Scrivener.net

Wednesday, July 27, 2005

Misleading with numbers. Or: Is today's labor market really as weak as many claim? Let's compare...

The current unemployment rate at 5.0% is significantly better than the average for the last 30 years. But the bad news bears out there aren't having any of that. They say that the job market really is in bad shape, and since it is that unemployment number must be hiding something.

Their explanation #1 is that things are so bad that millions of people have totally given up even looking work, and thus aren't counted in the unemployment rate. That's it ... in fact, that must be it as a matter of arithmetic if we are to have a better than average unemployment rate in a bad job market.

But that's not all they cite. Paul Krugman writes...
... adjusted for inflation, average weekly earnings have been flat for the past five years ... As Berkeley's J. Bradford DeLong writes on his influential economics blog, "We have four of five indicators telling us that the state of the job market is not that good and only one - the unemployment rate - reading green."
... quoting Brad DeLong's ....
Four Out of Five Indicators Say the Job Market Really Is Weak

It's not just employment-to-population ratios. It's real wage growth. It's the relative amount of long-term unemployment. It's payroll employment. We have four of five indicators telling us that the state of the job market is not that good and only one -- the unemployment rate -- reading green.
Such claims can be found today all over the left-liberal side of the econo-blogosphere. But are they true?

[To find out, by comparing the numbers for those five indicators today to the numbers for them at the same point in the last business cycle which lead to the "miracle economy", read more.]