Fun with numbers: The unemployment rate

There are signs that things are better than our depressed emotional states may think they are where the economy is concerned.

Today, state officials say Minnesota gained jobs for the second consecutive month in June.The Minnesota Department of Employment and Economic Development says the state’s seasonally adjusted unemployment rate dropped to 5.3 percent, down from 5.4 percent in May. The U.S. jobless rate held steady at 5.5 percent in June.

Unemployment is never a good thing for those involved, but it’s not entirely as if we’re crashing and burning.

This graphic, by MPR’s Than Tibbetts, tells me that one of the reasons things feel so unusually bad right now is that they were so unusually good before. But in the big scheme of things, they’re generally…. usual.

unemployment_june.gif

It was interesting — to me — to listen to Cathy Wurzer this morning talk to three people about their experiences with the economy. Two of the three were doing pretty well — the health care consultant in Rochester and the outfitter in Ely. The third — a person in the lumber business — said things were pretty poor and we’re a long way from getting back to “where we were,” but he said there are positive signs that things are starting to turn around.

However, MPR’s business reporter, Annie Baxter, has put together a documentary that takes a look at the economy in Minnesota these days. The first installment — posted online — was decidedly downbeat, mostly because it focuses on the housing industry. Clearly, we’ve learned by now, the housing industry ripples through the entire economy, and it dominates the news.

But the comparatively upbeat employment picture of the last couple of months suggests that there’s at least the possibility that the drumbeat of negative news is not entirely warranted. The fact is, most people in Minnesota haven’t lost their jobs. And most people in Minnesota won’t.

Other nuggets from the employment report:

* While the U.S. lost 438,000 jobs through the first half of this year, Minnesota added 1,900 jobs. We’re not rolling in boom times, of course. But we’re not a “cold Detroit” either.

* According to a news release from the state, “Manufacturing added 1,300 jobs during June. The state’s manufactured exports are up nearly 10 percent this year through May.

Other sectors gaining jobs this month included Government, and Education and Health Services, which each gained 1,400 jobs. Growth was also seen in Financial Activities (up 900), Other Services (up 600) and Construction (up 600).”

* Contrary to what you may have heard, government is not expanding, at least in terms of the number of state workers as a percentage of the total labor force. Taking people who work for the courts and Legislature out of the mix, the ratio of state workers to the labor force is relatively unchanged over the last 8 years. There is one state worker for every 55.8 members of the labor force. A year ago it was one for every 56.3 and in 2004, it was one for every 55. (These numbers are as of Jan. 1 each year.)

  • bsimon

    The question is whether the unemployment rate really reflects the economy and/or the rate of unemployment. It does not. The unemployment rate measures the number of people eligible to collect unemployment benefits compared to the size of the workforce. It does not tell us whether the workforce is growing or shrinking.

    to find that, we can go to another part of the documentary called ‘The Minnesota Slowdown’. At the bottom of one page ( http://minnesota.publicradio.org/projects/2008/07/16_minnesota_slowdown/ ) is a fascinating graphic that shows the changing MN workforce from 2000 to today. According to this graphic (which is very cool, by the way), the MN workforce has shrunk between 2000 and 2007. According to the graphic the total difference in jobs is: -109,087 (-4.4%) jobs lost between 2000-2007. The peak (q4 2000) shows 2,607,563 jobs, while the latest numbers ( q3 2007 ) show 2,368,847.

    So, again, is it relevant to point to the ‘unemployment rate’ as a valid indicator of the labor market generally or even the economy as a whole? Or is it a limited statistic that we should be wary of reading too much into?

  • Bob Collins

    Actually the size of the labor force is growing, actually. The URL is here.

    The number of people employed is not substantially different from 06 to now. 2,781,438 are now employed. 2,784,863 were employed in 2006.

    Now compare the gnashing of teeth now with 2006.

    The total employed in 2000 was 2,692,652. My math says that’s 89,000 more people employed today than in 2000.

    I don’t know what the origin of the data is in that graphic but I’ve asked because it doesn’t mesh with the state numbers. It oculd hinge on the definition of “all industries.”

  • Mark Gisleson

    Are you sure your graph is measuring the same kinds of numbers? I know the feds have tinkered with the unemployment formula many times since ’83, with each change in the formula making our unemployment numbers more and more understated. I would be surprised if the same wasn’t true of the state’s numbers.

    And what about pay in real dollars? If you ignore the top 10% of wage earners (who’ve seen ridiculous unmerited increases in their pay), I’m guessing the total number of dollars earned has been fairly constant, with each worker’s share declining steadily over the years.

