Calculating Your Own Target Retirement Savings Amount

You can individualize your own target amount for retirement savings by using the replacement rates from the rightmost column in the following table from an Aon Consulting report, based on your final working income to the nearest $10,000 in the leftmost column.

This is the percentage of your final annual salary these consultants believe you will need to replace after you retire. Calculate your replacement amount by multiplying this replacement rate times the annual income you expect to be earning just before you retire (in today's dollars because your Social Security benefit will be quoted in today's dollar).

Calculate your expected Social Security benefits at the SSA website and convert this monthly estimate to an annual benefit by multiplying by 12. Your projected shortfall is the replacement amount minus your Social Security benefit.

How much savings would you need when you retire to buy the annual income to cover your shortfall? A good way to estimate this is to figure how much annual income you could receive if you used that money to purchase an inflation-indexed annuity from an insurance company.

Unfortunately, interest rates are historically low right now, so annuities are expensive. An inflation-protected annuity today would payout about 3.875% per year, or just $3,875 per year for every $100,000 of annuity you purchased.

Of course, there is no way of knowing how much annuities will be paying if you are going to retire several years from now, so this is only an estimate. On the positive side, annuities can’t get a lot more expensive than they are today, so this is probably a conservative estimate.

Here’s an example for someone earning $50,000 the year before they retire, with an estimated $21,000 a year of expected Social Security retirement benefits:.

a) Expected income the year before you retire in today's dollars	$50,000
b) Replacement rate from Aon Consulting (see table)	81%
c) Amount of final year income you will need to replace (a times b)	$40,500
d) Expected annual household Social Security benefit from SSA.gov	$21,000
e) Your retirement income shortfall	$19,500
f) Current payout rate for inflation-protected life annuities	3.875%
g) Amount you will need to save by retirement date (e divided by f)	$503,226

If you’re lucky and these annuities are paying 5% when you retire, instead of 3.875%, the annuity would only cost $390,000. It’s unpredictable but critical variables like these that cause the estimates of the experts to vary so widely in the Table 1. They each use different assumptions for these variables.

Losing Money with the Best Mutual Fund Manager of All Time

In a previous blog on averages, I used “average market returns” in my examples. In Stocks for the Long Run, Jeremy Siegel concludes that stocks have returned a nominal (not adjusted for inflation) compound rate of return of 8.3% a year over the past 200 years — the average market return.

In reality though, no individual investor earns “market returns” for very long, not even the best professional money managers.

The record for longest streak of outperforming the stock market belongs to Bill Miller.

Bill Miller managed Legg Mason Capital Management Value Trust fund to 15 consecutive years of outperforming the market. It is a feat that will likely never be repeated and that is far less than the 30 years you will have to invest for retirement.

What happened after this amazing 15-year stretch? Allan Sloan of Fortune magazine explained in a column he wrote in late 2011:

“When it comes to bad experiences, it's hard to top what has happened to Miller's investors since his hot streak ended in 2005. From Jan. 1, 2006, through this past Oct. 30, [2011] the last date for which average-investor results are available, his fund lost 7.40 percent a year; his average investor, buying high and selling low, lost 8.31 percent. By contrast, the average Vanguard index investor made 2.52 percent.

Thanks to the six-year underperformance, the return of the average Miller investor from the start of his streak in 1991 through October has fallen below the average index investor's return: 6.06 percent to 6.61 percent.”

All of those amazing years of market gains were given back rather quickly. Bill Miller is a legend among mutual fund managers, yet investors who stuck with him for his historical run actually underperformed the market. Why should you or I expect to do better?

Morningstar compares mutual fund investors’ actual returns to the fund’s return, and the fund’s return to market averages (indexes). Funds typically return less than the market, as the Bill Miller story exemplifies, but individuals earn even less than the funds in which they invest.

Mutual funds earn less than market averages primarily because they charge fees. Funds that charge its investors a 2% fee have to earn 2% more than the market just to match the market return. They also earn less because only a few money managers have the skill to earn more than investors should expect from random chance.

Investors, in turn, buy and sell funds at the wrong time and pay both mutual fund fees and taxes on their gains that further reduce their actual take.

According to Morningstar, from 2000 through 2009 the S&P 500 index returned an average of only 2.9% a year. The average U.S. equity fund, however, only returned 1.59%. As I said, most funds don’t earn as much as the market index. Finally, the typical investor in the U.S. equity funds earned only 0.22% a year for the reasons stated above, but primarily due to buying and selling at the worst times.

