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Friday, September 4, 2015

Weak August Jobs Data: How To Read The Numbers

Legal cases and investigative jobs tend to heavily use and depend on statistical analysis. The closest many people get to this analysis is reliance on government data, so let's look at this morning's just released jobs data from the Bureau of Labor Statistics.

Look at summary chart A first. This is summary information and is seasonally adjusted (meaning the government does not have the excuse of seasonal fluctuations yet, as with all data, reserves the right to correct the data later. This is very common.)

I advise people to look at any percentages by looking at the denominator. Employment statistics including the headline "unemployment rate" (of which the main rate reported by everyone is the "U-3" rate, and is down to 5.1%) involves the numerator (the top number in the fraction), but the denominator determines what the percentage is. The easiest way to affect the quotient (the result), to get the percentage you want, is to affect the calculation of the bottom number (denominator).  And what is the denominator? It's the labor force!  Reduce the labor force number, and you can get a lower unemployment rate, even when real employment may be declining (that is a separate issue entirely involving hours, wages and so on -- that gets to real income.) simply because the labor force denominator is getting smaller, either in real terms or in relative terms (such as when it grows less than the numerator).

Go eight lines down to the line item "Not in labor force."  Then look to your right for the first column (August 2014) and the next to last column (August 2015). Comparing these two columns' data will show a year over year change so you are getting the truest (we think) comparison whereas month to month comparisons (i.e., August 2015 versus July 2015) are always prone to seasonal fluctuations.

You'll see that the 12-month change (August 2015 vs. August 2014) shows the people not in the labor force is about two million greater than this time last year.

Then go to "civilian labor force" which is the second line. Look at the columns again. The increase year over year is barely one million.

This means the growth, seasonally adjusted, of the population not in the labor force is about double what the growth of the labor force is.

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