Comment by ta_donk_gt | Hacker News Reader

Comment by ta_donk_gt | Hacker News Reader

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The right tends to prefer to reference labor participation rate, whereas the left tends to prefer unemployment rate. The reason for this is obvious: right now, unemployment rate advances the narrative of the left, and labor participation rate advances the narrative of the right.

The argument from the right is that unemployment rate does not include the very large number of people who have given up searching for work (and have found some other way to survive, be it government assistance, or family, or charity, or illegal activities, etc.). This argues that the economy is actually in much worse shape than the unemployment rate would suggest.

The argument from the left is that labor participation rate does not clearly indicate who really needs or wants to be working, only who is and is not working. This argues that the people out of the work force don't actually need to be in the workforce and therefore the economy is actually fine.

If ever the unemployment rate works out better for the right, and labor participation rate better for the left, you will see the sides switch which metric they prefer to reference. That's how humans work.

Calling those who don't subscribe to your preferred narrative "stupid" and "crazy" is probably not helpful.

> This argues that the economy is actually in much worse shape than the unemployment rate would suggest.

This argument usually doesn't work because if you consider a different subset of the people who aren't working, you must then compare it to a different baseline. So being able to pick a different set of people to call unemployment (e.g., people not in labour force) doesn't actually let you claim the things are much better/worse, you still need to work further. In particular with respect to the labour participation rate, I think it's well known in leftish circles that it went down quite a lot in the GFC and that that represents a problem. I don't really know where you got your impression from.

In any case, I disagree that that's the argument they are usually making when questioning unemployment statistics. It could be their argument, but they'd have to actually make that argument. There usually isn't much beyond just rejecting statistics, unfortunately.

Furthermore, there is demonstrably a lot of people who think the inflation figures are downright made up (even here on HN), despite plenty of evidence to the contrary. In fact, the inflation example is even clearer, due to how little leeway there is in deciding, for example, what to call inflation.

In any case, I didn't call them "stupid" and "crazy" because they "didn't subscribe to my preferred narrative", as you put it. It definitely wouldn't be stupid or crazy to make the argument you are making. There has been plenty of discussion in economics history of which measures best represent the state of the economy. However, if someone, as many politicians do, feels comfortable enough to reject that because they don't feel it's convenient, then, sure, "stupid" and "crazy" are decent enough words to describe that particular behaviour.

After all, just because I can come up with a better argument for someone's position, doesn't mean I can substitute the argument they made with a different argument that I find more reasonable (it would be distinctly uncivil). Specifically with respect to unemployment rates, you and I may simply have been reading different things, but I believe what I said was accurate.

One further thought: the unemployment rate (not the participation rate) is part of the Federal Reserve's mandate, and it is the rate that has traditionally been used, with perfectly decent theoretical justification, so I feel quite comfortable saying that it's not some kind of left-right partisan divide.

> Specifically with respect to unemployment rates, you and I may simply have been reading different things

Certainly possible, but what I generally see is:

"the unemployment rate is not what [democratic administration] says it is because they redefined the metric to not include those that have given up trying to find work...the labor participation rate has dropped several percent since the beginning of [democratic administration], and the unemployment rate has also dropped several percent in that time, and these cannot both be the case."

Often the sound bytes we're shown only show the "I don't believe it" part, but if you dig a bit, at least I, generally find more context and clarification in other statements from the individual (often in an expanded version of the same quote in the sound byte), showing that the above quote is roughly the thought process of most challenging the unemployment rate statistic.

What the sides are really arguing about, as is the case with most "statistics" used in politics, is what the definition of "unemployed" should be.

Re people dismissing clear facts, again, this is just human nature. The brain finds a way to twist reality around facts that challenge foundational beliefs. The more foundational the belief, meaning the more structure built on top of it and the more decisions you have made based on the belief, the harder your brain will work to twist reality to allow you to dismiss this inconvenient fact. All humans do this, and both political wings in this country do it equally. Somewhat meta, but believing that only the "other side" is victim to this behavior is yet another example of the behavior (and we all do it).

So first of all, any significant drop in employment is overwhelmingly likely due to the GFC.

Second, I must take issue with the idea that they (the administration) "redefined" the metric. As I said above, there is a genuine (and basically settled, I believe) question in economics about what the right way is to summarize the state of the economy's labour force in a number. So any concern with it is going to have to be a technical concern: does a measure summarize the state better or worse than another measure. In fact, the BLS consists of professionals with a specific job to do, so I would be really skeptical of a claim that the administration redefined a metric that was inconvenient to it. It is rather more likely that it was already settled on economics grounds previously.

It would be really surprising if the BLS, an independent statistical agency, did something like what the argument accuses it of doing, so there needs to be some more solid evidence that it actually happened.

Specifically with respect to people who gave up looking for work being included as unemployed, I'm pretty sure that's been like that for ages now.

Third, and my main problem with that argument, is that it's an argument ad hominem. Instead of settling the choice of unemployment measure on merit (economics is a relatively old discipline, there is more than enough to talk about to decide what the merits are), the argument instead tries to argue based on imputed motivation of the current administration. That's a very dodgy road to go down, because settling it on merit is always a better thing to do.

> these cannot both be the case

It's not my main field of expertise, but this, I believe, is just plain wrong. The structure of the economy can definitely change with time. Two prominent examples to my mind are: (1) women entering the labour force, leaving the unemployment rate unchanged, but drastically increasing the number of working adults, (2) changes to disability and health insurance rules that sometimes mean that people who are seriously ill drop in/out of the labour force with good reason (they might be very sick yet still need to work to be able to afford things). So I think it definitely can be the case that different measures will go different ways, depending on the underlying changes in the economy.

