You can’t keep a good saying down.

“There are lies, damn lies and statistics.”

It’s a great saying, and in the USA is typically attributed to Mark Twain. He, in turn, attributed it to Benjamin Disraeli. That credit is undocumented. What is certain is that it was in common use by the early 1890’s, and ever since. Like most good quips, it’s the truth of the thing that makes it sing.

Take yesterday’s unemployment statistics. My local newspaper proclaims: “Hope for Workers, Recession May be Ending” on the front page. Above the fold.

Oh…really?

Every economist, even the most optomistic, is predicting a jobless recovery. They are almost unanimous in saying that unemployment, a lagging indicator, will continue to rise to Q3 or Q4 of 2010. So are yesterdays numbers an anomaly, a contrarian indicator, or a lie?

Well, they are statistics. The Bureau of Labor Statistics breaks down the unemployed into subgroups, only one of which counts as “unemployed.” That group, those who are actively seeking jobs, consists of 6,244,000 people.

Not included are 796,000 who admit to having given up looking, at least in the last 4 weeks. 1,486,000 who aren’t looking for some other temporary reason such as family responsibilities (can no longer afford day care) or ill health. And a whopping 7,282,000 who are working two jobs to make ends meet.

If I extrapolate the governments 9.4% rate by adding the other categories (and I don’t know if that is valid, but it seems intuitive) then the real unemployment/underemployment rate is something like 24.5%!

I admit that I’m not a statistician. I’ll also admit that my not being a statistician doesn’t automatically make these numbers the truth, although the axiom quoted above might seem to support that. I don’t know enough to venture into seasonally adjusted methodologies. But according to Floyd Norris in the New York Times those adjustments include stuff like this:

The auto industry fired 8,600 workers in July. But since normal summer line changes would have traditionally idled 36,800 in Detroit, the Bureau of Labor deems “seasonally adjusted” auto employment to have added 28,200 workers!

Now you and I might think that only 8,600 workers were cut because so many more are on the street already. (GM’s total employee number will drop from 340,000 in 1997 to 38,000 by next year.) But the statistics say that only dropping eight thousand people last month should be interpreted as a sign of robust automotive health!

My point is to get you to ignore the statistical proclamations, or at least take them with a grain of salt. Unless you have really hard data on specific industry indicators like housing starts in your market or same store growth, don’t plan your business around the hype.

And hype it is, and will continue to be. American consumers have reduced their spending by 7% this year. That is extrapolated from a savings rate that has gone from -2% of wages to +5% of wages. It does not include the unemployed, who obviously have no wages to spend at all.

Consumer spending was 70% of the pre-recession economy, so consumers have to start spending again to support any strong recovery. Yet consumer confidence continues to weaken. Unless the government and others can convince you to reach into your pockets (even with borrowed money) and stop this silly savings, the recovery will be long, slow and painful.

That’s why the Outdoor Advertising Association is using its unsold billboards for the “Recession 101” campaign. The quicker they can convince you to start spending, the faster they can take down those stupid public service announcements and start selling that space again.

Categories: Economic Trends, Managing Employees, Strategy and Planning... Bookmark this post.

Leave a Reply

Your email address will not be published. Required fields are marked *