Understanding Unemployment Statistics

The magicians at the Labor Department have even Abbott and Costello totally confused

Many of my regular readers are well aware of my suspicions when it comes to any statistics and numbers coming from any of our governments. As the son of a financial controller/CPA and studied economist I have always maintained a deep respect for real and un-massaged numbers. Give me the raw numbers and keep all subjective interpretations to yourself is my sacred approach to reality.
So when I ran into this awkwardly enjoyable ping-pong conversation between Abbott and Costello I couldn’t help but smile from ear to ear.
Hope you will enjoy it too. It goes like this.
COSTELLO: I want to talk about the unemployment rate in America.
ABBOTT: Good Subject. Terrible Times. It’s 9%.
COSTELLO: That many people are out of work?
ABBOTT: No, that’s 16%.
COSTELLO: You just said 9%.
ABBOTT: 9% unemployed.
COSTELLO: Right, 9% out of work.
ABBOTT: No, that’s 16%. [Except according to John Williams, it’s about 22%]
COSTELLO: Okay, so it’s 16% unemployed.
ABBOTT: No, that’s 9%…
COSTELLO: Wait a minute. Is it 9% or 16%?
ABBOTT: 9% are unemployed. 16% are out of work.
COSTELLO: If you are out of work, you are unemployed.
ABBOTT: No, you can’t count the “Out of Work” as the unemployed. You have to look for work to be unemployed.
COSTELLO: But they are out of work!!!
ABBOTT: No, you miss my point.
COSTELLO: What point?
ABBOTT: Someone who doesn’t look for work can’t be counted with those who look for work. It wouldn’t be fair.
COSTELLO: To who?
ABBOTT: The unemployed.
COSTELLO: But they are all out of work.
ABBOTT: No, the unemployed are actively looking for work… Those who are out of work stopped looking. They gave up. And if you give up, you are no longer in the ranks of the unemployed.
COSTELLO: So if you’re off the unemployment rolls, that would count as less unemployment?
ABBOTT: Unemployment would go down. Absolutely!
COSTELLO: The unemployment just goes down because you don’t look for work?
ABBOTT: Absolutely it goes down. That’s how you get to 9%. Otherwise it would be 16%. You don’t want to read about 16% unemployment, do ya?
COSTELLO: That would be frightening.
ABBOTT: Absolutely.
COSTELLO: Wait, I got a question for you. That means there are two ways to bring down the unemployment number?
ABBOTT: Two ways is correct.
COSTELLO: Unemployment can go down if someone gets a job?
ABBOTT: Correct.
COSTELLO: And unemployment can also go down if you stop looking for a job?
ABBOTT: Bingo.
COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to just stop looking for work.
ABBOTT: Now you’re thinking like an economist.
COSTELLO: I don’t even know what the hell I just said!
And now you know why the government’s unemployment figures are improving!
And speaking of suspect numbers. Cut and paste this URL in your browser window and follow the instructions. I guarantee (most of) you will be flummoxed.

1 Comment

  1. Ameliaprivateeye

    At the bottom of your tax return you write in your “occupation”  – wouldn’t you love to see the raw number of tax filers who put “unemployed” in that box?

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