So, the market earned 2.9%. Your mutual fund shaved off 1% of your return by charging fees and making bad investment decisions, and you shaved off 1.68% by investing in the fund when stocks were soaring and then selling after they fell, leaving you a paltry 0.22% return per year over a ten-year period.

How does Morningstar know how much the typical investor earned? Mutual funds have to report cash in-flows and out-flows. Morningstar knows what the prices were when most people bought and when they sold.

A similar study determined that while the long-term average for the S&P 500 is about 8%, the typical mutual fund investor earns about 2.5%. They could have earned about the same in a money market fund with far less risk. Investors who try to time the market typically lose 2% a year.

When you look at a table of returns for various stock funds, the first thing you should know is that these amounts are what the funds earn. The typical person who invests in the funds earns significantly less.

Most retirement planning studies and strategies assume that investors will earn market average returns over the long run, but the evidence shows that most don’t come close.

Losing money in the stock market is not only possible, it’s highly likely. My retirement advice is that you not base retirement plans on long-term or “expected” market returns. Market returns are not your returns.

Before you invest, think about how losing that money might change your lifestyle. If you are unwealthy and need all your savings just to make ends meet then you shouldn’t invest in stocks, at all.

If your financial planner builds your retirement plan around the assumption that you will earn market returns for 30 years, she’s overly optimistic.

If “she” is you, I hope you’re a better money manager than Bill Miller.

The Non-Existent Law of Averages

There’s an ancient joke about a statistician who drowns wading across a river that is, on average, three feet deep. I have often found myself wading rivers to fly fish with water up to my knees, only to step into an unseen hole that drenched me to the neck. I know that my belongings might get dunked even if I stash them in my cap.

Funny stories, perhaps, but I find that hardly anyone understands even the most basic concepts of statistics and probability. That includes professionals who should understand at least the basics, like doctors and financial planners.

That lack of understanding includes the most basic statistic, the average, or mean. For example, you frequently hear the expression “law of averages”, though there isn’t one. Look it up. No such thing.

You also hear about average market returns. Those do exist, but they may not mean what you think.

In order to understand averages, you need to be able to differentiate long-term probabilities from one-time events. The difference is demonstrated by actuarial forecasts.

If we gather 1,000 people of the same gender and health and age in a room, actuaries can tell you how many of those people will still be alive in 10 years, 20 years, 30 years, or longer with amazing accuracy — but they can’t tell you which individuals in the room will still be alive.

This is useful information for an insurance company. Long-term averages are accurate enough for them to make bets that will result in profits from selling life insurance policies. They will guess wrong sometimes and right sometimes but they get to make lots of bets and on balance they will come out ahead.

However, if you are an individual in that room, probabilities can’t tell you how long you will live. The insurance company gets many bets, but you get just one. Your life is a one-time event. 

50% of the people in that room will live to their life expectancy or longer, but you either will or you won't. You can't have 50% of each outcome.

Perhaps a fourth of the people in the room will actually live past age 90, but no one can know whether they are in that group or not. Consequently, everyone in the room should plan for the possibility of living past 90 because if they bet on living a shorter life, they may run out of money if they're wrong.

Actuaries might tell us that the life expectancy of everyone in the room is age 78. That's the age at which they predict half the rooms occupants will still be alive and half will be dead.

If everyone in the room planned to pay for a retirement only until their average life expectancy, half of the people in the room would die broke. Averages turn out to be a very poor way to develop your retirement plan. Planning for the worst case works better.

Long-term stock market returns are another example. The S&P 500 grew at an annual rate of 9% from 1928 to 2008, but people who began investing in 1928 only earned about 7.9% over the next 30 years, while people who began investing in 1942 averaged 13.6% a year.

That’s a huge difference over 30 years. At 7.9%, $1 grows to $13,579 in 30 years. At 13.6%, a dollar grows to $40,280.

So, yes, had you invested a dollar in 1928 and held onto that investment for eighty years (and achieved market returns), you would have earned an average 9% a year — and you would be very old. In reality, you will only have about 30 years to invest for retirement. 

Depending on when your 30 years of investing ended (which depends largely on when you were born), however, you might have earned as little as 7.9% or as much as 13.6%. You probably wouldn't have received the actual average of 9%.

Your investing life is a one-time event. The market returns you receive may be much more or much less than the long term average.

