Saturday, August 4, 2012

How Low Can NPR Go?

Last night at 5, NPR announced that the unemployment rate rose from 8.22 to 8.25%. Note that this went out over the airwaves; their print site does not document this.

I have never heard of such a thing.

I am starting my 24th year as a professional macroeconomist. Before that I was tuned into macroeconomic issues for at least 10 years.

And not once, ever, have I heard a mainstream news organization carry the unemployment rate to the hundredths position. Never!

Of course, I have heard academic macroeconomists carry out the unemployment rate that far. We have the data, and running the calculation is easy. In fact, that’s the source of the number: Alan Krueger, the White House economist.

But, does being able to do something mean that you should do it? Academics tend to know better than to make claims at this level of fineness.

So why now? My guess is because the “rounded” values would be 8.2% and 8.3%, which sounds like a much bigger change, and might decrease Obama’s reelection chances.

Even so, 8.2% and 8.3% are the official unemployment rates. Officially, this number is not carried to the hundredths.

To even get the number to the hundredths spot, you need to dig a bit, and get the actual number of unemployed, and the number in the labor force, and do the division yourself.

Of course, the BLS is not full of stupid Republicans. Instead, they don’t do this for a reason. After the seasonal adjustment process used before those numbers are released, the hundredth digit is not considered accurate enough to announce.

There’s a more practical reason as well. You and I can’t feel a 0.1% change, much less a 0.03% change. I’ve told macroeconomics students for a decade or two that our tolerance for what we can feel is about 0.5% up or down.

To me, as a pretty decent economist, that suggests that we shouldn’t even be worried about the change that did take place. But the Obama administration has to worry about it, because they don’t have any better news to crow about.

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