Pollyanna Creep

In the previous post, I included a link to an article in Greener Times (a weekly e-zine I edit) by columnist Maryrose Asher. However, I realized that, while a link is okay, posting the article here would be so much better. So, here it is!

Un-Spinning the Spin: Pollyanna Creep in Latest Job Report from Department of Labor

Maryrose Asher is a former Chair of the Green Party of Washington State and a tireless activist of many causes.

“Pollyanna Creep” is a phrase familiar to economists and statisticians and is credited to John Williams, an economic analyst and statistician from California, who “shadows” government statistics (see his website). Williams first used the phrase in a 2006 interview, stating the government “always footnotes the changes and provides all the fine detail. Nonetheless, some of the changes are nothing short of remarkable, and the pattern over time is what I call Pollyanna Creep.”

"If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is." Harpers Magazine

The recent job’s report from the Department of Labor is a good example. The much publicized “official” report is that the unemployment rate has dropped from 9.5 percent to 9.4 percent. With “Pollyanna Creep” the government is able to present “evidence” that we are heading out of the recession.

The actual data reveals quite a different story.

The number of unemployed 14 weeks or less is 6.79 million. The number of unemployed 15 weeks or more is 7.88 million. This number (7.88 million) is an increase of 74 percent since December 2008. One third of those 7.88 million have been unemployed for at least 27 weeks. The average in 2008 was 20 weeks; it is now 25 weeks.

The Department of Labor in their job’s report also does not include those who have stopped looking for work and those who are involuntarily working part-time. If it did include these figures, the correct unemployment rate would be 16.8 percent, not 9.4 percent as reported.

Just as John Williams said, the government “always footnotes the changes and provides all the fine detail.” The Department of Labor’s U-6 report has the actual unemployment rate of 16.8 percent cited above.

"The BLS has six different regular jobless measurements—U-1, U-2, U-3 (the one routinely cited), U-4, U-5, and U-6. In January 2008, the U-4 to U-6 series produced unemployment numbers ranging from 5.2 percent to 9.0 percent, all above the “official” number. The series nearest to real-world conditions is, not surprisingly, the highest: U-6, which includes part-timers looking for full-time employment as well as other members of the “marginally attached,” a new catchall meaning those not looking for a job but who say they want one. Yet this does not even include the Americans who (as Austan Goolsbee* puts it) have been “bought off the unemployment rolls” by government programs such as Social Security disability, whose recipients are classified as outside the labor force."

If those “bought off the unemployment rolls” were included, 20 percent unemployment would probably be a more accurate number.

This manipulation of economic data started shortly after the inauguration of John F. Kennedy (1961). Since high unemployment numbers would not look good for “Camelot-on-the-Potomac,” the administration appointed a committee to recommend some changes in reporting. The result was those unemployed who gave up looking for job were labeled “discouraged workers” and excluded from unemployment figures.

Not to be outdone, the Clintonites used Pollyanna Creep in their statistical reports. Although previously excluded from unemployment figures, as stated above, these “discouraged workers” were still counted as part of the larger workforce. That changed during the Clinton administration (1994) when the Bureau of Labor Statistics “redefined the workforce” and only included those “discouraged workers” who had been actively looking for work for less than a year. Those looking for work for longer periods were not tallied into the monthly reports (“hidden unemployed”). The Clinton Administration also dropped the household economic sampling from 60,000 to 50,000, a disproportionate number from inner cities, resulting in the perception of reduced unemployment among Blacks and lower poverty figures. Pollyanna Creep at its best.

Unfortunately, as time goes on, unemployment insurance benefits will be lost to millions of jobless Americans. Already, Congress has voted for emergency extensions in states hardest hit by the recession, extending benefits for up to 79 weeks. However, as this recession continue, even this extension will be used up before many job seekers find new employment.

"Tens of thousands of workers have already used up their benefits, and the numbers are expected to soar in the months to come, reaching half a million by the end of September and 1.5 million by the end of the year, according to new projections by the National Employment Law Project, a private research group.

"Unemployment insurance is now a lifeline for nine million Americans, with payments averaging just over $300 per week, varying by state and work history. While many recipients find new jobs before exhausting their benefits, large numbers in the current recession have been unable to find work for a year or more.

"Calls are rising for Congress to pass yet another extension this fall, possibly adding 13 more weeks of coverage in states with especially high unemployment. [Note: The present extension to 79 weeks is the longest period since the unemployment insurance program was created in the 1930s]" Crooks & Liars

It is unfortunate that the American public is being misled by this manipulation of data.

As stated in the Harper’s article, “Transparency is the hallmark of democracy, but we now find ourselves with economic statistics every bit as opaque — and as vulnerable to double-dealing — as a subprime CDO.”

* Obama designated Austan Goolsbee as chief economist and staff director of the Presidential Economic Recovery Advisory Board, a newly created body. Goolsbee was also appointed to the Council of Economic Advisors (CEA), which develops much of White House economic policy.

Resources used:
US Department of Labor, Table A-12. Alternative measures of labor underutilization
Open Left: 247K Job Losses; Unemployment Rate Drops to 9.4%
Not as Bad, but Not Good - Floyd Norris Blog - NYTimes.com
Numbers racket: Why the economy is worse than we know By Kevin P. Phillips (Harper's Magazine)
No Jobs In Sight and Unemployment Checks Running Out. Mr. President, Help Us! | Crooks and Liars