Thursday, January 1, 2009

Data Trap: Don’t Ignore the Increasing Denominator

The current headlines are that initial jobless claims have spiked to 26 year highs (see The Big Picture, Across the Curve, and Angry Bear, to name a few). That sounds really bad, until you pause to reflect, as Mark Perry does in this Carpe Diem post, that jobless claims are reported as the absolute number of claims, and the labor force has grown 41% over the last 26 years. Here’s the right way to look at it in a graph from that post:


When you’re looking at absolute numbers over a long time series, you need to figure out what’s happening with your denominator too.