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Lies, Damned Lies, and Job Statistics
Why employment and unemployment are down at the same time.


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Mark Twain once said, “There are three kinds of lies: lies, damned lies, and statistics.” I doubt whether Mr. Twain would approve of our use of his quote for the purposes of defending supply-side economics, but on the other hand, he didn’t believe in the afterlife, so no harm done.

There is something odd that’s been occurring in the national statistics regarding employment and unemployment in America — and one half of that oddity has been reported. The press has spent a great deal of time and energy informing us about the decrease in employment in America since George W. Bush became president, and even in the past year while the economy has been in mild recovery. What they have neglected to report with as mush vigor is that at the same time, paradoxically, unemployment has been decreasing as well. We say “paradoxically” for a very specific reason. Someone once said that a contradiction is an attempt to hold two irreconcilable ideas in the same mind at the same time. On the other hand, a paradox is the attempt to hold two seemingly irreconcilable ideas in the same mind at the same time. Thinking about a contradiction is a waste of time: thinking about a paradox is a way to a deeper understanding of the subject matter being considered. The question is: What can we learn from thinking about the seeming paradox of a simultaneous decrease in employment and unemployment? The answer has been identified by supply-side economist Brian Wesbury, the chief economist for Griffin, Kubic, Stevens and Thompson. While there are some differences between what the unemployment and employment statistics are measuring, the most important difference between them is how the information is procured in the first place. Employment statistics are based on surveys of established employers — in essence, the good folks at the Bureau of Labor Statistics call up their contacts among employers and ask them how many people they are hiring currently and how many people they are laying off. The difference between those two numbers is the net increase or decrease in employment. This is called an “establishment survey.” When the economists are trying to ascertain the level of unemployment, on the other hand, they do so by surveying households rather than employers. In other words, they call the homes of individual Americans, and ask them whether they are employed or unemployed. What this seems to mean is that many people are employed who are not on the official payrolls of established businesses — at least not on the pay rolls of businesses that are sufficiently established as to be on the list of businesses that economists survey. In other words, the employment growth that is occurring in the economy is occurring “below the radar screen.” That includes businesses that are not sufficiently large enough to appear in the establishment survey, new business start-ups run by self-employed individuals, or even micro-entrepreneurial ventures or “free agent” work (like the new breed of white-collar professionals who juggle multiple consulting arrangements and are often based at home). This is to be expected. Recently we interviewed some executives with SCORE (the Service Corps of Retired Executives), an organization that offers free consulting to owners of small businesses. They told us that the number of requests for information on how to start a new business always goes up toward the end of recessions, and that over the past two years they have seen record numbers of people contacting them for help on business start-ups or attending seminars dedicated to the same. This is to be expected following a deflationary recession that hit large businesses with unionized work forces and heavy debt service more harshly than it did other industries. This is to be expected at a time when information technology has dramatically lowered the barriers to entry for small entrepreneurs. It will be some time before we know with certainty — that is to say, with statistical evidence — whether this boom of entrepreneurism has occurred beneath the radar screen; and of course, like most government statistics on the economy, the evidence will arrive long after it is of much use to investors and entrepreneurs. However, a good deal of early, tangible evidence is now available, and most of it portends good things for the United States economy. It appears that the industrial and telecommunications recession of 2000-01 has “hived off” a new generation of small entrepreneurs. Many of them will of course fail. But some of them will show spectacular growth and in so doing, eventually drive the employment and economic growth of the country.

— Jerry Bowyer is a radio and television talk show host and the author of the up-coming book, The Bush Boom: What the Data Says About Our Mis-Underestimated Economy. He can be reached through www.BowyerMedia.com.



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