I Just Do Not Understand Percentages

The Asso­ci­at­ed Press ran a sto­ry a few days ago on the lat­est unem­ploy­ment num­bers.

The nation’s unem­ploy­ment rate dropped to its low­est lev­el in two years in March

Yea!!! That’s good news.

But…

Few­er than two-thirds of Amer­i­can adults are either work­ing or look­ing for work — the low­est par­tic­i­pa­tion rate in 25 years.

So the news is mixed.

But the point of my blog post that is wast­ing your time is here:

Econ­o­mists expect the stronger hir­ing to endure through­out the year, pro­duc­ing a net gain of about 2.5 mil­lion jobs for 2011. Even so, that would make up for only a small por­tion of the 7.5 mil­lion jobs wiped out dur­ing the recession.

So if we have lost 7.5 mil­lion jobs and we gain 2.5 mil­lion jobs in 2011, that 2.5 mil­lion is just a small por­tion of the 7.5 mil­lion. You see, to me it looks like 33% of the lost jobs.

OK, it is not quite that simple.

Let me try and fig­ure this out. The arti­cle says that the pri­vate sec­tor added 216,000 jobs in March (I think it means March, but it is kind of impres­sive that we know this on April 1). If we annu­al­ize that num­ber, we get the 2.5 mil­lion jobs for 2011 (more or less).

But the arti­cle also says that

The econ­o­my must aver­age up to 300,000 new jobs a month to sig­nif­i­cant­ly low­er unemployment.

I take it this is a ref­er­ence to the fact that so many new jobs are need­ed every month just to tread water. I believe that num­ber is 127,ooo or so. Anu­al­ized, we need 1,524,000 new jobs to break even.

But in March, we gained at an annu­al­ized rate 2.5 mil­lion, or 976,000 more than need­ed to break even. So, by my cal­cu­la­tions, the annu­al­ized pro­jec­tion of 976,000 new jobs above the break even point rep­re­sents 13% of the 7.5 mil­lion jobs wiped out dur­ing the recession.

Now the arti­cle said 300,000 month­ly new jobs would “sig­nif­i­cant­ly low­er unem­ploy­ment.” That annu­al­izes out to 3.6 mil­lion new jobs. That is 2.1 mil­lion more than is need­ed to break even. That would be 28% of the 7.5 mil­lion lost jobs.

So 28% is sig­nif­i­cant while 13% is a small por­tion. Maybe.

Must be that lib­er­al press.

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