FUN WITH NUMBERS : MAKING UNEMPLOYMENT FALL / MONEYNEWS.COM ( HIGHLY RECOMMENDED READING )

Fun with Numbers: Making Unemployment Fall

Friday, December 4, 2009 11:45 AM

By: Michael Carr

How can the unemployment rate decline by 0.2 percent within hours of a White House jobs summit?

That’s easy, just make a few assumptions.

To start with, we can assume that the number of people who need a job declined last month.

That’s what government economists did. They decided that, since jobs are so hard to find, another 96,000 people voluntarily decided to leave the work force last month. Perhaps they did. Nobody knows.

Then we can ignore anything that might have raised the unemployment level. While the population of the United States increased by 193,000, for instance, economists presumed that none of them decided to look for a job that month.

Normally, more than half of those folks would in fact be job hunting and probably were.

Finally, let’s ignore the fact that the Fed says small businesses are suffering the largest credit contraction in history. Let’s decide, just amongst ourselves, that small companies — the backbone of U.S. employment — still somehow managed to create 30,000 jobs.

Thirty-thousand new jobs would be in line with the long-term historical average, and the economists creating the report seem to have concluded that nothing right now that would make job creation below average, credit problems or not.

Add it all up and the report shows the number of unemployed declined by 110,000, using non-seasonally adjusted numbers.

Get rid of these assumptions, however, and unemployment would be almost 11 percent, about the same as last month’s “real” number, once when the rosier assumptions are removed.

The only thing we can safely assume at this point is that a high-profile, press-ready jobs summit just isn’t engine of economic growth.

But fooling with numbers can do magic in minutes, if you like.

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