Donald Trump is asking us not to believe that the U.S. unemployment rate is below 5%. He's "heard" that it could be as high as 42%. Skepticism about statistics is usually warranted. Who is right?
The latest official U.S. unemployment rate figure is 4.7% and most likely underestimates true joblessness. This is because it accounts only for those who are actively looking for a job and excludes discourage workers and part timers who would prefer to work full time. Including these people, the jobless rate would be 9.7%. This statistic, measuring underemployment and known as U6 unemployment, is estimated monthly by the U.S. Bureau of Labor Statistics.
To get to 42%, Trump counts as unemployed American newborns and octogenarians. The labour force participation rate in the U.S. incidentally is 58% (1 - 42%). It tells us that 58% of Americans are in the labour force, whether they are working or not. The 42% who are not in the labour force are not unemployed. They are people who do not work, such as retirees, disabled and toddlers.
Moreover, the unemployed are not even part of the 42%. They are those among the 58% in the labour force who wish to work but do not. In the end, unemployment is likely somewhere between 4.7% and 9.7% but nothing close to 42%. Conclusion: Don’t believe M. Trump!Other statistics can more easily fool us. Take the fallacy of the average. Assume that we mostly drink milk at the age of 10, beer at 20, wine at 30 and scotch at 40. Upon learning that a hockey bunch - average age of 20 - will visit, a restaurant owner replenishes his bar mostly with beer … only to later regret it when Timbits show up with their thirty something mothers.
Things get trickier when we try to project the future. China’s economic growth averaged almost 10% for the last 35 years. Many assume that it will continue forever. Reducing growth expectations to 7% - in line with that of the Chinese leadership - may be more realistic. Still, at such a sustained growth rate, if the rest of the world continues growing at 2%, China’s economy would represent 70% of the global economy by 2050!
A more plausible view would be that China's growth is already decelerating and will gradually converge to 3.5% within a 5 to 10 year horizon. Yet, by 2050, China’s economy would still be 4 times its current size; more plausible than the 7% growth scenario but still worrisome and a trajectory certainly laced with speed bumps along the way. Let's move on to a more complex issue: The growth of alternative energy required to meet the Paris conference objectives on climate change by 2050. British Petroleum recently estimated that, over the last 10 years, the share of renewable energies in the global energy market grew from 0.8% to 2.8%. Is this a good performance?
Consider the following thought experiment to evaluate the progress. Assume that we consumed 100 Units of energy in 2005 of which renewable energy (excluding hydro and nuclear) provided a mere 0.8 Units (0.8% of the energy consumed in 2005) while conventional energy sources generated the rest, 99.2.
By 2015, still according to BP (LON:BP), total energy demand had grown by 20% or 120 Units: alternative energy capacities were up to 3.8 Units (2.8% of 120) while 116.2 Units (120 - 3.8) came from non-renewables. Having increased from 0.8 to 3.8 Units over a 10 year period, renewable energy capacities grew at annual rate just shy of 17% (almost doubling every 4 years) while the annual growth of other energy sources was only 1.5%.
At such relative growth rates for another 30 years, alternative energies would surely completely replace fossil fuels before mid-century.
However, celebrations would be premature. In absolute terms, while alternative energy capacities grew by 3 Units (from 0.8 to 3.8), that of conventional energy grew by 17 Units (from 99.2 to 116.2). In other words, over the last 10 years, we developed (and consumed) roughly 6 times more new conventional energy sources than renewable ones.
But these 17 Units are only the tip of the iceberg. As conventional energies are mostly non-renewable (80% fossil fuels), their depletion has to be factored in. Fossil fuels are assumed to deplete at an annual average rate of 4%; as high as 40% for shale oil. We can thus conservatively posit a 2005-2015 cumulative depletion rate for conventional energy sources of 33% of the 2005 original 99.2 Units.
In other words, just to maintain our initial 2005 energy capacity, 33 more Units of non-renewable energy were needed. Added to the new 17 Units, resources to produce at least 50 Units of non-renewables energy were invested over these 10 years. Compare this to the meagre 3 Units of renewable energy capacity that were added over the same period and the progress of emission-free energy sources now seems mediocre at best.
Given the urgency, why did not we radically ramp up renewables? The energy industry seems well positioned to grab the benefits offered by alternative energies. However, their technologies do not appear to be scalable yet. Moreover, we may not collectively truly recognize or comprehend (yet) the urgency of the situation.
Consider another statistical though experiment to assess this urgency. Assume that the concentration of a harmful substance in our atmosphere was 0.1% in 1900, that its concentration sluggishly grows at 3.5% and that catastrophe will strike when it reaches 100%. By virtue of its slow growth, the substance concentration would have reached only 5.5% by 2016. Given such slow progress over these 116 years, the critical threshold may seem far remote. But, if left to grow at the same rate, the meagre 6% will become 18% by 2050, 25% by 2060 and 100% before the century is over.
The bottom line is that while we may be very encouraged by the 15% annual growth of alternative energies over the last 10 years, sustaining such growth might simply not be feasible with current technologies. Conversely, harmful emissions might be growing at a much slower pace but failure to recognise the looming threat might make us miss our 2050 Paris rendez-vous by a wide margin with aggravating consequences for the future.