Thursday, February 10, 2011

It’s flat world after all

Love makes the world go around. In that case I better look into membership with the Flat Earth Society!  Kidding aside, I know how to fall in love. [I do so several times a day.] Distinguishing between love and fantasy is particularly important as we celebrate Valentine’s Day.

Named after St. Valentine in 500 AD the Catholic Church then rescinded the Feast Day during the Second Vatican Council in 1969 and the day is now largely a secular celebration of love, affection, and romance between intimate companions. $15.7 billion will be spent, including $681 million on gifts for pets.

I love my doggies, but buying them gifts for Valentine’s Day isn’t in the cards. My friends and I have spent the last 20 some odd years having a singles dinner. Happily for some they’ve graduated to coupledom – but we have some stalwart members. We have outgrown going to a fancy romantic restaurant as a large group to mock the couples cooing at each other. Bitter didn’t quite suit us as the aging process kicked in, so now we just go to one of our favorite places and toast saying “Next year with …”

Finding gainful employment in the current economy feels an awful lot like the dating scene.  Like modern romance, job hunting is virtually virtual.  There are more lookers than buyers. When you do find a match it’s not quite what it originally seemed, or the really good looking ones go quickly.

The unemployment rate fell to 9% from 9.4% last month and from nearly 10% a few months ago.  The political establishment are nearly triumphant in finding a cause-and-effect from the President’s economic policies to the unemployment rate. Fed Chairman Ben Bernake said this week that the reduction is "encouraging."  New jobless claims are at their lowest level since 2008.  The celebration is a bit premature.

Not to get too mathy – but according to the Department of Labor’s own press release  the unemployment rate drop of 4% represents a change of 600,000 jobs. In the very same report only 36,000 net jobs were added to the economy. This is a 564,000 discrepancy in one month and nearly 1.5 million jobs in the past few months. Jobs aren’t being created, the jobless are just disappearing.

More than half a million people, including me, fell off of the unemployment statistics in January. The Federal Government tracks unemployment based on those who are eligible for benefits. The maximum number of weeks an individual may receive benefits depends by state with the longest being 99 weeks. At the 100th week even if you don’t have a job the Bureau of Labor Statistics no longer considers you unemployed…they don’t consider you at all. Contributing to the murky nature of the rate are people who are underemployed (working part-time but want to work full-time).  It's no surprise that new claims are also decreasing:  eligibility has expired.

Out of the jobs that were created, The Week reports that 2/3rds of all jobs created in 2010 were "low paying jobs - $9 to $15 per hour."

Americans put a lot of value in statistics. One assumes that utilizing government resources that the statistic will be unbiased and consistent. How the Unemployment Rate is calculated takes 19-pages to outline its history and methodology.  The rate is not  consistently calculated and therefore comparisons from one period of time to another (i.e. the Depression) can’t really be done without adjusting the rate for consistency.  We can't just accept that "Avatar" is the best selling movie of all time without adjusting for inflation and currency adjustments all movies of all time.
The current Unemployment Rate melodrama is itself a sequel.  In 1981 Unemployment was high and the economy was in recession. President Reagan’s administration changed the methodology four times in a few years leading to a dramatic reduction in the unemployment statistic.

Did the chicken come first or the egg? Does the unemployment statistic go down due to a statistical change and then jobs get created because people think the economy is improving…or are jobs created and the unemployment statistic simply reflects it? The romantic idealist in me this Valentine’s weekend would like to think the latter, and is hopeful that the declining Unemployment Rate will lead more jobs becoming available. The eternally single guy in me knows that the former is much more likely.  The upside?  Next week Valentine’s candy is 50% off!

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