    But what I’d really love to see is a graph showing how many Minnesotans are now self-employed, and what their average income is. I think this would be fascinating since, as we all know, the self-employed aren’t legally required to make minimum wage, and I think more than a few don’t.

    As to whether the work force is growing, well, I would hope so. The relevant question is whether or not the percentage of Minnesotans in the work force is growing?

  • Alison

    As an analytical chemist, I plot a lot of results. It really drives me crazy to hear journalists and politicians talk about trends when numbers are going up or down by one number in the last decimal place since the time before. This almost certainly does not make a trend. To really see a trend, you would have to graph quite a few points and see what the noise in the graph looks like. From the graph you provided, certainly a loss or gain of 0.1 is essentially no change.

    I really wish journalists were required to take a basic stats course before using them. I also wish they would call politicians on it when stats are used inappropriately. I’d like to hear “But Senator/Represntative/Commissioner…, isn’t that trend you just noted not a statistically significant change?”.

  • Lily

    I have said for a while now that reading and participating in Cut is good for one’s mental health. Today is no exception. Thanks for this uplifting piece.

  • bsimon

    Bob, thanks for the link.

    Looking at the state’s data, it appears the unemployment rate on that table is the difference between the labor force participation rate & the employment to population ratio. Comparing to 2006, when there was less ‘gnashing of teeth’, we see the labor force participation rate has gone down ( 73.0 to 72.3 ), but not as fast as the employment to population ratio ( 69.7 to 68.5 ). The gap – the unemployment rate – has risen from 4.5 to 5.3. Given the direction of the trend, why wouldn’t there be more teeth gnashing this year than last?

  • Paul

    Do you have any more lipstick to put on this pig? I second Alison’s suggestion that people get some basic stats under their belts before they pretend to tell us how things like the economy are doing. A little basic economics would be nice as well. One factor that is always completely overlooked is the Job Vacancy Rate: http://www.deed.state.mn.us/lmi/publications/jobvacancy.htm

    This compares the number of job available to the number of people seeking employment (which is always underestimated because we stop counting those for whome unemployment runs out before they find a job). Last year at this time there were 2.5 unemployed people for every available job. The new figures are due out next month, but I don’t expect they’ll be that much better. This means that the economy is not producing enough jobs to employ even half of those looking for work, those people are just not going to find work.

    Finally, we’re told that the jobs created where in the manufacturing sector, but how much do they pay? If your replacing median or high wage jobs with low wage jobs you’re reinforcing an over-all downward trend in the economy. We should discuss job creation without also discussing the wages of the jobs being created.

  • c

    /But what I’d really love to see is a graph showing how many Minnesotans are now self-employed, and what their average income is. I think this would be fascinating since, as we all know, the self-employed aren’t legally required to make minimum wage, and I think more than a few don’t./

    For Mark G:

    story of the Hoop dancer:

    The Hoop represents life and we all dance with the Hoop in our own way. There are those who jump through Hoops when told, and those that hold Hoops, yet still they jump through the Hoops of others. Then there is the True Hoop Dancer. No longer jumping through the Hoops, he/she is the wise one that always chooses their own path. What sort of Hoop Dancer do you choose to be?

  • Bob Collins

    Here’s the update from the smart folks on the numbers discrepancy. As usual, I was right. (g)

    “There was a problem with how the overall data was being aggregated. It’s been fixed, and now shows a bump of 93,702 jobs in Minnesota between 2000 and 2007. ”

  • Bob Collins

    BOB NOTES: The problem I have with the folks with “a basic understanding of statistics” is they use them to foresee the future. I can’t say I’ve been impressed with the track record. This isn’t the first recession we’ve had, it won’t be the last, and it’s improtant to keep in mind that it’s a key ingredient of politics to make you think either that (a) things aren’t as bad as we thing or (b) things are worse than we think.

    We can wring our hands and we can diminish the qualificationz of others to comment on how we “feel” about the economy. But in the end, I prefer to go with a true guideline: this, too, shall pass.

    Statistics are great, numbers crunchers. But while they might tell you the sky is falling, they’re not telling you it’s going to fall.

    We do that on our own.

  • bsimon

    “Here’s the update from the smart folks on the numbers discrepancy. As usual, I was right. ”

    Sadly, the repair did not account for the 24 thousand + jobs lost in ‘Information’ in the last quarter. Anyone know what happened there?

