While reading Common Sense Economics (previous post) this morning on the EL, I ran across this assertion by the authors:
“…it is important to keep in mind that it is production that really matters, not jobs. If jobs were the key to high incomes, we could easily create as many as we wanted. All of us could work one day digging holes and the next day filling them up. We would all be employed but we would also be exceedingly poor because such jobs would not generate goods and services that people value.”
Makes perfect common sense to me. So, why is there such a huge emphasis on reporting the “unemployment rate?”
The authors point out the most likely reason for this as well… political agendas and special interest groups.
What do you think?
Let me preface my comments with, I’m not an economist, so my comments are merely opinions and based on anecdotal evidence.
I’d say that while agree that production matters significantly more than jobs, jobs do matter. You might generate a service or good that I value, but without a job – or a means to purchase that good – I will not buy, which means you won’t sell so your production will go down. So it seems to me that while the production side is primary, the jobs side also plays a role.
My job is currently unstable and I do look at unemployment as a rough indicator or how hard it will be for me to find another job if I lose my current one. Since I perceive a difficult job market (whether accurate or not), I am currently far less likely to purchase any product I don’t absolutely need and just hold my money. So even if the author’s premise is 100% accurate, job number are significant, even if only based on perception.
As to the emphasis on reporting unemployment rates – I’m sure part is political and special interest. But also remember, the media’s appetite is voracious and “new news” is needed every day. Fear sells and we as a society respond to bad news, so this is what the stations run (I guess our society values this???).
Plus, unemployment is easy to understand, while production is not. “1 of 10 Unemployed” is a much sexier headline than “GDP tops 14.2 Trillion”. And who reading this can off the top of their head explain how GDP is calculated (let alone its relationship to GNP, HDI, GPI, ISEW and CPI)?