Investors have been convinced by the marketing of brokerage firms that if you just stick with the market long enough, you will end up with an 8% to 10% return. Just keep the faith in the bad times, stay invested, and you will eventually get back to that 8%.

But that simply isn’t true. Your investment career is a one-time event and your investing results may be very different than the returns of a hypothetical person who might have been investing in the stock market for the past 80 years.

Be realistic. You could earn a lot in the stock market and you could lose a lot, or somewhere in between. Hanging on in bad markets is no guarantee that you will eventually be just fine.

So, what does this mean (pun intended) for retirement planning? It means that you have to plan for those holes in the river I sometimes step into. Have a plan that keeps your head above water if you live to 90, or if the stock market gods don’t smile on you.

You have to plan for the worst case, not the average.

In my next post, I'll explain why you probably won't earn "market average" returns.

Social Security Part 2 - Breaking Even?

 Would you be willing to bet a large portion of your retirement income, perhaps a hundred thousand dollars or more, on whether or not you will die before you’re 75? If you are married, would you bet that neither you nor your spouse will live past 75?

Assuming you’re not in seriously poor health, that seems like a pretty dumb bet, huh? Risking all that money on the belief that you can guess when you and a spouse will die? Nonetheless, that’s the bet people make when they decide to claim Social Security benefits at the earliest possible age (62).

Surveys show that people tend to underestimate their longevity. A married couple age 65 today has a 25% probability that at least one spouse will live to 90. If the couple claims at age 62, the surviving spouse — if he or she is the lower earner — will receive far less income from Social Security. (It might make sense for the lower earner to claim early, but that’s a topic for its own post.)

Still Willing to Make That Bet?

Perhaps the crux of the decision process is how you frame it. If you consider Social Security benefits an investment, then you might concern yourself with when it becomes profitable, as in the break-even analysis. For example, “I’ll receive more benefits from Social Security by claiming at age 62 unless I live past age 75.”

But, don’t forget what you’re betting. If you lose the bet, you’ll have a lot less income when you’re old. Postponing benefits can increase them by as much as 85%.

Social Security Is an Insurance Policy

Social Security is not an investment; it’s an insurance policy. The actual title of the program is Old Age and Survivors Insurance. It’s an inflation–protected lifetime annuity insurance policy. And “break-even age” and “profitability” don’t make sense with an insurance policy.

Do you decide whether to purchase homeowners or auto insurance based on the number of years to “profitability”? Imagine thinking, “I’m better off not buying car insurance if I can just avoid having an accident for three years”, or “I’m better off not buying homeowners insurance if my house just doesn’t burn down.”

We don’t buy insurance to make a profit or to break even. We buy it to protect against the risk of a catastrophic financial loss.

Deciding to claim Social Security benefits at age 62 because it takes a dozen years to break-even compared to delaying benefits to age 66 is equivalent to thinking, “I can make more money if I can just die before I’m 75.”

Kind of a weird thought process, isn’t it?

I’ve been paying homeowners insurance since 1975 and, true, I’ve made a few claims along the way. On balance, though, I’ve paid a lot more in premiums than they have paid in claims. In other words, it would have been more profitable to me to skip homeowner’s insurance and pay the claims myself.

But I don’t buy insurance hoping to make a profit. I buy it to protect myself against the risk of a catastrophic loss, like my house burning down. I paid for risk protection and I received it whether or not my house burned or my car crashed.

Social Security is an insurance policy, too. When you claim benefits at age 62, you receive protection against the risk that you will run out of money before you die. With Social Security, however, you can “buy” more insurance against going broke in old age, referred to as longevity insurance. You pay for it by foregoing those benefits until you are older.

If you claim Social Security retirement benefits at age 62 and die before you reach your early 70’s (the break-even age varies by individual circumstances), then you will receive more benefits before you die than you would have had you postponed claiming.

The thing is, I don’t think wringing the most out of your benefits if you die early is the best goal. A better goal is to provide for you and your spouse should you live to a very old age, in other words, to provide longevity insurance.

Not maximizing your benefits if you die at an early age would not be a catastrophe but living two decades of old age with inadequate income would be. Postponing benefits helps you insure against the worst-case outcome, which is what insurance is intended to do.

Four Scenarios

Let’s consider four scenarios in which you claim retirement benefits at 62 and 66, and die before and after your break-even age of say, 70, as depicted in the following table.

