Older readers may remember that last week, in a simpler, more innocent America, the 7.8 percent U-3 unemployment rate was supposed to reverse the stunning collapse of President Obama's re-election campaign. At the time, some spoilsports cast doubts on the surprising 0.3 percent drop in a month (which was unsupported by any discernable improvements in economic growth, increases in job creation or declines in new unemployment benefits claims), and the gloomiest Gus was former General Electric CEO Jack Welch, who accused the Obama Labor Department of fudging the numbers.
Welch got pilloried for that claim, but he's back with a more detailed defense. Although his Wall Street Journal op-ed starts out inauspiciously, by comparing his travails to Soviet show trials and Maoist re-education, Welch makes some interesting points about how the Census Bureau and the Bureau of Labor Statistics conduct their unemployment surveys:
Some questions allow for unambiguous answers, but others less so. For instance, the range for part-time work falls between one hour and 34 hours a week. So, if an out-of-work accountant tells a census worker, "I got one baby-sitting job this week just to cover my kid's bus fare, but I haven't been able to find anything else," that could be recorded as being employed part-time.
The possibility of subjectivity creeping into the process is so pervasive that the BLS's own "Handbook of Methods" has a full page explaining the limitations of its data, including how non-sampling errors get made, from "misinterpretation of the questions" to "errors made in the estimations of missing data."
Bottom line: To suggest that the input to the BLS data-collection system is precise and bias-free is—well, let's just say, overstated.
Even if the BLS had a perfect process, the context surrounding the 7.8% figure still bears serious skepticism. Consider the following:
In August, the labor-force participation rate in the U.S. dropped to 63.5%, the lowest since September 1981. By definition, fewer people in the workforce leads to better unemployment numbers. That's why the unemployment rate dropped to 8.1% in August from 8.3% in July.
Meanwhile, we're told in the BLS report that in the months of August and September, federal, state and local governments added 602,000 workers to their payrolls, the largest two-month increase in more than 20 years. And the BLS tells us that, overall, 873,000 workers were added in September, the largest one-month increase since 1983, during the booming Reagan recovery.
These three statistics—the labor-force participation rate, the growth in government workers, and overall job growth, all multidecade records achieved over the past two months—have to raise some eyebrows. There were no economists, liberal or conservative, predicting that unemployment in September would drop below 8%.
I know I'm not the only person hearing these numbers and saying, "Really? If all that's true, why are so many people I know still having such a hard time finding work? Why do I keep hearing about local, state and federal cutbacks?"
I sat through business reviews of a dozen companies last week as part of my work in the private sector, and not one reported better results in the third quarter compared with the second quarter. Several stayed about the same, the rest were down slightly.
If Obama can't trust General Electric CEOs, this country really is racist.
The BLS maintains six different measures of unemployment, and U-6, which measures part-time work, is the only one that didn't go down last month. I don't know whether that does or does not support Welch's hypothesis about babysitting accountants. Would the hanky panky come from shifting part-timers who would have counted toward U-3 into U-6?
The Census Bureau's 26-page questionnaire [pdf] tries gamely to comprehend the shifting, idiosyncratic nature of work, and the BLS and Census gather a wide range of nuanced information. The data-gathering certainly seems to be a pretty transparent process. (Caveat: I've never met anybody who's been contacted for an unemployment survey, but I've also never met anybody who's been contacted by Gallup and I've only met one person who's been contacted by AC Nieslen; I've also never seen a trapdoor in the ceiling of an elevator nor a loose floorboard which allows important items to be concealed, though I understand from movies and literature that these are ubiquitous.)
Secretary of Labor Hilda Solis says top men are working on the unemployment statistics, but that doesn't mean the numbers couldn't be manhandled. Welch scores a nice hit by digging up a New York Times op-ed former Obama economic advisor (is there any other kind of Obama economic advisor?) Austan Goolsbee wrote back in 2003, when the genocidal G.W. Bush administration was sucking dry the marrow of the laboring classes with an unconscionable 5.9 percent unemployment rate. Money quote: "the government has cooked the books."
Besides the skepticism a reasonable person should have about Solis' Labor Department, Obama in 2009 moved to get the Census Bureau to report directly to the White House. This was widely believed have doomed one of Obama's celebrated efforts to "reach across the aisle," when Commerce Secretary nominee Judd Gregg dropped out of the running.
Welch still doesn't present any evidence of fraud. But the administration's dedication to accuracy on items that are more important than jobless numbers seems notably less fervent than its commitment to protecting America's lady parts and its wildly popular children's television characters from the mortal threat posed by Stacey Dash. Good on Jack Welch for keeping this question alive.