Friday, October 26, 2007

Definitions Matter

Here’s a great example of why you should never put much stock into “the unemployment rate”. The headline gives a good clue:
New jobs boost unemployment
That’s right, job creation can increase unemployment, at least when “unemployment” is defined they way the government defines it.
PEORIA - The Peoria area, like much of the state, may be a victim of its own success when it comes to unemployment.

More jobs have been created in the region and throughout the state in the last year, and that has brought more people out looking for work.

As a result, unemployment was up considerably in September from a year earlier, according to statistics released Thursday by the Illinois Department of Employment Security.
You see, unemployment doesn’t mean “out of work”, it means looking for work and not finding it. There’s a big difference. The government’s unemployment statistic almost always covers up the segment of the population that has simply given up looking for work. These are mostly people who would work, but they have become discouraged at not being able to find anything. When more jobs become available, they resume their search for work and become “unemployed”. Silly but true.

1 comment:

chief said...

How does the government know who is looking for work and who is sitting on the couch waiting for the phone to ring?