Sunday, July 26, 2009

Expert opinion

Sometimes I question how good the "experts" are at interpreting and understanding data. This article in Explore Howard tells us that the unemployment rate hit a record high of 5.8% in June. This is up from 5.1% in May. A somewhat local "expert" offers the following possible explanation for the increase:
Anirban Basu, chairman and CEO of the Sage Policy Group, an economic consulting firm based in Baltimore, said the rising number of jobless people in recent months could be due, in part, to the recent influx of high school and college graduates entering the job market. People who left their jobs during better economic times also are trying to re-enter the labor force, he said.

The bit about people who left their jobs in good economic times but who need to work now that the economy has fallen apart is a reasonable explanation for the rise in unemployment. However, the bit about college and high school kids entering the workforce is an unreasonable explanation for the rise. This is because unemployment data which compares two months in the same year is useless unless it is seasonally adjusted. The seasonal adjustment would have already accounted for the cyclical rise in unemployment that naturally occurs when recent graduates of colleges and high schools enter the workforce.

I think the data that Basu opined on is SA, only because the May data did not square back to these not seasonally adjusted numbers.