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Atlanta Fed Chief admits false Unemployment Stats

with 2 comments

In what we can only assume to be an embarrassing slip, the Chief of the Atlanta Federal Reserve announced Wednesday that the real unemployment rate is something close to 16%, almost double the Bureau of Labor figure of 9.4%.

Just add another 7 Percent!

According to the Atlanta Fed, this graph is a does not represent "real unemployment". For that, you must add 7%.

It is common knowledge that the Labor department regularly under-reports unemployment by a variety of methods (not counting so-called “discouraged workers”, not counting those who run out of unemployment benefits, not counting those ineligible to work, etc.), but for an administration official to acknowledge this deception is a rare event indeed.

If anything, we can take this announcement as a tacit acknowledgment of our worsening situation. It may also signify dissent within the Federal Reserve system (Bernanke’s re-appointment must have ruffled some feathers), but that is mostly speculation. What this does tell us, with some degree of certainty, is that our unemployment rate is far worse than officially recognized.

Once again this throws new light on Ben Bernanke, who has neither curbed unemployment or small bank failures. He has, however, kept inflation low at the expense of unemployment, saved a few big financial players, and allowed some large competitors of Goldman Sachs, AIG, Citigroup, et. al. (namely, Lehman Bros) to fail.

Issues concerning the everyday American appear largely beneath Mr. Bernanke’s concern. No wonder he was re-appointed!

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Written by pavanvan

August 29, 2009 at 5:06 pm

2 Responses

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  1. I don’t think its fair to characterize the BLS’s unemployment figures as “deception”. Even you acknowledge that the underreporting is “well known”, and it’s well known because the BLS is very forward about its methodolgy and there are about 1,000 academic articles on the BLS’s methodology.

    The fact is, the BLS does not underreport unemployment because it wants to, but because it has to. Unfortunately there is no positive, empirical way to differentiate between certain types of people without a job. For instance a graduate student and a stay at home mom (or dad if we need to be progressive about it) are something different than the factory worker who got laid off 16 months ago and hasn’t found employment. All three are “jobless” but only 1 is genuinely unemployed.

    To differentiate the jobless from the unemployed, however, would take a a herculian survey and tons of people manning the phones every week. This is expensive and the literature suggests not valuable.

    Instead, the BLS has chosen to systemically exclude the “discouraged” unemployed because the marginal cost to obtain this information is not worth its marginal value. The key driving force here is in a very significant and cheap information source: state labor offices which typically require people on unemployment benefits to submit applications for employment on a weekly basis. Because it is cheap to find information on people submitting job applications and it is incredibly expensive to differentiate between the jobless and the unemployed, the BLS has for decades decided, quite reasonably, to base unemployment figures are those actively seeking employment (i.e. those submitting applications for employment).

    Deception it is not. If there is deception, it is driven, not by the BLS, or even the FED, but the media who have no time for nuance and desperately seek to present all complex issues in tidy boxes that can be satisfactorily presented to an American public with a pathetically short attention span.

    BG

    August 31, 2009 at 6:42 pm

  2. Well, I guess we can disagree on the impetus of the fixing of our unemployment figures. I don’t doubt that negating “discouraged workers” helps with the collection of data, but I also think it conveniently understates the extent of the situation before us. I’m sure our leaders would much rather have us believe unemployment is 9.4% than 16%. Hence the surprise over the admission. So while many reasons exist for the BLS’s selective omission, I believe presenting a rosy picture for the public ranks chief among them. Thus, deception.

    As far as your analogy of the single mom is concerned – it is valid, of course, but I do not think it represents most cases. I am more concerned with the neglect of “under-employed” persons, persons who have run out of unemployment benefits, and persons who have lost faith in the employment market. These are all very definitely “unemployed”, yet are not represented in government statistics.

    I think you’re right about the role of the media in this (so-called) deception. I was certainly not attributing all of the blame to the BLS, who certainly has no easy task to perform. But the touting of 9.4% unemployment by nearly every establishment figure as a solid fact – well, surely that constitutes deception.

    pavanvan

    August 31, 2009 at 10:16 pm


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