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Friday, January 6, 2012

Gallup Provides Best Unemployment Measure

Unemployment is a key issue in this presidential election year having both political and economic implications no matter the results. In turn, the credibility of the findings is likely to depend on face-validity of the results. Given the constantly changing -- and sometimes surprising nature of the government's reports -- Gallup's measurement of the U.S. unemployment rate, based on a random sample of more than 15,000 phone interviews monthly, is likely the best way to monitor the real unemployment situation.

On Friday, Jan. 6, the government reported the U.S. unemployment rate for December 2011 was 8.5% on a seasonally-adjusted basis and 8.3% unadjusted. The prior day, Gallup reported its unadjusted unemployment rate at 8.5% for December -- the same as in November. On an unadjusted basis, both Gallup and the government show a relatively stable unemployment situation over the last three months of 2011 -- probably the best view of the real situation.

However, the government's adjusted data -- as revised -- shows something completely different with the unemployment rate declining steadily from 8.9% in October to 8.5% in December. In 2012, anything may happen, as the government rebases its data in January and then adjusts its results monthly. The current declining trend could continue or reverse -- either way all of these adjustments may create political debates about whether the real job situation is improving or not.

Of course, Gallup's results may also go in one direction or another in the months ahead. Regardless, those using Gallup's measures to track the unemployment situation will know that the results will not be adjusted, rebased, or otherwise modified.

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