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!

No comments:

Post a Comment