The hidden-unemployment fallacy

With news this morning that the official unemployment rate has dropped to 8.6%, the titans of media punditry have jumped into their Olympian sumo ring to tussle over whether this is good news or not-good-enough news. The argument is deeply flawed because it's based on inadequate statistics and methods, which every statistician admits readily.

The top talking point in the mainstream (corporate) media is that because the number of jobs created is less than that needed to mathematically reconcile the new lower unemployment rate, medium-city-sized groups of people are "giving up" on finding a job, so can't be counted in the labor-force survey, and are therefore "hidden" from the numbers, making the numbers worse in reality.

Can we think that through for a second? What could that actually mean in real life? Are we saying that hundreds of thousands of people, formerly employed and recently looking for income, can just decide that income is optional?

On the radio this morning I heard one talk-show caller, identifying herself as middle-aged, aver that after months of looking for new work, she'd decided to "coast" till she qualifies for Social Security. Okay, fine. But if she can afford to "coast," and this is the critical question, isn't she irrelevant to the unemployment number? She's still out there paying for housing, utilities, food, fuel, whatever. She may be relying on family, friends or even charity, but she's not relying on public resources (otherwise she would be counted). It's hard to imagine how she fits into the kind of unemployment that matters to public policy.

If people are dropping out of the labor force, they must have the resources to do it, ergo they're not in any way "hidden unemployed." Maybe they're going back to school on their parents' resources, maybe they're starting their own legit or grey-market enterprises, maybe they're living on savings, but they still have money and they're still eating. Rather than weighing down the job market, they've made room for others who continue to look for work, and that's gotta be a good thing for the employment picture.

Is there a conspiracy here to promote the idea that the government is ineffective in dealing with unemployment? It's a tempting thought, but it's never a good idea to infer malice where incompetence will do as well. I expect that the media simply react to the numbers as if they're important, thereby making them important, the pundits apply their standard biases to the matrix, and with all that garbage going in, we naturally get garbage out.

Let's just try to avoid making stupid decisions based on garbage reasoning.