	Die Before Break-Even Age	Die After Break-Even Age
Claim at 62	1. You maximized income and have the least chance of outliving your savings	2. Delaying benefits would have provided more income and you may run out of savings
Claim at 66	3. Claiming at 62 would have provided more income, but you have the least chance of outliving your savings	4. You maximize income when you have the greatest chance of outliving your savings

Scenario 1 is not a bad financial outcome, though you might have wanted to live longer.

In scenario 3, you left some benefits on the table, but had the least chance of depleting your personal savings and you were better insured against scenario 4. You purchased an insurance policy and it turns out you didn’t get to file a claim, but you had coverage and more peace of mind about the future and that’s the purpose for insurance.

The worst-case outcome is scenario 2. You limited your Social Security income for the rest of your life (and your spouse’s) by claiming early and then lived a long time, possibly depleting your personal savings. You and your spouse are at risk of growing old with too little income.

A basic principle of personal finance is that we protect ourselves against worst-case outcomes when we can.

Delaying Benefits Helps Married Couples Even More

The advantage of delaying your claim is magnified if you are married and are the higher earner. Your spouse is entitled to half your full retirement age benefit as a “spousal” benefit. If your full retirement age benefit is $1,000 per month, your spouse is entitled to a spousal benefit of $500 per month, regardless of when you actually claim your benefit. In other words, if you claim early it will not reduce your spouse’s spousal retirement benefit, nor will delaying your claim increase their benefit.

Your spouse’s survivors benefit, however, is up to 100% of whatever retirement benefit you were receiving at the time of death. Your spouse will receive a larger survivors benefit if you delay receiving your retirement benefit. (In either case, the spouse’s benefit will be reduced if he or she claims it before reaching his or her own full retirement age.)

Let’s look at an example. Assume you and your spouse are the same age and claim retirement benefits at age 62. You were earning $45,000 a year before retiring and your retirement benefit is $11,892 per year. Your spouse will receive a $5,946 annual spousal benefit.

Your spouse’s survivors benefit will be up to $11,892 per year after you die, assuming she claims it after her full retirement age. Should you die at age 75 and should she live to 95, she will receive 20 years of payments of $11,892, totaling about $238,000.

If you claimed at age 66 instead, your retirement benefit would be $16,428 per year and her spousal benefit would be $8,214 per year, but her survivors benefit would be $16,428 per year. You would forego four years of benefits between the ages of 62 and 66. If you then died at age 75 and she lived until age 95, she would receive 20 years of payments worth nearly $329,000, or 38% more than if you had claimed early.

Single retirees will “buy” longevity insurance by delaying receiving Social Security benefits, protecting themselves against inadequate income should they live a long life. Married retirees will also protect their spouse from inadequate income in old age.

If you can’t live without your Social Security retirement benefits, then claim them when you need them. But, if you have the option to postpone receiving your Social Security benefits, by working longer or by paying for a few years from your retirement savings, then do so. You’re purchasing insurance against becoming very old and very poor.

You don’t have to delay claims to age 66 or 70 to purchase more longevity insurance. Even postponing a single year increases benefits by about 8%.

Receiving benefits at age 62 because you don’t want to die while leaving some benefits money on the table makes about as much sense as skipping homeowners insurance and simply hoping you never need it.

Your goal should be to protect yourself and your spouse from running out of money in your dotage and you increase your protection every year you delay receiving your Social Security benefits.

 Social Security benefits are tricky and your claiming decisions are typically irreversible. You want to get it right the first time. Check out my book, Retiring When Your 401(k) Fails, for more information.

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Claiming Social Security Retirement Benefits - Part 1

I promised to provide some useful retirement funding advice for people who aren’t wealthy. By my definition, that’s anyone who hasn’t saved enough for retirement to avoid a significant decline in their standard of living after retiring. As I showed in my blog on retirement savings balances, that’s at least 50% of all Americans. I suspect the percentage is much larger.

Claiming Social Security benefits is a complicated issue, particularly if you are married or divorced. In many cases, it’s an emotional one, so I will need a few posts to even cover the basics. 

But this I can tell you up front: Social Security is the most reliable source of retirement income most Americans will have and when you decide to receive benefits is, unless you are quite wealthy, the most important retirement funding decision that you will make.

