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Professor says stats can deceive

Amanda Gray | Wednesday, December 7, 2011

Several Notre Dame economics professors said the latest unemployment numbers, released by the U.S. Department of Labor’s Bureau of Labor Statistics last week, should be taken with a grain of salt.

The numbers show a .4 percent decrease in unemployment, going from 9 percent to 8.6 percent from the end of October to the end of November, according to the Bureau.

Economics professor Eric Sims said that the reason this number has fallen may not be a good one.

“The numbers mask some stuff,” he said. “The unemployment percentage is the ratio of people actively seeking work and not working to the number of people in the work force, which is all the people wanting jobs.”

While the number of jobs did increase by around 120,000, what changed the number most was around 315,000 people leaving the work force — meaning they are no longer working and no longer actively seeking employment, according to Sims.

“Most of what drove the numbers was people dropping out of the work force, not new job creation,” he said. “We have a term for these people —‘discouraged worker.’ These are people who have been looking for work and are going to quit looking.”

However, Sims said there are also other reasons why people drop out, such as women who become mothers and decide to stay home with their child.

Assistant economics professor Abigail Wozniak said the number of jobs created might be around the number needed to keep the U.S. economy stable, but there needs to be more.

“That number — 120,000 — is about the number of new jobs we need per month,” she said. “But this won’t put us in a positive growth. To really keep people out of unemployment, we need about 200,000 jobs a month.”

Sims said initial positive reports might have been overzealous.

“I think there was an initial hysteria over good numbers,” he said. “These numbers are just from surveys — I think there’s a decent chance that, with more time, the job growth numbers will be revised.”

Most of the job growth was in the private sector, with government jobs decreasing, he said.

“Most jobs were in services, like retail, but there was not much change in construction or manufacturing,” he said. “We won’t see a better employment picture until we see more construction and manufacturing jobs.”

Wozniak, however, cautioned against construction. She said workers in this sector might not have skills for jobs in other sectors, which leaves them vulnerable.

“As a labor economist, I’m more concerned with the long run,” she said. “I’m concerned with training and skill of workers. We need to do a lot more with people coming out of high school, especially with even more skills and secondary education.

“Growth in manufacturing is good, but it’s never going to be the main engine for growth. …Workers doing best in this economy are those in selective fields with skills that aren’t necessarily job-related. They learn how to write and communicate.”

She said she would like to see policy makers focus on making programs for these skills.

“A lot of people see construction as an economic indicator,” she said. “I’d like to move away from this — these are unskilled workers. It’s not a great sector for the workers in it, because they don’t have skills for other sectors.”

Both professors said students entering the job market should be patient.

“Those numbers mean we still aren’t seeing much of a recovery,” Sims said. “It’s a bad job market. Don’t be too discouraged.”

Wozniak said this economic state might be cause for concern for graduating seniors.

“Students should keep in mind that unemployment numbers are higher for young people,” she said.

Ultimately, these numbers don’t tell the most accurate story, Sims said.

“The unemployment rate is imperfect measure, it provides an imperfect picture,” he said. “What the economy needs is people moving from unemployed to employed, not unemployed to no longer looking for employment.”