“There are three kinds of lies,” observed Mark Twain.  “Lies, damned lies, and statistics.”  Perhaps Twain had government economic reports in mind when he made his famous quip.

For example, a quick glance at the headline unemployment numbers published Friday show things are moving in the right direction.  The unemployment rate in August dropped to 7.3 percent…all the way from 7.4 percent in July.  Not bad.

But, unfortunately, when you scratch below the surface of the Labor Department report a gigantic omission comes into view.  In particular, the increasing part of the working age population that has been disappeared from the labor force because they’ve stopped looking for jobs.  Just in August alone, 516,000 American workers were dropped out of the labor force, which bumps up the total number of working age Americans who are not in the labor force to almost 90.5 million.

By subtracting discouraged workers out of the numerator in the unemployment rate equation, the Labor Department can show a decline in the unemployment rate.  Obviously, that’s the goal of a government statistician. Continue reading →