As I have explained before, there are solid reasons to apply statistical adjustments to data. But what should worry us is the practice of not labelling adjusted data as such. For example, the unemployment rate commonly referenced does not count so-called "discouraged" workers; the inflation rate excludes so-called volatile components, such as gas prices; a lot of economic statistics are seasonally adjusted.
Missing labels presents an easy trap of drawing conclusions as if the data were unadjusted. For instance, we frequently hear people explain away bad unemployment numbers in the fall by seasonal reduction in summer jobs. This makes sense if the unemployment numbers were not seasonally adjusted. The seasonal adjustment already accounts for the effect of summer jobs so that explanation doesn't fly.
So, today I saw this piece by Gregory White (on Business Insider) in which he makes this claim:
The San Francisco Federal Reserve just released a report that suggests the natural rate of unemployment in the U.S. (also sometimes called NAIRU) is going up and may actually be 6.7%. That means, relying on last month's 9% unemployment rate, we're only 2.3% away from the natural rate.
This interpertation has always bothered me -- and if there are economists reading this blog, maybe you can tell me if I make sense here.
The natural rate of unemployment seems to account for those "unemployable" people, people who don't have the right skills, cannot find a job, are not willing to work at the prevailing wage level, etc. To me, the unemployment rate of 9% as typically reported (not the U-6 number) already excludes these types of workers. So, you can't do 9% - 6.7% and claim that our gap is 2.3%. In fact, our gap is almost all of the 9% because the adjustment already takes care of the "natural" rate.