Friday, March 7, 2008

"The fundamentals are sound," or; How to lie with statistics

As you may have heard, companies cut 63,000 jobs from the economy in February, a staggering figure that seems to confirm the fact that the U.S. economy is indeed on the verge of entering or has entered a recession. But somewhat strangely, the unemployment rate also fell in February. Not too many people are familiar with the statistical methodologies that allow such a phenomenon to happen, but David Leonhardt spells it all out in a really good piece in today's New York Times. As Leonhardt explains, "the government's definition of the unemployed includes only those people actively looking for work. And last month, the number of people in that category fell significantly. It seems that more of the jobless gave up looking for work. So the unofficial number of unemployed fell, even as the labor market worsened."

The piece gives a short but rather interesting account of how the current methodology came into being. Well worth reading.

No comments: