Wednesday, August 27, 2014

New Research Shows the Official Unemployment Rate Is Underreporting the Real Unemployment Situation

There is now academic evidence that deep inside the bowels of the Department of Labor's unemployment survey, something is causing a downward trend that is distorting the unemployment number to make it look as though fewer are unemployed than actually are.

A new academic paper suggests that the unemployment rate appears to have become less accurate over the last two decades, in part because of this rise in nonresponse. In particular, there seems to have been an increase in the number of people who once would have qualified as officially unemployed and today are considered out of the labor force, neither working nor looking for work, writes David Leonhardt at NYT

Leonhardt continues:
The trouble with the unemployment rate revolves around a technical concept known as “rotation-group bias,” explain the paper’s three authors, Mr. Krueger, Alexandre Mas and Xiaotong Niu. The government surveys people for four consecutive months, gives them eight months off and then surveys them for four more months. This pattern allows the Labor Department to track people’s experiences for more than a year in a way that is less burdensome than 16 months of monthly surveys would be.

Over time, the kinds of answers that people give — or the kinds of people who respond — change. In later months as part of the survey panel, people who aren’t working are less likely to report being available to work and having looked for a job in the previous four weeks, which is the definition for unemployment. The differences are big, too.

The unemployment rate in the first half of 2014 among people in the first month of being interviewed was 7.5 percent. Among people in the final month of being interviewed, it was only 6.1 percent. Because the Labor Department weights later panelists – for whom there is historical data – more heavily, the official unemployment rate during this period was 6.5 percent...
The problem has existed, and been growing, for decades. A redesign of the survey in 1994, to move it from paper-based to computer-based, seems to be one cause. The full reasons aren’t clear, but something about the redesign seems to have changed the way people answer questions. The gap in jobless rates between early and later panelists starting spiking in 1994 and is now about twice as large as it was then.
That number seems too low. The authors note that the higher jobless rate among early-month panelists correlates more strongly with some other economic indicators than the rate among later-month panelists.


1 comment:

  1. Obama Caught Lying About Jobs and Bricking Layups

    Published on Aug 27, 2014
    The total corruption of the White House by criminally fraudulent banks that are swollen through congressional racketeering and protected by their agents throughout an executive branch that refuses to enforce the law has cost ordinary Americans millions upon millions of jobs.

    The unchecked looting epidemic that passes for economic policy is difficult to distinguish from a national suicide attempt, but one thing is certain: the labor force participation is dropping faster than Obama can launch bricks on a basketball court.

    Naturally, the White House has searched for an alibi and a team of servile minions to broadcast it. The latter role has been eagerly filled by the mainstream media. Yawn.

    The problem is that no one bothered to check out the alibi, which holds that the ills in the labor force have been caused by aging baby boomers. As this video definitively demonstrates with data supplied by the government itself, the White House yarn is not just ludicrous but an outright lie that turns the black-and-white numbers upside down. There is far more support for the flat earth theory.

    The Golden Truth is pleased to present this U.S. economic burlesque against the backdrop of Obama's many athletic pratfalls, complete with a new introduction and (finally) a functioning green screen. More improvements to come.

    Our apologies for the delay in this episode.