> Re people dismissing clear facts, again, this is just human nature.

Meh, I don't care, I just want to get it right.

Edit: On further thought, I think the argument you mentioned is pretty damn close to dismissing statistics. Your original argument, above, was totally different, and much better.

I think you misunderstood much of my last comment, sorry if it was my fault.

First, none of these are really "my argument", I was just explaining some of the behavior that you are witnessing and didn't seem to understand (the reasoning behind some on the right dismissing the unemployment statistic as well as humans in general dismissing data that causes problems with their foundational beliefs), though I do tend to lean more towards the right's side on this issue.

As to the argument of those who have given up looking for work not being included: whether or not those who have given up looking for work have always been excluded from the unemployment measure is not the point of the argument. What they are saying is "8 years ago (or whenever) when the unemployment rate was (say) 7.9%, the count included a large number of people who have since stopped looking for work..these people now no longer count as unemployed today when the rate is 4.9%, and very significant part of that drop is from people just giving up, and not from an increase in people finding work". You could argue that over any given range new people are entering the unemployed count and people are giving up, and that over a long enough period this behavior is not statistically significant, but the counter-argument is that during this particular period there were massively more people just giving up than at any other time, and so the drop in the rate isn't actually a reduction in the count of unemployed.

As to both the labor participation rate and the unemployment dropping a significant amount during the same period, of course there are conditions that could lead to this, but the point is that it is not intuitive and the causes for it really need to be explained for either of these number to have any real meaning.

Nobody (mostly anyways) is arguing that 4.9% of respondents to a survey didn't actually indicate that they are unemployed. What people are arguing is that the definition of "unemployed" being used doesn't accurately reflect the "real" unemployment rate.

One further thought: I was looking at https://fred.stlouisfed.org/release/tables?rid=50&eid=4786, and it seems that both the unemployment rate, and the U-{1,2,3,4,5,6} measures are approximately at their historical values right now. So it seems that when the unemployment rate shows unemployment at normal historical levels (5% is about the equilibrium rate), the other underemployment rates show the same thing, which makes using the unemployment rate okay. So I think there is quite some danger of looking at the data, seeing what it shows, and not believing it (thus "dismissing" it).

I don't think I misunderstood your comment. I think in decisions about who to include in unemployment statistics, one should just defer to the professional body in charge of them, unless there is a clear methodological reason not to. There is no particular reason to think any rate is the "real" rate, so while it is true there are multiple rates you could compute, the right thing to do is to pick the standard one. And so anyone who relies on the standard rate (politicians, the Fed) is quite correct to do so. Besides, I'm not sure about this, but I have the feeling the unemployment rate by design isn't meant to track structural changes in the economy (and that's fine!), so if you find a structural change in the economy it doesn't track, you'd still be okay using it.

Edit: In fact, there's this (https://www.bls.gov/cps/cps_htgm.htm#unemployed), so it wouldn't be correct at all to call that 'the "real" unemployment rate'.

> Is there only one official definition of unemployment? There is only one official definition of unemployment—people who are jobless, actively seeking work, and available to take a job, as discussed above. The official unemployment rate for the nation is the number of unemployed as a percentage of the labor force (the sum of the employed and unemployed).

> Some have argued, however, that these unemployment measures are too restricted, and that they do not adequately capture the breadth of labor market problems. For this reason, economists at BLS developed a set of alternative measures of labor underutilization. These measures, expressed as percentages, are published every month in The Employment Situation news release. They range from a very limited measure that includes only those who have been unemployed for 15 weeks or more to a very broad one that includes total unemployed, all people marginally attached to the labor force, and all individuals employed part time for economic reasons. More information about the alternative measures is available on the BLS website.

Ok, it's clear you are just trolling at this point. It's really not that difficult. In October of 2009 the unemployment rate was 10.0%, and today it is 4.9%.

Democrats use this stat to say "look how many people the administration has put back to work". Republicans then say "easy there, most of this 'improvement' is from people just giving up, not from all of these people finding work".

Nobody is arguing that the stat is being _recorded_ incorrectly. They are arguing that it is being _used_ incorrectly. It is being used to imply that there has been a massive improvement in the availability of work. The other side says this stat does not actually show an improvement in the availability of work. What is meant by "real unemployment rate" is a stat that would better show the availability of work.

If you don't like that name, then name it whatever you want, but don't pretend that you don't know what people are talking about when they use the term. That is the "dangerous" behavior as far as I am concerned.

I think you are wrong to bring politics into this, especially the left-right divide. The question of whether the unemployment rate is meaningful and useful is a question of economics, and should be settled as such. In fact, it is being used exactly as it is meant to, consistent with its historical use. Like I said in the other comment, since the other measures of underemployment show similar results, that makes it that much more likely that the unemployment rate is reliable.

Also, please don't throw trolling accusations like that.

You started this thread with "And yet there are enough politicians who reject even those statistics, and that seems like a totally different category of stupidity".

Now you say "I think you are wrong to bring politics into this".

This entire subthread was about politicians' use of this statistic. I've mentioned several times now that the disagreement over the statistic is a disagreement over its use by politicians, not over the accuracy of recording the statistic, and you continue to sidestep this. If that's not trolling, I don't know what is.

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