Monthly Archives: February 2010

President Obama, I Fixed Your Chart For You

You may have recently seen the new chart put out by the Obama administration pushing the idea that the President’s policies are responsible for the decrease in newly unemployed. It looks something exactly like this:

Now… as a piece of visual political propaganda, this is brilliant. The colors draw sharp contrast, the symmetry is appealing. And the numbers are right.

But keep in mind how carefully I phrased the units being used “decrease in newly unemployed”. This isn’t an increase in jobs or a decrease in unemployment. It just means that we’re losing jobs slower that we were before.

Make no mistake… this is good news. And we can bicker back and forth as to whether President Obama’s policies are responsible for this slowdown in newly lost jobs. He would say yes and point to the stimulus.

But in order to point effectively to the stimulus, we would have to take a look at the expectations of the stimulus. Everyone expected that we would come out of the recession eventually and that job loss would slow. The question was how quickly that would happen.

To help us visualize the expectations of the stimulus against the reality of it, I’ve added that piece of context to the graph. See if you can spot it.

I got these numbers by multiplying the labor force by the expected unemployment rate with the stimulus (per this chart) and then subtracting that number from the labor force times the actual unemployment rate.

One may say that this is unfair. I would actually kind of agree. Economic predictions are pretty hard to make. But the original chart is similarly unfair. Keep in mind that it took a few months to get the stimulus money out the door. In fact, they didn’t even release any data on the stimulus funds for second quarter 2009 (the first stimulus report was for third quarter 2009).

Side Note: This data has actually been scrubbed from the website. They’ve re-compiled the data into new categories. But I’m wary about trusting the data since it looks like, according to the official data, about $12 billion of the stimulus was spent before the stimulus was signed with projects being approved as early as 2000.

So the first several months of decline don’t even reflect the impact of the stimulus. The decline in new job losses seems to be just a happy coincidence that looks good on a chart.

Glenn Beck Tries to Duplicate My Visual, Messes Up The Math

Last week, I posted a new video on the recent budget freeze using colored cups of water (seen here).

The following Wednesday, during the morning Glenn Beck radio show, Glenn was introduced to my work. Apparently he liked it so much that he had his own version by the evening.

I made a lot of noise on Twitter about him taking my video, but that was because I thought he actually took my video as opposed to translating it into a similar idea. Taking my idea… who cares? I’m hardly in this for the money; if people understand something better than they did before and they were true to the data, I’m happy.

But that was the problem: I don’t know who was doing the math for the demonstration, but it was way off.

Let’s assume that the 100 gallons of water represented the spending over the next 10 years.

The reason we’re making this assumption is not because it makes sense but because we’re giving Glenn the benefit of the doubt. (Glenn implies that we’re looking at the budget for 2011, but he never says that so I don’t want to lock his meaning into something he might not have meant.) According to President Obama’s 2011 budget, we expect to spend $45.9 trillion from 2011 to 2020.

Let’s also assume that Glenn is using the “$250 billion saved over 10 years” number to represent the amount of money saved. I assume this because that’s the only number that I’ve seen that is “over the next 10 years”. If this is the case, then Glenn says that what looks like a shot glass (about 2 ounces of water) represents $250 billion.

I don’t know who did the calculations, but they got it pretty far off. If $45.9 Trillion is equal to 100 gallons, then $250 billion is equal to a 2 liter bottle of water.

That’s a lot of water to chug and not nearly as impressive a visual as the little shot glass. But it is accurate.

Like I said before, taking my idea is fine if you think it helps other people understand something better. But maybe next time someone should drop me a line to make sure you get your numbers right.

January Employment Numbers or How To Lose 1.1 Million Jobs But Keep The Unemployment Rate The Same

It’s that time again! First Friday of the month and job numbers for the previous month are released.

This month’s unemployment rate is (drumroll please…)

9.7%!

That’s a 0.3% decline in unemployment. But, if you’ve been reading this blog long enough you know that we can’t just let that go without caveats.

The Good Stuff

Good news is a matter of context. This news isn’t so much good in the sense that the economy is super awesome so much as it is good in the sense that it isn’t actively bad. But I’ll take “not actively bad” for now.