There are three primary ways to pay for retirement: 1) pensions, 2) personal retirement savings in 401(k) and other savings accounts, and 3) Social Security retirement benefits. Many studies include home equity by assuming that retirees will take out reverse mortgages to generate income, but I find that troublesome. First, most people simply don’t take out reverse mortgages for various reasons and second, studies show that about 85% of Americans want to retire in their current homes. Many want to pass their home to their children.

Nonetheless, a Boston College Center for Retirement study found that taking out a reverse mortgage would add about 10% to the number of Americans who have saved enough for retirement. In other words, for many households, successfully funding retirement will require tapping home equity with a reverse mortgage or by downsizing.

Pensions work fairly well, but they have all but disappeared since the early 1980’s. Mostly public workers like teachers, firemen and the military have them now.

Pensions were largely replaced by 401(k) accounts beginning in the early 1980’s, transferring the risk of retirement financing from businesses to individuals. As I pointed out in an earlier post, the personal savings approach (401(k)’s, IRA’s, etc.) has only worked for a very small percentage of American households. That leaves Social Security benefits to serve as the backbone for retirement financing.

Regardless of how you feel about Social Security as a social safety net, it is unquestionably the most secure component of retirement income. Without Social Security retirement benefits, most of our elderly would live in near poverty. About 14% of all Social Security recipients derive more than 90% of their income from those benefits. For about half or recipients, it contributes 50% or more of their income.

If you qualify for these benefits because you paid FICA taxes for 40 quarters or more, or because you are married to someone who did, deciding when to claim them may well be the most important retirement financial decision you make. That’s because the amount of your benefit will depend on when you choose to receive it.

You can receive these benefits as early as age 62, but every year you postpone receiving them, they will increase about 8% in value. They stop increasing after age 70, so there is no gain from postponing them past age 70.

For example, you might receive a benefit of $1,000 a month for the rest of your life if you claim benefits at age 62. If you forego those payments for twelve months, though, you might receive $1,080 a month for the rest of your life.

On the other hand, it may turn out that you have no decision to make. 

Nearly half of retirees recently surveyed (45%) say they were forced to retire earlier than they had planned, typically because of layoffs, health problems, or the need to take care of a spouse. You may plan to retire later than age 62, but life won’t necessarily oblige.

If you can postpone claiming, however, it will be the most effective way possible to improve your retirement income. It helps in three separate ways. First, it increases your benefit, as I explained above, by about 8% each year that you postpone claiming. Second, it delays the date when you will need to draw down your personal retirement savings to pay living expenses, so your savings will last longer. And third, it gives you a few more years of work income to contribute to your retirement savings.

Assuming you’re in the 55% of workers who actually get to make this choice, why wouldn’t you choose to wait?

First, you might need the income at age 62, in which case claiming early is a no-brainer.

Second, you might be persuaded by the “break-even” argument that says you have to live 10 years or so before you are paid back for the years you elected not to receive benefits. This is a specious argument and one that I will explore in my next post.

Third, you might believe that the entire Social Security program will go away before you can take advantage of it, so you should grab what you can get while the grabbing is good.

I don’t buy the latter argument for two reasons. First, conservatives have been trying to eliminate the program since its inception in the 1930’s without success. People love Social Security and it has proven politically disastrous to recommend ending the program. Second, eliminating Social Security would create a massive elderly poverty problem, and so would be self-defeating as a way to cut the federal budget. Americans aren’t going to let their elderly starve.

Still, if you feel strongly that the program will go away, claiming early would be a rational choice, though I don’t recommend it. The reality is that only very wealthy people can afford retirement without Social Security.

So, here’s my first bit of retirement advice for people who won’t accumulate several hundred thousand dollars in retirement savings by their early sixties. 

Postpone claiming Social Security retirement benefits as long as you can up to age 70.

This is especially true if you are the higher earner of a married couple. If you are the lower earner, it may make sense to claim as early as your full retirement age (66 for people retiring soon), and have the higher earner postpone his benefits as long as possible, but that is a more complicated decision that I’ll address subsequently.

Social Security retirement benefits are a deferred joint lifetime annuity. Those benefits are paid to you and your spouse for as long as you live. You could purchase an annuity that is equivalent to your Social Security benefits from several insurance companies, though it would be expensive.

Social Security retirement benefits are a single premium immediate annuity with inflation protection. You could buy one of those from an insurer recently with a 3.875% payout, meaning it would pay $38.75 per year for every $1,000 of annuity you purchased. 

The average household Social Security benefit in 2012 is about $14,000 a year. Divide that by .03875 and you get $361,290. That’s the amount you would have had to save to purchase an annuity equivalent to the average Social Security benefit in 2012.

