Thursday, February 9, 2012

If Abbott and Costello discussed the unemployment rate

Thanks to Andi Gilbert for forwarding this to me.  I've always told people that "unemployment rate" is an unreliable economic indicator.  It's even less reliable at the local level than nationally.  More often than not, employment and unemployment rise and fall together in small counties, making a mess of the UE rate.  Adding to its lack of reliability is the fact that the way it is estimated, a mass layoff in San Diego actually affects the UE rate way up in Siskiyou County.  I am not kidding!

(OK - I'll be fair - a mass layoff of 1,000 people in San Diego County is not nearly enough to move the UE rate in Siskiyou County by as much as 0.1 percent, but the way UE is calculated, it does move by a hair)


COSTELLO: I want to talk about the unemployment rate in America.
ABBOTT: Good Subject. Terrible Times. It's 9%.
COSTELLO: That many people are out of work?
ABBOTT: No, that's 16%.
COSTELLO: You just said 9%.
ABBOTT: 9% Unemployed.
COSTELLO: Right 9% out of work.
ABBOTT: No, that's 16%.
COSTELLO: Okay, so it's 16% unemployed.
ABBOTT: No, that's 9%...
COSTELLO: WAIT A MINUTE. Is it 9% or 16%?
ABBOTT: 9% are unemployed. 16% are out of work.
COSTELLO: IF you are out of work you are unemployed.
ABBOTT: No, you can't count the "Out of Work" as the unemployed. You 
   have to look for work to be unemployed.
ABBOTT: No, you miss my point.
COSTELLO: What point?
ABBOTT: Someone who doesn't look for work, can't be counted with those 
who look for work. It wouldn't be fair.
ABBOTT: The unemployed.
COSTELLO: But they are ALL out of work.
ABBOTT: No, the unemployed are actively looking for work... Those who 
are out of work stopped looking. They gave up and if you give up, you are
no longer in the ranks of the unemployed.
COSTELLO: So if you're off the unemployment roles, that would count as 
   less unemployment?
ABBOTT: Unemployment would go down. Absolutely!
COSTELLO: The unemployment just goes down because you don't look for 
ABBOTT: Absolutely it goes down. That's how you get to 9%. Otherwise it 
would be 16%. You don't want to read about 16% unemployment do ya?
COSTELLO: That would be frightening.
ABBOTT: Absolutely.
COSTELLO: Wait, I got a question for you. That means there are two ways 
to bring down the unemployment number?
ABBOTT: Two ways is correct.
COSTELLO: Unemployment can go down if someone gets a job?
ABBOTT: Correct.
COSTELLO: And unemployment can also go down if you stop looking for a job?
ABBOTT: Bingo.
COSTELLO: So there are two ways to bring unemployment down, and the 
   easier of the two is to just stop looking for work.
ABBOTT: Now you're thinking like an economist.
COSTELLO: I don't even know what I just said!

Tuesday, January 24, 2012

2012 Economic Forecast Conference

Okay, now that I've figured out how to get back into my own blog...

This year's Economic Forecast Conference, hosted by my office, the Center for Economic Development, was a bigger event than ever.  I'm really proud of my co-workers for organizing it (I wish I could take any credit for that) and of my community for getting behind it!

I got a lot out of the conference this year and I promised to write about it, but unless you want to read another blog thesis, I'll limit the post to my response to one comment from one of the presenters.  If you want to know what other kinds of neat things we learn at this conference, you'll have to come on down next year.  :)

So, the comment that kept sticking in my craw was uttered by the Federal Reserve economist, Dr. Gary Zimmerman.  Now, Gary's been doing this kind of stuff for some time and passing thoughts on his part can me major revelations on ours.  The comment had a lot to do with macroeconomics, which is something I don't promise to get into very often, but it also has to do with economic measurement (data!!!).

The comment that got to me?  Dr. Zimmerman mentioned, somewhat in passing, that ending unemployment benefit extensions are likely to hurt the economy.  Now, I've heard much of the political back and forth about unemployment and don't look for me to get into any of that here, but I had two competing reactions to this:

Reaction 1:  "Oh my gosh, he's right!"
Reaction 2:  "Oh my gosh, that's sad!"

It's right because if we stop unemployment insurance payments, that is income that would go away and not be replaced by anything else.  That leads to the sad part - we're propping our economic growth with deficit spending.  I mean, that's like me taking $10,000 in credit cards and telling people I got a raise -- but in the odd accounting of GDP, that's exactly how this works.  Money is borrowed to pay for unemployment (and other) benefits, which in turn becomes income for the recipient.  The recipient spends the money and it becomes income for someone else, etc., etc.  Except for one little problem - the government has to pay that money back, somehow and sometime.   Until it does, the debt accrues interest, and that just makes this borrowed money more expensive.

The larger issues this brings up is: our GDP growth is not discounted by the amount the federal government goes into debt to support it.  Well, heck -- that means we just have to go further into debt to grow our economy, right?  But it seems to be it would be more accurate to discount deficit government spending from the GDP.  That's where the data comes in!  We have other adjustments to GDP like the GPI and the GNH, why not one that more realistically measures economic growth corrected for deficit spending to support it?

Hmmm.  New data to analyze.  Yeah, that'll work.

Wednesday, January 11, 2012

Welcome to my Regional Economics Blog!


I've been wanting to do this for some time now.  In case you don't know me, hi!  I'm Warren Jensen.  I'm a project manager and regional economist for the Center for Economic Development at California State University, Chico.  For the past 12 years, I've managed projects involving community data research and analysis, including regional economic, demographic, and social statistical profiles, economic impact analysis, retail gap analysis, community indicators, and regional economic clusters.  Learn more at

In short, I'm a data geek!

So what?  Well, in my years on studying and analyzing community data, I've come to realize a few things.  First, there is no perfect data.  Let's face it, data is collected and disseminated by human beings, each with their own bias, preconceived notions, and sometimes, people just have an ax to grind.  Over the years, I've learned how to separate the fact from the fantasy so I can give you, the public, an unbiased, non-judgemental, ax-free perspective on your community!  Wouldn't that be nice for a change?

I'll try and post every week, but more realistically, I'll post when I can or when I come across a particularly interesting (or exceptionally egregious!) data or analysis.  I'll post when I have an update on my facebook account, so friend me at, or on our CED Website, so check back often!

I'll try to keep these short.  If you're as busy as I am, you don't have time to read a thesis every week.

For my next post, I'll provide my insight and perspectives on the topics discussed at CED's 12th Annual Economic Forecast Conference, which is tomorrow.

Thanks for reading, everyone, and stay tuned for some data fun - I promise!

- Warren.