  • My big “thing” for the last half-year is that the nature of the unemployment rate calculation is hiding a huge story, which is the disappearance of the labor force. This latest report has the labor force increasing for the first time since August.
  • Actual employment increased a little over half a million (although comparing January to December is difficult because the population controls are altered at the beginning of every year). This is the biggest increase in approximately forever (since 2007).
  • The people who want a job but aren’t looking for one declined about 350,000.

The Bad Stuff

The good news on the job numbers is basically that they don’t suck. The bad news is that they really only look good when compared to December. Compare them to further back and they still look like of questionable.

For example, the last time we had 9.7% unemployment (back in August), we had 1394 million jobs. In January, we had the same unemployment rate, but only 138.3 million jobs. In 5 months, the unemployment rate is the same, but we’ve lost 1.1 million jobs. Mathematically stated:

August, 2009:
15.0 million people looking for jobs
divided by
154.43 million people employed or looking for jobs
equals
9.7% unemployment (139.4 million actual jobs)

January, 2010:
14.8 million people looking for jobs
divided by
153.17 million people employed or looking for jobs
equals
9.7% unemployment (138.3 million actual jobs)

Welcome to the world of job statistics. Basically, the unemployment rate is a measurement of people with jobs vs. people who are looking for jobs. If people stop looking for jobs for whatever reason, they move out of the “unemployed” category and even though a new job has not been created, the unemployment rate has gone down. Incidentally, I have a video on this phenomena that I made back in October (aired in November).

The Weird Stuff

You may have seen a headline along the line of “Payrolls Decline 20K as Unemployment Rate Falls to 9.7%” and said, “What the…?” This is basically the messy nature of statistics poking its ugly head up through the facade of mathematical certainty.

More simply stated: These numbers are estimates based on a set of surveys. The surveys are gigantic (tens of thousands of respondents) and employ certain controls to try to give a more accurate picture of what is going on. But there are two different surveys: one for household data and one for establishment data. Usually they show a similar picture. Right now they are showing a different one. The household survey says we have more jobs than last month while the establishment survey says we have fewer.

These numbers are not now, nor have they ever been, exact. But they’re good enough for government work (get it!).

My Dance Of Humility Before Robert Stacy McCain

Back at the beginning of September, Robert Stacy McCain stated that:

The FHA is on the hook for lots of “underwater” loans, taken out by low-income homeowners who got special low down-payment deals and — in case you didn’t notice — unemployment hit a 26-year high in August, with no prospect the 9.7% jobless rate will go down any time this year.

At the time, I wrote a post stating:

If unemployment dips below 9.7% by the end of the year, I will make a point that your enormous confidence in the suckiness of the economy was misplaced.

If it does not, I will write a humble post begging your forgiveness. I’m curious to see how this goes.

Therefore, I take note that Stacy McCain predicted the trajectory of the economy more accurately than I would have. I humbly beg his forgiveness.

I would like to take a moment, though, and explain why I wrote that post in the first place.

I am fascinated by neurology… particularly how the brain forms memories and how those memories interact with reality. The evidence that pretty much everyone has false memories (where we can vividly remember things that didn’t happen) is overwhelming. What I’ve found in the last 10 years of following politics is that this area is particularly vulnerable to people saying things about the past that they totally believe are true but are, in fact, based on a narrative that was established after the fact.

People look back in hindsight and say “Well, of course John Kerry was a terrible candidate.” But they’re only saying that because he lost. If he had won, the narrative would have been established that he was the right guy at the right time who ran a campaign of brilliance with these subtle nuances that connected with the people. We have this certain sense of fate through which we look as if the world we live in was one of inevitability and we realign our perspectives and (frighteningly) our memories to align with reality as it turned out.

That’s why I love the internet and blogs in general. I love to take the feeling understanding of a certain time and place and write it in stone. Looking back at September now, it seems obvious that we weren’t out of the woods at the time. But it didn’t seem obvious to me or to a large chunk of those writing about the economy.

That the unemployment situation was still on the downturn seemed obvious to Stacy McCain and at the time I was struck by how different our expectations were. Some people will look back at his post and say “Well, of course the unemployment rate wasn’t going to decrease. Everyone knew that.” This post is to point out that not everyone knew that and that it wasn’t an obvious thing. We shouldn’t discount those who are right about something because the narrative has made their very gutsy prediction seem obvious.

It’s worth keeping record of our reactions at the time and comparing them to how the world turned out. It’s worth pointing out when someone is able to make an accurate prediction. And Stacy McCain had me on this one.