If there’s one thing you have to admire in this world is the creativity of pundits who know which side of their bread is buttered. What do you do when Russia releases new statistics on employment and they don’t say anything particularly interesting but you’re a Russia commentator and need to keep relevant? If you’re a blogger at Forbes the answer is simple – you do a little spinning.
Here is how:
Rosstat just released updated data on unemployment, and it makes for some interesting reading.
First, and most important, is the simple fact that unemployment did meaningfully increase during the course of 2015: it went from 5.5% at the beginning of the year to 5.8% by the end, about a 5.4% increase.
That’s minimal in comparison to the huge spike in unemployment during 2009, but it does demonstrate that the downturn in the economy has been broad in scope and that the pain hasn’t been concentrated in any particular sector.
If the unemployment rate in a recession year goes from 5.5 to 5.8 percent some might call that pretty remarkable. Some might say the unemployment rate barely budged. But to Mark Adomanis over at Forbes that’s a 5% increase over the previous year and also a “demonstration” of a “broad downturn” and “pain” in the economy.
Of course, going from 5.5 to 5.8 percent unemployment is in fact a relative increase of 5%, but let’s be real – building a far reaching argument on a statistic like that is disingenuous and misleading.
Here’s why: Let’s say we have two economies of 10 million workers each. Let’s say in the first one unemployment rose from 100,000 to 150,000 individuals. Let’s say that in the other the unemployment instead rose from 5,000,000 to 6,000,000 would-be workers. The first one recorded an incredible 50% increase in unemployment. The second one recorded a “mere” 20% increase.
So then is the first economy in a terrible downturn and feeling great pain, or the second one? According to Adomanis’ way of looking at things the first economy is in a downturn that’s more than twice as serious as that of the second.
The reason Adomanis’ argument is silly is because he’s approaching this from the wrong end. If you’re going to make relative comparisons on employment/unemployment you have to compare the size of the working, rather than the non-working populations.
Else you’re skewing your argument against economies with unemployment rates that are small and therefore more susceptible to greater relative changes. (It’s hard to record massive relative increases in the unemployment rate when you already have giant armies of unemployed from prior years.)
In our first hypothetical the employment rate goes from 99 percent to 98.5 percent. A relative decrease of 0.505 percent.
In the second hypothetical the employment rate goes from 50 percent to 40 percent. A relative decrease of 20 percent.
What about Russia? It’s employment rate went from 94.5 percent to 94.2 percent. That’s a relative decrease of of 0.317 percent.
That’s right. Today there are 0.317% fewer Russians plugged into the Russian division of labour than there were 12 months ago. That’s the “demonstration” of the “broad pain” in the economy?
There is certainly an intelligent and plausible argument to be made that Russian economy is in worse shape than many optimistic Russia watchers understand. I would very much like to read such an argument and weight it against contrary arguments.
However, such an argument would simply not include the employment/unemployment figure as proof of the poor shape of the economy, because that’s the one indicator that has been particularly resilient and can only serve as an argument for the contrary opinion – that Russian economy is sounder than many give it credit for.