturn, the most painful hit came in the 1957-58 recession, when GDP fell 3.8 percent.

President Barack Obama has acknowledged that we won't have a recovery as long as we keep losing jobs. He states businesses will start growing again and will start hiring again, and that's when it will truly feel like a recovery to the American people. Economists say they are hopeful that consumers will eventually increase spending and that would help stem the tide of job losses and stimulate hiring. So who's right? Will business start us on the path toward prosperity, or will it be the American consumer? Who's cart comes before who's horse? The chicken cart or the egg cart?

The truth is, the recovery of this economy has to start with confidence. Consumer confidence, and business confidence. Businesses are confident when consumers are confident, and vise-versa. They are inexorably linked! The stimulus act needed to include incentives for businesses to retain workers through this rough economic period. A tax break to both the business community and to the consumer would have done more to cure our current ills, and at substantially less cost to the taxpayer, than the wish list of social programs the democrats instituted with their, so called, "Recovery Act". If the consumer had more money to spend, businesses wouldn't have cut production and decreased payrolls. Talk of trillion dollar health care legislation, a new carbon tax and idealistic green job creation programs at any cost, instead of working to save our current jobs, have contributed to less confidence. Scaring the hell out of consumers and industry, with programs that are sure to cost them more down the road, has caused everyone to pull back until they know what the new cost of living, and the new cost of doing business, will be.

Some economists think growth in the July-to-September quarter could be more vigorous than previously forecast — possibly 3 percent annual growth or higher.

Cross your fingers...pray...maybe even...'HOPE'. But don't hold you breath.