Friday, June 03, 2005

How to Lie with Statistics

On top of yesterday's report (CNN Money) of 82,000+ lay-offs announced during May, today we find net job creation for May dropped to 78,000, the smallest monthly number in nearly two years.

The big "surprise:" the unemployment rate dropped from 5.2% to 5.1%.

The US needs to create at least 2 million net new jobs per year for 2001 - 2010 just to maintain 60% labor force participation. That assumes zero immigration for the entire decade. Why? Our birth rate & birth numbers took a sharp leap upward, starting in the early 1980's. Over 4 million babies a year turn into millions of new job seekers two decades later. "Boomlets" are flooding into the job market, and "Boomers" won't start retiring until the end of the decade (if then, but that's another story).

But where are the new jobs actually going? New immigrants, mostly illegal aliens, and foreign temporary workers (H-1b, L-1, etc. visas) are replacing citizens and earlier immigrants.

So how can we have young US-born workers pouring into the work force, plus more than one million legal (or legalized) immigrants, plus as many as three or four million illegal entrants per year, yet the unemployment rate is falling?

Statistical sleight-of-hand. None of those Americans seeking their first job (H.S. or college grads, plus school dropouts) are counted until they have been in the workforce (i.e. only those who have previously worked can be counted). Illegal aliens are notoriously difficult to count because they are evading the law. Furthermore, a Rutgers study about four years ago discovered that only half of all illegal aliens work, and half of those workers do so "under the table," i.e. untaxed and uncounted.

The biggest boondoggle is the "discouraged worker." After about 26 weeks, if you still cannot find a job, you are no longer "unemployed." You are out of the workforce!

The prime clue is the workforce "participation rate," the percent of the adult population counted as "in the workforce." From a peak of just over 67%, it is now back down to 60%. The potential participation rate for ages 21 - 65 is about 75%, which would allow for the quarter of adults who are full-time (mostly graduate) students, dependent spouses, independently wealthy, young mothers staying home with children, and the disabled. To reach maximum participation, we need to create nearly 40 million new jobs! (Again assuming we do not boost the number of adults through immigration.)

So the government can report "feel good" numbers, "look how low the unemployment rate is," while ever more people are desperate for a job, temp work, "freelance," "independent contractor," or home-based business owner in a crazed attempt to create-a-job.

And the underground or "black market" economy now exceeds a trillion dollars per year, or a tenth of our entire economy. That's economic disaster-on-a-rollercoaster.

Lies, lies, and damned lies.

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