In the first post on this subject, The Audacity of No Hope, I posted a video that showed that Government unemployment figures are affected not only when the unemployed find employment, but also when the unemployed become discouraged and quit looking for work. That is because the unemployment figure only counts those who are actively seeking employment and does not count those who have given up. Those workers are no longer considered to be part of the work force and are thus not counted.

This is nothing new. A commenter to my earlier post pointed out that the Government has always counted unemployment that way. That much was true. But the commenter also believed that the video suggested that the Obama administration was engaged in a sinister plot to fudge the numbers to create a rosier unemployment picture than actually exists. I don’t believe the video did any such thing. You can view it at The Audacity of No Hope and decide for yourself.

The video, a Jim Geraghty Video, rather suggested that the phenomenon of workers becoming discouraged and no longer looking for work was occurring at a rate higher in the current recession than in previous recessions and that this was working to the benefit of the Obama Administration because under the traditional way of calculating unemployment figures, these individuals will no longer be counted as unemployed. What the video does suggest is that the Obama Administration’s economic policies are destructive of job creation which leads to discouragement among job seekers, and results in lowering the unemployment figure, thus covering up the bad effects of President Obama’s economic policies. The video may also suggest that the Obama administration is perfectly happy with this result, which occurs without any sinister manipulation on its part of the employment data. That is an opinion with which anyone can agree or disagree, but it doesn’t really matter. It is always interesting to know the motives of politicians, but the results of their policies are what matter most, especially when those results are awful.

But now something new can be added to this story. The Washington Times today has an editorial that suggests, or at least asks the question, is the Obama Administration Fudging Jobless Statistics?

First, some background. The Government uses two different methods of collecting data. One is called The Establishment Survey, and the other is The Household Survey. Approximately 370,000 employers are queried each month in the establishment survey as to how many people they are currently employing. The household survey requests a response from about 110,000 people each month as to whether they are working. The establishment survey is a larger sample because about 40 million people are employed by the companies surveyed, so it is given more weight. But 110,000 is still a large sample for a statistical analysis and it is used to calculate the unemployment figure.

Here is the problem identified by The Washington Times:

The problem is that the two surveys have reached different estimates, with the household survey showing a significantly greater drop in the number of jobs than the establishment survey. It turns out that there might be a simple reason for that. For the survey of firms, the list of firms surveyed doesn’t change very often. Thus, the Bureau of Labor Statistics, which puts these numbers together, can only guess at the number of jobs created by new firms because it doesn’t even know how many new firms have been created each month. To get around this gap in the data, the bureau makes an assumption that the jobs created at new companies are about equal to the jobs lost at companies that go out of business.

That assumption hasn’t come close to being right during the current recession. The error in estimating the number of jobs from April 2008 to March 2009 was 10 times greater than the average error over the preceding eight years. Typically, the government error would underestimate the number of new jobs by 80,000, but this time, it overestimated the number of jobs by more than 800,000.

No one will know what the error rate has been with the establishment survey from April to December 2009 until the numbers are revised again in February 2011, three months after the 2010 midterm elections. But a great deal of skepticism seems warranted. The establishment survey assumes that new firms generated almost a million new jobs over those nine months. At the same time, the household survey just happens to show that about a million more jobs were lost than the survey of firms indicates.

The Obama administration has focused continually on the establishment survey in making its claims about changes in the jobs numbers, but this data can be quite misleading. The bottom line is that job losses are likely to be worse than reported, not better. Future jobs claims from the White House should be taken with a grain of salt.

Sinister Plot or just an administration benefiting from circumstances occurring without design? Is the Obama Administration intentionally placing more reliance upon the establishment survey than past administrations to obtain rosier employment numbers? I don’t think it matters. What matters is what is happening, not whether the politicians are directing it or just taking the benefit of numbers they know are unreliable without telling us. Either way, it is sinister. It is Machiavellian. And we are not getting the truth. Until now, in The Washington Times. And right here.