Job Numbers May Be Meaningless But They Matter a Lot
Whether the reports are actually right---and they usually aren't---voters are nonetheless going to treat them as if they are.
So, the July jobs report is out. But Felix Salmon cautions against over-reading it:
Every month, policy wonks and data-heads pore through the 25 different tables in the report, sometimes looking at their own favorite number (U-6 is particularly popular these days), and sometimes just looking for something to jump out at them. (Look at what happened to youth unemployment among Hispanics!)
The latter exercise is particularly dangerous. When you have 25 tables, each with hundreds of datapoints, it’s a statistical certainty that one or two of them are going to be weirdly off in some way. If you then pull out that datapoint and read too much into it, you’re guilty of a logical solecism, a bit like two people who discover they share a birthday and then exclaim at how unlikely that is.
But even the simple check-out-this-headline-number exercise, which every major news organization goes through every month, is statistically dubious. The headline payrolls number has error bars which are more than 100,000 people wide in either direction: if the number everybody’s quoting is 163,000, for instance, all that really says is that there’s a 95% chance that it’s somewhere between 59,000 and 267,000. What’s more, there’s a good 5% chance that it’s outside that wide range. Take the last two years of payrolls headlines, and the chances are that somewhere in there, a number is more than 100,000 off.
And the unemployment rate is less accurate still. Most people will say that it ticked up this month, to 8.3%; the official news release is closer to the mark in saying that it was “essentially unchanged”. And if you look at the numbers it’s based on, they’re all over the place.
This month, the two parts of the report tell differing stories: the headline payrolls number was higher than most people expected, even as the headline unemployment rate went up. Look a bit more deeply, and things become ever messier, what with all the revisions and the changes in people looking for work, and the decrease in median unemployment duration, and so on and so forth. As a result, this month of all months it’s actually quite easy for the markets (if not the politicians) to move on to the next thing. After all, they have very short attention spans at the best of times.
This is all, of course, spot on. But I’m not sure that it really matters for our purposes. Haters are gonna hate and wonks are gonna wonk, after all. And, whether the reports are actually right—and they usually aren’t—voters are nonetheless going to treat them as if they are. To the extent that the July and August economic reports are important in shaping what Americans do on the Tuesday after the first Monday in November, the topline numbers are all that matter.
I think the point is (was) of the July Report is that there was positive jobs growth, although it is very modest.
In other words, the fall out from the 2008 collapse of the financial and housing markets is still with us and is ongoing.
I’m not so sure. The correct way to deal with all these numbers is to take them in as a rolling average. Good news, bad news, bad news, you do a rough average in your mind of how things are trending. Economics and finance junkies are going to collect more data and average over more news, but the process should be the same for the average person. It’s about trends.
Employment data is going to be amalgamated with news from Europe and so on.
Big picture, people know this is a sluggish recovery with downside risk. These numbers don’t change that reality or impression.
From a macro-economic perspective, employment is the most meaningful number of all. Deficits rise and families fail when people lose their jobs, and the social effects of mass unemployment are pernicious.
@Ben Wolf:
Perhaps it is a useful available number.
If we had a delta on family net worth and debt obligations that would be far, far better.
@john personna: Federal Reserve Flow of Funds reports will give you net worth, obligations (by type) and a bunch of other very useful data points.
Realclearpolitics are saying that because job growth is sluggish Obama should commit seppuku and Romney is automatically president.
Then again, they say that every week.
@Commonist: Random insertions of stupidity into the conversation is not particularly useful.
In fact, RCP currently shows Obama with a 2.7 lead in the national polls, a whopping 247-191 lead in the Electoral College, and a 58.5 to 39.8 lead on Intrade. They also link to a sampling of interesting op-eds from across the spectrum.
@David Anderson:
I think that’s both less frequent and less specific than my “dream number.”
The Flow of Funds has debt (and deposits?) while the Census Bureau is the only one reporting net worth?
@Ben Wolf: Absolutely correct and you’re going to see long term effects of changes already occurring like kids not going to college, not getting drivers licenses, families not relocating, kids living at home into later life, fewer marriages which are all going to be tied to lack of prosperity and will exacerbate the problems.
@James Joyner:
For a man writing for Outside the Beltway you are quick to defend a website that might as well be named “Inside the Beltway”.
That site’s poll aggregates are completely unrelated to the intellectually sterile bilge they compile daily.
The left-wing writers they sample are usually quite boring and wonkish and their right-wing picks are basically right-wing blog posts and Reaganomics dolled up in fancy words and written in establishment media formats. It’s a completely null site.
The longer high unemployment goes on the worse its effects will become. I’m beginning to think a Job Guarantee may be the best solution available to us, having government purchase all labor unwanted by the private sector.