Friday, 5 April 2013


I'm deviating a bit from bike talk here, but it's irked me for years how media, and therefore the collective social intelligence discuss unemployment rates as barometers of the economy. 

For those who are innately familiar with the statistic, how it's calculated, and therefore it's measured changes have a context to you, that's great.

It sounds so simple, but it isn't.  Unemployment rate is the ratio of those who are unemployed divided by the labour force.  Makes sense.  However, those two variables have a lot of caveats, which statistically speaking, are valid.  In reality though, they give a lot of ability to modify the number - who's discouraged?  Who's in the army?  Who can't find work at their level?  Who is actually in the labour force?  The descriptions here illustrate where, and why there's leeway.

Sometimes its good to step back to the more abstract.  Less unemployment is good, meaning more employment is good. 

Why don't we look at something more fundamental.  If we're measuring the health of an economy, why not use Employed/Population?  The only way to fudge that one is to not count illegal immigrants, although most census data appears to capture them, and/or to hire more people on the taxpayer dollar (not the best system, but at least you in theory get more output that way than just paying benefits).

You may say this is irrational, as babies and grandmas aren't workforce.  But they are part of a nation's population, and they do consume national resources to care for.  Therefore, in comparing health of nations, those with higher Employed to Population ratios are likely to be somewhat better off.  Each person employed is one less on the dole, one more paying tax, one more paying into pensions, one more person who has better cash flow than collecting government checks provides.  If you're on a boat crossing the Atlantic with 100 people on board, you're better off wit 64 people rowing than with 57 people rowing.  Simple.

At times the US and Canada have appeared to be 4 percentage points apart (low-mid 60% level vs high mid 50% level). 

At the very least, help me understand how the US' poor trend correlates to the incredibe performance of major US indicies such as the S&P 500 and DJIA year to date.  It just doesn't make much sense to me.

IMHO, this is also why countries who surpress an additional half of their work force capability into not being able to be productive, are economic backwaters.  Women are capable of much more than what many places on earth let them contribute.  Not hard to pick those countries off this list.

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