Is the Obama Administration Juicing the Unemployment Stats?

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Peter Foley / Bloomberg / Getty Images

Jack Welch, former chief executive officer of General Electric Co., speaks at the World Business Forum in New York City, Oct. 3, 2012.

The Government releases countless statistics each year, but few get more attention from the press than the official unemployment rate, which is updated and released once per month by the Bureau of Labor Statistics (BLS). Employment statistics compiled by the government are relied on not just by policy makers, but also by business leaders, the press, and anyone else who is interested in gauging the state of the economy.

It doesn’t take long, however, for government stewardship of these statistics to be questioned. After all, if one of the main tasks of government is to facilitate employment, then can the government be trusted to issue statistics that will illustrate its success or failure in this task? Such questions were thrust to the fore on Friday, when the BLS announced that the unemployment rate had dropped from 8.1% to 7.8%, just one month before a presidential election that will be decided largely upon the public’s estimate of each candidate’s ability to create jobs.

Shortly after the announcement, the former CEO of General Electric, Jack Welch, took to Twitter to accuse President Obama’s political operation (which is based in Chicago) of manipulating the stats for political gain, writing “Unbelievable jobs numbers . . . these Chicago guys will do anything . . . can’t debate so change numbers.” This argument was taken up by other critics of the President, including Florida Republican Representative Alan West and CNBC commentator Rick Santelli, among others.

(MORE: Unemployment Rate Drops to 7.8% But Path to Recovery is Murkier)

The backlash against such conspiracy mongering was swift and overwhelming. The Internet has always been rife with paranoia, but it came as a surprise to many that such an establishment figure like Welch would question the credibility of the federal government statistics so directly. Even died-in-the-wool conservatives like CNBC host Larry Kudlow were critical of Welch’s comments. With the former CEO as a guest on his show, Kudlow hit back against Welch’s claims:

“I’ve worked in the White House under Reagan and there’s no way those numbers can be manipulated. Maybe the model is flawed but you can’t touch those numbers.”

Market strategist and columnist Barry Ritholtz took a more personal line of attack against Welch, reminding his readers that Welch’s time at the helm of GE was marked by a consistent and statistically-improbable beating of analysts’ earnings expectations, which helped the conglomerate’s stock soar:

“I have long stated that Jack Welch was one of the luckier, more wildly over-compensated CEOs around. He became CEO of General Electric in 1981, just before an 18 year bull market in big cap stocks began. He left in 2001, just as the market implosion was getting rolling.

GE’s revenues grew 385% under his watch, but the company’s market cap grew 4000%. How did that happen? GE increased earnings over the years, and with stunning regularity, managed a quarterly profit beat.”

It’s indeed ironic that a prolific massager of earnings such as Welch would have the temerity to criticize the Bureau of Labor Statistics of corruption and dereliction of duty, without any proof beyond a hunch.

Though the conspiracy theorists haven’t been explicit as to how they believe the Obama administration could coordinate a conspiracy to cook the books (which would involve coercing dozens of career civil servants to lie on its behalf), they do offer a rock solid motive: that the administration’s chances of reelection would benefit from a lower unemployment rate.

(MORE: What Are the Jobs Figures Really Telling Us?)

But this sort of manipulation would only get the administration so far. On the margins, voters might be swayed by what they hear the media reporting about the economy, but the main reason why presidents have a hard time getting reelected during times of high unemployment is that the lives of voters are directly affected by a bad economy. They have a harder time getting a raise, they know more people out of work, and they are confronted each day by their stagnant wealth. And no amount of propaganda is going to dissuade them of the reality they’re living every day.

In other words, while the risks of getting caught fudging the data are huge, the benefits are negligible. Though this may not sound very lofty, it’s the most logically sound reason to trust government statistics. As Slate’s Matthew Yglesias argued last week, the fact that statistics compiled by the American government are trusted is the real story. One-party governments like those running the show in China and Russia — governments which enjoy authoritarian control of the media and the capacity to retaliate against wayward government workers — don’t always issue reliable data. But we do. Yglesias writes:

“This is a remarkable fact and it’s a big part of what makes America great. Trustworthy economic data is a very valuable public good that serves as a useful production input for tons of private businesses. It also helps smaller-scale government agencies and nonprofits make smarter decisions. And last but by no means least, precisely because the BLS is credible, presidents know that they’d take an enormous political hit if they were seen as manipulating it.”

The conspiracy theorists point to the obvious incentives that government officials have to fudge numbers in order to inflate the public’s perception of their performance. And there’s no denying that given a riskless opportunity to do so, many (or even most) politicians would juice data to make themselves look good. But what these conspiracy theorists ignore is the risk of getting caught. All it would take is one BLS economist with enough probity (or even a desire for fifteen minutes of fame and a book deal) to step forward with his story of how the administration made him manipulate the stats and the jig would quickly be up.

There is a reason why statistics are trusted in America and not in China, and it’s not because Americans are constitutionally more trustworthy or honest. Much like markets, political systems are made better through competition and dissent. And while it’s in vogue to lament the fractious condition of our body politic, it’s precisely this state of affairs that makes the sort of conspiracy Welch is alleging more than a little hard to believe.