  • Tom Hughes

    Do you really think construction employment was up by 900 jobs? Quite unlikely. Unfortunately there is a statistical abnomaly that shows up quite strikingly during a rapid drop off in employment, and that is called the Birth/Death factor that the US Labour Bureau drops into the stats. It looks back over last couple of years at the growth of employment and makes assumpltions based on past sector growth.

    In 12 to 18 months you will find adjustments coming from the Labour Dept that will adjust away all these new Construction and Finance jobs.

    Things are not as upbeat as they may appear by the Stats.

  • c

    I love it and raise an eyebrow when people make comments on who and what is smart.

  • Victor

    Despite the stats, I see lots of high paying jobs posted on employment sites –

    http://www.realmatch.com

    http://www.indeed.com

    http://www.simplyhired.com

    There are 100K, 150K and 200K jobs.

  • Paul

    “BOB NOTES: The problem I have with the folks with “a basic understanding of statistics” is they use them to foresee the future. I can’t say I’ve been impressed with the track record. This isn’t the first recession we’ve had, it won’t be the last, and it’s improtant to keep in mind that it’s a key ingredient of politics to make you think either that (a) things aren’t as bad as we thing or (b) things are worse than we think.”

    I think this “note” illustrates one of the biggest problems we have as citizens trying to make or, more accurately, avoid making public policy. First of all, back to the basic statistics thing, one should know that statistics are not necessarily about predicting anything, the stats we’re talking about are descriptive, they attempt to tell us what our current situation is, and what has been going on for the last year-month-quarter- whatever. Knowing todays unemployment rate doesn’t tell you what it’s going to be next month. Stats are just tool, they can be used to attempt to predict future trends, in the right hands they work well. The problem is that as a society we conflate things like economics and stats with ideology and politics. Hence Bob starts out talking about statisticians and ends talking about politicians as if stats are a tool for politicians rather than an attempt at rational examination of economic trends.

    The “predictors” with the worst track record over the past 30 years have been the free market ideologues, they have practiced faith-based free market cheer leading under the guise of market analysts, statisticians, economic corespondents, and economists. We’ve been told that housing prices can only go up, and that a national housing crisis is impossible. Then we were told that the this was just a bump in the market, and that “they” expected prices to be climbing again by Sept of last year (chief economist at Wells Fargo came up with that one). Then we were told that the housing crisis couldn’t affect the over all economy, that energy prices were going to come down… etc. etc. None of this was based on any rational examination of the economy, it was all wishful ideology masquerading as analysis- the market just doing its thing.

    Two economists that I know of who have consistently gotten it right are Paul Craig Roberts, Micheal Hudson. They’re not free market idealogues so they are not to be seen or featured in mainstream media, but there they are nevertheless.

    Will this pass, well yeah, everything passes. The question is how bad will it get, and what will it look like in the aftermath. Economies do collapse, and there’s nothing magic about the U.S. economy. It could be that if we don’t start making good economic, and energy policies, by the time this passes we’ll look like Argentina ten years ago. The question is will we use the rational tools at our disposal to make good policy, or will we be blinded by ideology (i.e. “optimism”) until it’s too late?

  • Bob Collins

    Actually bob started out talking about the EMOTIONAL connection to the economy. The politics part of is merely the manipulation of that emotional for the personal benefit of the politician.

    For the purposes of this exercise, when discussing how bad the economy is, then, tell me about YOU. Tell me how the economy has personally affected you and we can match whether the emotional response is appropriate.

    Paul, when you say “our” who do you mean? The “situation we’re in” is much different for the person who’s been unemployed than the person who hasn’t.

    I’m not suggesting anything in the way of an economic policy, I’m not suggesting re-evaluating whether an individual state of depression (economic and otherwise) should or shouldn’t contribute to a change in policy. I’m suggesting that as individuals, re-evaluate whether it is PERSONALLY as bad as you think?

    Take the Star Tribune this morning. The entire local content was crime stories. Does that mean crime is increasing? Does it mean the chances of us being victims of crime are increasing?

    No, it does not. But it may increase the perception that our INDIVIDUAL situation and prospects are more dire than they really are.

    Drop the “our” and talk about the “you” and let’s see.

  • Paul

    Bob writes: “For the purposes of this exercise, when discussing how bad the economy is, then, tell me about YOU. Tell me how the economy has personally affected you and we can match whether the emotional response is appropriate.”

