WASHINGTON (MarketWatch) — It’s hard to completely trust any government that reserves the right to assassinate me (or you) with a robot airplane. So it’s no wonder that many people are skeptical about the government’s economic data.
There’s a lot of money riding on the accuracy and credibility of U.S. economic data. A lot of that faith is misplaced, but it’s not because the government is actively fudging the numbers or lying to us. Unlike a lot of people in Washington, the statisticians who crunch the numbers are a professional bunch who want to get things right.
We know that because we can verify much of what they produce from other independent sources. By and large, the government data are consistent with numbers produced by the private sector.
Of course statistics, by their very nature, can never be perfect or pure, no matter how well-meaning their creators.
Frequently we make it even tougher on ourselves by misinterpreting what the data could tell us with a bit of certainty. Too often we pay attention to the wrong numbers and ignore a more useful alternative. Those problems in understanding the data are compounded when we try to use them to make political points.
In recent years, the unemployment rate has become one of the most politicized economic numbers. Which means it’s also become one of the most misunderstood numbers. I have a partial solution for that, as you’ll see.
In theory, the jobless rate should be noncontroversial. It’s simply the percentage of people who want a job who can’t find one. However, it’s more complicated in practice. What does it mean to look for work? How hard do you have to try? How often do you have to try? What does it mean to have a job? Does it have to be a full-time job to count? What if it’s irregular work?
Back in the 1940s, the government defined those terms: Any paid work in the past week counts as a job. And to be counted as officially unemployed, a person must have actively looked for work some time in the past month.
With a few exceptions, those are still the definitions used by the Bureau of Labor Statistics. Political opponents of Barack Obama (and of George W. Bush before him) are wrong to suggest that the current administration has moved the goal posts on unemployment. (Optional Bob Woodward joke here.)
Under those definitions, the official unemployment rate (known as the U-3 rate) was 7.7% in February; there were 12 million people who said they had looked for a job without success, compared with 155.5 million in the labor force. Read U.S. economy adds 236,000 jobs in February.
But there were also 6.8 million people who said they wanted a job but weren’t even looking, perhaps because they were discouraged. Or maybe other hurdles, such as transportation problems or child-care duties, stood in their way. See the data on the BLS website.