There are lies, damn lies - and statistics. – Mark Twain
On Friday the stock market rallied over 100 points on the news from the Department of Labor that the unemployment declined one tenth of a percent from 9.5% to 9.4%. The economy only shed 247K jobs in July, half the pace of previous months. The discerning might ask, if the economy actually shed jobs, how is it possible the unemployment rate declined instead of rose? Therein lies the paradox of statistics.
I’ll be the first to admit, I do not normally understand Government statistics, all the twists and turns, contortions, and adjustments to arrive at the answer they want. In this case, however, to get the .1% uptick the statisticians shrank the denominator twice as much as the numerator. In terms laymen can understand, the numbers of people counted in the civilian labor force as seeking work shrank by 422K. The assumption is that these 422K people became too discouraged to even bother looking for work anymore so they were dropped from the counts into the pool of people no longer in the labor force. My gut feeling is that the true unemployment rate in the country right now is somewhere in the 13-15% range.
I will agree, the fact that the economy shedding jobs at only half the pace of previous months is better news than expected, but one month does not a trend make. The politicians might like the feel-good message that unemployment shrank that coincides with their declarations that the stimulus has broken the back of the recession, but they just seem to be manipulating numbers to arrive at the desired outcome. Until I see a positive number (i.e., actual job growth, not a deceleration in shrinkage), only then will I believe the recession is starting to end.