Mark Twain once famously said there are “Lies, damned lies and statistics.” He was referring to his self-compiled statistics on his own writing production, but given Twain's general skepticism (he would probably have been a member of the Tea Party today), one can easily imagine him applying it to any number of figures supplied to us by the government.
It seems that for as long as I can remember, the government and the national media have emphasized the unemployment rate as a measure of our nation's economic prowess. Ronald Reagan, in his own Tea Party-like revolution in the 1980 election, often used it as the source of his famous “Misery Index” (along with inflation). While it may have accurately assessed the nation's misery at that time, even then it failed to accurately spell out our nation's growth.
It turns out the unemployment rate really doesn't correlate well with economic growth (as measured by our nation's GDP. In fact, there's only a 31 percent correlation with the GDP. On the other hand, our total employment correlates very well (i.e., 98 percent) with GDP growth. A white paper by Joseph LoMando explains this. Titled “What Employment Data Tells Us About the Economy,” LoMando says he was able to derive this better correlation “within minutes.”
What's amazing is that the correlation discrepancy between the unemployment rate and total employment traces back before Reagan's Misery Index. And yet, government bureaucrats and the popular media have continually cited the unemployment rate as some sort of viable indicator of our economy. Except for searching deep within the bowels of government data, you’d be hard pressed to find the total employment numbers bandied about.
Which is too bad, because then no policy maker would have any place to hide. Even though the unemployment rate was worse during Reagan's first term and the economy suffered its infamous double-dip recession, total employment dropped in only one year. Contrast that to today's recession where total employment dropped for three straight years (2008–2010).
While the Reagan Revolution saw us top our total employment record only one year after we lost net jobs, the movement of the unemployment rate is arguably worse (or at least no better than) under Reagan compared to Obama's tenure despite the fact it's been six years since our last total employment high and, given present trends, it might take until 2015/2016 to surpass that old high. Another way of saying this is Obama would have gone nearly two full terms without breaking the total employment record set in the previous administration.
So the next time you see some talking head bloviating about the latest unemployment rate statistics, ask them to explain the total employment figures. If they claim they don't know anything about this number, keep digging.
There's bound to be a pony in their somewhere.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
