Tag Archive for bad math

Dean Baker Completely Unaware How BLS Calculates Unemployment Rate

Holy crap, how did Dean Baker from the Center for Economic and Policy Research get a job writing about economics?

Check out this line of his report on the recent unemployment numbers:

The unemployment rate fell to 9.7 percent in May, primarily as a result of 411,000 temporary Census jobs.

Mr. Baker is apparently unaware of how we calculate the un2employment rate. Let’s help him out here.

First we take the number of people who have jobs. This is not the “non-farm payrolls” number, which increased by 431,000. It is the “Employed, 16 years and over” number which decreased 35,000 (from 139.455 million to 139.420 million). Mr. Baker seems to have those two numbers confused, so I thought I’d clarify.

Then we take the number of people who are looking for jobs but can’t find them. This is where we get the “unemployed” number, which decreased from 15.260 million to 14.973 million.

Then we add the employed number to the unemployed number and you get the Labor Force number. In order to calculate the unemployment rate, we divide the number of people unemployed from the labor force.

139,420,000 + 14,973,000 = 154,393,000 people in the labor force

14,973,000 / 154,393,000 = 9.7% Unemployment rate

Let’s try to prove Mr. Baker’s statement that the unemployment rate dropped to 9.7% “primarily” due to the 411,000 census jobs. We’ll subtract 411,000 from the “employed” number.

139,009,000 + 14,973,000 = 153,982,000 people in the labor force

14,973,000 / 153,982,000 = 9.7% Unemployment rate

We get the exact same unemployment rate with or without the census jobs. That is because unemployment rate dropped due to people leaving the labor force. And most of the people who left the labor force came from the “unemployed” category. Otherwise known as “discouraged workers”.

This is part of the reason that economic understanding is so dismal among the general public. An economic reporter should be able to get the simple facts right about a job report.