You can divide your own annual Social Security benefit by .03875 to see what your benefit is worth. In fact, I suggest that you head over to the Social Security website and use their calculator to estimate your benefits and calculate how much you would have had to save to buy those benefits. (Remember to multiply the monthly benefit by 12 and then divide by .03875.)

I recommend that you consider your benefits as longevity insurance, guaranteeing that you will have substantial income if you live a very long time. If you do so, the value of postponing claiming benefits will be obvious.

The best argument for delaying benefit claims as long as possible is the sentiments expressed by many elderly women who have outlived their spouses by two decades and now suffer with a benefits check that could have been as much as 85% larger. Their biggest financial regret is that they and their spouses claimed Social Security benefits at too early an age.

In my next post, I’ll explain why break-even analysis is a poor way to decide when you should receive your benefits.

Did the Jobless Rate Go Up, Down or Sideways?

Recently, the Bureau of Labor Statistics reported that the September 2012 jobless rate had fallen to 7.8% from 8.1% and the Obama administration pointed to the decline as proof that their economic policies were working. That’s seems only fair, since Romney’s camp claimed that the increase from 8.1% in April to 8.3% in July proved the opposite.

Monthly Jobless Rates from the Bureau of Labor Statistics Website

Then, in October, though the reported jobless rate increased from 7.8% to 7.9%, the BLS stated, “Both the unemployment rate (7.9 percent) and the number of unemployed persons (12.3 million) were essentially unchanged in October, following declines in September.”

So, when do jobless rates actually go up or down? The answer is that the BLS doesn’t know for sure, because jobless rates are very hard to measure.

What does the BLS actually mean when they report October joblessness with a single figure, like 7.9%?

If you research the details and read the fine print on their website, http://www.bls.gov/, you’ll find that what they actually mean is something like this:

“We estimate the jobless rate by inferring it from random samples because it isn't practical to go ask every American every month if they have a job. We believe the jobless rate is somewhere around 7.9%. 

We’re 90% confident¹ that the actual rate lies somewhere between 7.6% and 8.2%. In fact, we would bet that it wasn’t exactly 7.90%  and we would usually win that bet, if we could actually know with certainty what the jobless rate was (we can’t). We picked 7.9% because it’s in the middle of the range and so it minimizes our potential error.

10% of the time, we will be wrong and the actual jobless rate will be outside this estimated range, simply because inferring data from samples is imperfect. We could give you an estimate that was only wrong 5% of the time, or even 1% of the time, but the range of our guesses would be progressively and substantially larger.

We will modify our guess of the October jobless rate in November and December (after you have stopped paying attention to it) as additional data comes in. It wouldn’t be unprecedented for us to reduce our guess in the next 60 days by 0.7% or increase it by 0.6%², so we might end up guessing somewhere between 7.2% and 8.5%.

When we finalize our estimate after 60 days, we will still only be guessing at the actual jobless rate within a range of about +/- 3%.

And remember that the number you’re comparing it to from September is also subject to this amount of uncertainty, so when the average drops 0.1%, we can’t say with any certainty whether that is more, less or the same as September’s rate.”

For some reason, it's difficult to find the confidence interval for BLS' national jobless estimates. You'd think that would be an important piece of information to convey, like, "This election poll has a margin of error of +/- 3%." But, that would expose the broad range of uncertainty in the estimates.

BLS does, however, specify confidence intervals for regional jobless estimates as in the following table for September 2012. It's easier here to see that the BLS is actually estimating a range of possible jobless rates and not one number:

Let's put it in football terms, the universal metaphor. Before the play (September), the ball was somewhere between your team's own 30-yard line and your 35. After the play (October), the ball was somewhere between your team's own 31-yard line and your 36. Was there a gain or a loss on the play?

I'm not ragging on the BLS for its inaccuracy. They're providing the best information they can within the limits of statistical tools.

But, remarkably, when BLS estimates that in one month the jobless rate was somewhere between 7.5% and 8.1%. . .probably. . .and in the next month it was somewhere between 7.6% and 8.2%. . .probably. . . the news media shouts, “Unemployment grew!”

Maybe it did. But maybe it didn’t. We’ll never know for certain.

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[1] The BLS website states that they commonly use a 90% confidence interval for all estimates.

[2] BLS-reported range of absolute corrections in the past decade.