The Associated Press does it again! Do they even know how to read statistics?

by Brian Johnson on September 10, 2009

UnemploymentAccording to Associated Press Economics Writer Christopher S. Rugaber, the recession is showing signs of recovery because 10,000 fewer people filed for unemployment benefits than the figure projected by economic analysts.  Another sign of recovery, according to Rugaber, is that the number of people receiving unemployment benefits fell 159,000 to 6.1 million.  Of course, that’s a tricky number as it’s clear by the rise in the overall unemployment rate that the drop in unemployment benefits wasn’t due to people finding jobs, but to people losing their benefits. In other words, they’re now out of work and out of income.  What I’d like to know is: how does Rugaber read these figures and determine that these are positive signs of recovery?

Let me first address the figure upon which Rugaber seems to base the lion’s share of his opinion:  analysts predicted that American companies would lay off 560,000 workers last month and as it turned out, they only laid off 550,000.  Let us be reasonable about this: both numbers are staggering.  Either number indicates half a million people.

The cause for optimism, according to Rugaber is that the analysts were off by 10,000.  I think we have every right to ask what value the original figure has for any of us since it is, essentially, the guess of analysts.  Yes, it is better informed than our own maybe, but it is still just a guess.  They don’t have a crystal ball that informs them of the future.  560,000 was never a number set in stone.  Had they guessed a higher number, say 600,000, it would have made it seem that we were on an even stronger road to recovery according to this logic, but it wouldn’t be real — the American household would still face the same challenges as it facing right now.  If the analysts’ predictions were always right, we would have seen this recession coming in the first place…

Real signs of recovery are things like companies hiring more people than firing.  The inability of the unemployed to continue receiving benefits is not a good sign. Even after giving his readers these facts and figures, Rugaber still acknowledges that unemployment rates are on the rise, and are likely to top 10% by the end of the year (again, according to analysts).

Ultimately, Rugaber’s claim that “the economy is showing consistent signs that the worst recession since the 1930s may be over” is completely unfounded.  There may be less people laid off because there are less people working to begin with.  A drop in unemployment benefits coupled with an increase in the overall unemployment rate means that more people are without any income.  If we are leveling out, it could mean that we are recovering, it could mean we’re headed into deeper problems, but one thing is for sure, our economy is not yet out of danger.  It’s nice that we’re not sinking as fast as analysts had projected, but even equilibrium is no good given that our head is still under the water…

What is, perhaps, the most disturbing part of Rugaber’s story is that he must know all this.  He knows that the unemployment rate is at a tragically high level and acknowledges that companies are continuing to lay off their employees. Why, then, is he writing with all of this optimism?  Part of my problem here with economic reporters is that they seem to miss extremely salient points about what they are talking about.  When the unemployment rate is threatening 10%, the recession simply isn’t over.

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