Yesterday, on the sister blog, I posted a pair of charts that digs into how the unemployment rate is computed. This number has been in the news a lot because we supposedly have a super-tight labor market, the lowest unemployment rate since the peak of the tech boom in 2000! But the story is much more complex if one understands how unemployment levels are counted.
Another reason why counting unemployment is in the news is because of the government shutdown. And the Wall Street Journal has a nice (but rather convoluted) article about what that means for the unemployment number. This is where you can see how politics enter into the statistics - it's via rules that determine what gets counted and what doesn't.
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As I pointed out in Numbersense (link), the Labor Department uses a specific definition of employment, and here is how the WSJ describes it:
The Labor Department... determines the number of people on nonfarm payrolls by asking employers for a head count during the pay period including the 12th of the month. For many federal employees, that would be the pay period from Jan. 6 to Jan. 19.
In other words, someone just needs to have worked at least one hour during that pay period to be considered "employed".
Based on that definition, if the government shutdown extends beyond Jan 19, then there should be a big negative impact on the unemployment rate.
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But wait - politicians of neither party would want that to happen (in case they are the ones in power at the moment).
So what do we learn from the WSJ reporter? This:
even if the shutdown extends beyond the pay period, workers would be counted if legislation is enacted that requires agencies to pay employees for what they would have earned had there been no shutdown, a spokesman for the Labor Department’s Bureau of Labor Statistics said. Such practice would be consistent with how the department accounted for workers during previously lengthy shutdowns.
The reason given for this is precedence. But that actually means that the unemployment rate in that scenario would not accurately portray the state of employment in the U.S.
An economist cited in the article further explained that the following could also happen:
some federal employees initially furloughed have been called back to work and some are being paid with supplemental funds.
Since it only takes one hour of work during that specific pay period to be counted as employed, it's not hard to come up with ideas about how to turn these not-working people into employed people.
As a data analyst, there is no getting around learning all these nuances if you want to interpret data properly. It's the nature of our work.
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