Numbers Can Be Deceiving

Well, the Orange One has delivered a “major” speech on the economy. As usual, very little he said is remotely accurate; here’s just one example from a Time Magazine article deconstructing those claims:

Trump’s claim that one-in-five American households “do not have a single member in the labor force” is also therefore not a reflection of employment problems so much as it’s a recognition that 20% of American households are headed by retirees. Your 85-year-old grandfather and his 82-year-old wife aren’t participating in the labor force—and that’s probably a good thing.

Because we Americans have a tenuous grasp of economics, politicians often feel free to play with the numbers. That’s nothing new (although Trump does take misinformation to a whole new level…)

Last May, the website of the Indiana Institute for Working Families had a discussion of unemployment numbers that explained what those numbers do–and do not–reveal about the health of a state’s economy. Since we are in the middle of a campaign season in which Trump and other candidates will continue to take liberties with those numbers, it is worth revisiting that explanation.

The post itself was triggered by a seemingly rosy employment report: more Hoosiers were working, and the workforce was nearing an all-time high. Good news, right?

Well, as the policy analyst explained, “all that glitters is not gold.” Among the reasons for caution is something called the Labor Force Participation Rate.

 it’s also important to look at the Labor Force Participation Ratio (LFPR)—the ratio of the civilian labor force to the total non-institutionalized civilian population 16 years and older—as a useful tool in determining the overall health of the labor market. A low LFPR means there is slack in the labor market, which puts downward pressure on wages, and holds back growth in household incomes.

In layman’s language, the LFPR means that a decline in the unemployment rate can be explained, at least to some extent, by the number of Hoosiers leaving the labor force. That’s because workers are only counted in the unemployment rate if they are actively seeking work. But the workforce dropout rate isn’t the whole story either.

That brings us to the third and final point, which helps to illustrate declining LFPR; while the state is reaching employment levels (total nonfarm employment) not seen since the summer of 2000, the population of adults in Indiana (16+) has grown by more than a half-million during that time period. In other words, Indiana has added jobs, but not nearly enough to keep up with population growth.

Worse yet, the jobs that the state is adding are low-paying jobs. A recent report from the Indy Star – Economic Gaps Growing Among Hoosiers – encapsulates the conundrum that is the state’s insistence on low road growth strategies: “As the state economy grows and state leaders say pro-business policies have created more than 57,000 new jobs last year alone, poverty is on the rise. That’s right. More jobs, yet more poverty.”

It’s always useful to consider what the statistics tell us–and how the real story differs from the snake-oil on offer.
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