ark
Twain once said, “There are three kinds of lies: lies, damned lies, and
statistics.” I doubt whether Mr. Twain would approve of our use of his
quote for the purposes of defending supply-side economics, but on the
other hand, he didn’t believe in the afterlife, so no harm done.
There is something
odd that’s been occurring in the national statistics regarding employment
and unemployment in America — and one half of that oddity has been
reported. The press has spent a great deal of time and energy informing
us about the decrease in employment in America since George W. Bush became
president, and even in the past year while the economy has been in mild
recovery. What they have neglected to report with as mush vigor is that
at the same time, paradoxically, unemployment has been decreasing
as well.
We say “paradoxically”
for a very specific reason. Someone once said that a contradiction is an
attempt to hold two irreconcilable ideas in the same mind at the same time.
On the other hand, a paradox is the attempt to hold two seemingly
irreconcilable ideas in the same mind at the same time. Thinking about a
contradiction is a waste of time: thinking about a paradox is a way to a
deeper understanding of the subject matter being considered. The question
is: What can we learn from thinking about the seeming paradox of a simultaneous
decrease in employment and unemployment?
The answer has been
identified by supply-side economist Brian Wesbury, the chief economist for
Griffin, Kubic, Stevens and Thompson. While there are some differences between
what the unemployment and employment statistics are measuring, the most
important difference between them is how the information is procured in
the first place.
Employment statistics
are based on surveys of established employers — in essence, the good
folks at the Bureau of Labor Statistics call up their contacts among employers
and ask them how many people they are hiring currently and how many people
they are laying off. The difference between those two numbers is the net
increase or decrease in employment. This is called an "establishment survey."
When the economists are trying to ascertain the level of unemployment, on
the other hand, they do so by surveying households rather than employers.
In other words, they call the homes of individual Americans, and ask them
whether they are employed or unemployed.
What this seems to
mean is that many people are employed who are not on the official payrolls
of established businesses — at least not on the pay rolls of businesses
that are sufficiently established as to be on the list of businesses that
economists survey. In other words, the employment growth that is occurring
in the economy is occurring “below the radar screen.” That includes businesses
that are not sufficiently large enough to appear in the establishment survey,
new business start-ups run by self-employed individuals, or even micro-entrepreneurial
ventures or “free agent” work (like the new breed of white-collar professionals
who juggle multiple consulting arrangements and are often based at home).
This is to be expected.
Recently we interviewed some executives with SCORE (the Service Corps of
Retired Executives), an organization that offers free consulting to owners
of small businesses. They told us that the number of requests for information
on how to start a new business always goes up toward the end of recessions,
and that over the past two years they have seen record numbers of people
contacting them for help on business start-ups or attending seminars dedicated
to the same.
This is to be expected
following a deflationary recession that hit large businesses with unionized
work forces and heavy debt service more harshly than it did other industries.
This is to be expected at a time when information technology has dramatically
lowered the barriers to entry for small entrepreneurs.
It will be some time
before we know with certainty — that is to say, with statistical evidence
— whether this boom of entrepreneurism has occurred beneath the radar
screen; and of course, like most government statistics on the economy, the
evidence will arrive long after it is of much use to investors and entrepreneurs.
However, a good deal
of early, tangible evidence is now available, and most of it portends good
things for the United States economy. It appears that the industrial and
telecommunications recession of 2000-01 has “hived off” a new generation
of small entrepreneurs. Many of them will of course fail. But some of them
will show spectacular growth and in so doing, eventually drive the employment
and economic growth of the country.
—
Jerry Bowyer is a radio and television talk show host and the author of
the up-coming book, The Bush Boom: What the Data Says About Our Mis-Underestimated
Economy. He can be reached through www.BowyerMedia.com.
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ark
Twain once said, “There are three kinds of lies: lies, damned lies, and
statistics.” I doubt whether Mr. Twain would approve of our use of his
quote for the purposes of defending supply-side economics, but on the
other hand, he didn’t believe in the afterlife, so no harm done.