    OK, this is getting a little bizarre. I assumed that since absolutely no data or information pertaining to, or demonstrating any collective or individual level of “depression”, or any other EMOTIONAL state is contained in the article, that the reference to depression was merely a rhetorical device. Apparently, this is not the case. Apparently, we are conducting a therapy session here whereby MPR will sort out for me whether or not my current EMOTIONAL response to the economy is appropriate based on the latest round of unemployment figures for MN.

    Unfortunately, I’m not in need of therapy, I am not depressed about the economy or anything else, I am happily married, and my wife and I are doing well financially. I am simply acting as a responsible citizen/community member trying to rationally evaluate the current economic condition of my city, state, and nation. I must say however, as someone with extensive experience treating mental illness, the presentation of unemployment figures, good or bad, is not an effective treatment regimen for depression or any other mental disorder. This departure from journalism into the realm of psychotherapy would seem to be ill-advised and the conflation of economics and psychology is even more troubling than the previously mentioned conflation of statistics and ideology.

    As to whether my emotional state, as fine as it is, should be a factor in the development of public policy, or the evaluation of current economic trends, only an idiot would suggest that it should. We need to make policy based on rational appraisals of our circumstances using reliable data that actually tells us what we need to know. Since the article suggests that we may be more alarmed that we should be about the state of the economy, it invites us, or so I thought, to re-evaluate the data upon which our alarm may be based, hence the discussions about statistics and different economic measurements. Since we have repeatedly been told by the majority of mainstream market analysts not to worry, only to see economic conditions deteriorate even further, skepticism would seem prudent.

    You appear to be suggesting that I may be more alarmed than I should be PERSONALLY, and that a review of recent unemployment figures may make me feel better. This is faulty logic. Economic statistics are generalizations, I am a specific, no economic figure affects me specifically. I may gain or lose my job regardless of unemployment figures. I may make more or less money regardless of inflation rates. I may buy or sell a home regardless of the mortgage crises. If I just lost my job, your unemployment numbers are not going to make me feel better. If I’m doing well, you’re numbers are irrelevant. This is a mundane observation, not serious economic analysis. The economy is what it is, it’s not what I “feel” it is whether it’s good or bad. If you’re telling me that I shouldn’t worry about the economy unless or until it affects me personally, well that’s the most uninteresting advice I’ve gotten in years. I’m pretty sure a guy just had to resign from the McCain campaign for handing out that kind of advice.

  • Bob Collins

    // or so I thought, to re-evaluate the data upon which our alarm may be based, hence the discussions about statistics and different economic measurements.

    That’s my question. Is the alarm based on data? Does the average person know the unemployment rate, the inflation rate, the GDP, the current interest rate and trends, the Dow?

    Or does the average person just know that gasoline is $4 a gallon and milk costs a lot more?

    That’s the question. What exactly are people reacting to?

    And just for the heck of it, Paul, engage int he discussion without the adjectives and the chip on your shoulder. You’re obviously a learned person capable of engaging in an intellectual discusssion without all the nonsense that permeates most other bulletin boards.

    Here at News Cut, we don’t believe a respectful tone is a weakness.

  • awakewitheyeswideopenbut’unlearned’

    unemployment only tracks those on unemployment. what about the unemployed without being paid by unemployment. there are quite a few and i have personally witnessed employers going to great lengths to keep from having to pay unemployment by unlawfully firing and disqualifying their employees.

    your graphs and pie charts aren’t counting everyone bob. i think that you should spend a day in the human resourses building on kellogg for a day. this might open your eyes. and you will get a good look at where your tax dollars are going as far as civil service paychecks are concerned. my question is that do all the civil service really earn their wages?

  • Paul

    I suspect that to the extent that the average person is alarmed, they are alarmed by the data, and their personal experience such as gas prices and milk. a slight dip in the unemployment rate notwithstanding, people should be alarmed. If people were more familiar with the figures, they would be more alarmed. The unemployment and wage numbers have been fudged several times over the past 20 years to make things look better than they are, and it’s still looking bad. This is the most seriously disfunctional economy since the great depression, and no one is even talking about any rational policies that could avert further deterioration. The Fed’s bag of tricks is empty, the White House is protecting the top 10%, and congress is to afraid to tell everyone what’s really going on. The media of course by and large has no clue at all. Remember when they told us our interest rates were going to go down when the Fed last lowered the prime? Now we’re being reassured that we don’t have to worry about our banks failing because of FDIC. We’re looking trillions of dollars bad debt and the FDIC only has something like 86 billion in reserve. There’s plenty to worry to about.