MORE: Every American Is Experiencing a Different Economy

58 comments
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josephmateus
josephmateus

Mr. Chirstopher Mateus (Matthews) here you go again. I am just amazed at your blatant ignorance. You should know that the real unemployment figures are much higher than the official one put out by the US government. For one thing, the government doesn't count people who gave up looking for work nor does it consider underemployed people now working in extreme low paying  partime jobs after losing the good paying jobs they had before. This is another form of unemployment, going from a horse into a donkey, extreme poverty.

Therefore, when you include all this folks the real unemployment figure is actually 22% and even higher in the youth unemployment who graduate from college and cannot get a job in their qualified field, so instead they go work as waiters or working in sweat shops making phone calls on comission trying to sell insurance, credit cards, etc.

So if the US government is willing to distort so much the real unemployment figures, in this context it would be very easy for them to cook the books and  announce another decrease in unemployment to 7.8% just before the election to make them look better. Look, its the big guys who make the decisions, they are very close to the president in this case, Obama  himself would just need to call up his Secretary of Labour and tell him to lower the unemployment rate to 7.8% at his department's Bureau of Labor Statistics. Then the secretary of Labour tells the head of the Bureau of Labor Statistics to lower the unemployment numbers and voilá, fact accompli,  its done.  There guys -  the president, the Secretary of Labour and the director of the Bureau of Labour Satistics (BLS) are the ones doing this, not the other hundreds of lower level burocracts working at the BLS.

Jack Welch is right to be madder than hell because unlike you, he knows how the machinery works, and he fully knows how easy it is to cook the books and get away with it very easily.

JS
JS

Yes, the numbers can be changed if you change the basis. The unemployment number now does not include part time workers and people who have quit looking for work because Obama has gutted the Work Requirement and the welafre receipients do not have to look for work. Instant improvement. It is called Chicago style of Politics. Jack Welch was right.

dakinsky
dakinsky

If the theory doesn't fit the facts, change the facts. Then drop a little boy or a fat man.

romerjt
romerjt

 The unemployment number does include the part-time workers and either you just mde that up or got it from the same place your got the idea that Obama ended the work requirement for welfare.  He didn't, here's the truth:          " The Romney campaign has released two more

ads repeating the line that work requirements were "gutted" line and

it's become a regular talking point for Romney campaign surrogates.   "Our most effective ad is our welfare ad," strategist Ashley O'Connor said at an RNC forum on Tuesday. "It's new information."  "We’re not going to let our campaign be dictated by fact-checkers," added Romney pollster Neil Newhouse.

 

"Since 1996, welfare has been administered through block grants to

states. The grant program, called Temporary Assistance to Needy

Families, or TANF, limits how long families can get aid and requires

recipients to eventually go to work. It also includes stringent

reporting requirements for states to show they are successfully moving

people into the workforce."

   

A memo

from George Sheldon, acting assistant secretary at the Department of

Health and Human Services, said the department wanted to give states

more flexibility in meeting those requirements. The memo notifies states

"of the Secretary’s willingness to exercise her waiver authority ... to

allow states to test alternative and innovative strategies, policies,

and procedures that are designed to improve employment outcomes for

needy families."

 

steveforever
steveforever

I canceled my subscription for this article

kbpenguino
kbpenguino

I asked some dude, "Are the numbers juiced?" "No," said one guy. There you have it folks, those numbers are the god's honest truth. 

I'm no reporter, but it seems a better way to prove your case would be to break down the numbers, not to ask people's opinion as to whether or not the numbers are juiced.

cm6096
cm6096

Well the devil is in the details which is why Time or any other leftist publication is going to show them.

Sheldon Danto
Sheldon Danto

The Obama Administration has demonstrated that they will do whatever they think they need to do to win the election. I believe any number can be manipulated and I believe the significant drop to 7.8 % from 8.1% was manipulated. The increase in new jobs while good was not large enough to generate the .3% drop.

FredsDead
FredsDead

I don't know if the numbers are faked or not (and don't particularly care - I have a job and have had 2 job offers during the past month, so maybe that's a sign of the times)... but I do have to laugh at the right's "indignation" at this type of behavior.

http://swampland.time.com/2009...

BJamesB
BJamesB

Sadly, Christopher Matthews makes no attempt to answer the question posed by his headline.  Rather than do some real reporting, you know, like the news media used to do, he answers the rather provacative headline with opinions about opinions. 

Is the Administration cooking the books?  Well, why not ask someone who works at BLS, or used to work at BLS, or economists familiar with their methods?  What about the non-disclosure agreements they all sign? Are there any past incidents that might suggest malfeasance given that advance knowledge could give employees an enormous edge in investing in investment in the market?  This of course requires work, which is harder than web surfing.

Instead we get warmed over opinions about opinions.  Why should we care about what Barry Ritholtz said about Jack Welch?  Mr. Matthews is probably right that it would take only "one BLS economist with enough probity"  to blow the whistle, but that his opinion.  In fact, as far as we know none has been reported, a point more valuable than the writer's opinion, or the others quoted in this story.

The print media is slowly making itself obsolete.  It is no match for the sound and fury of cable news, which values pretty faces and provactive opinions and thrives on viewers' adrenalin rush of faux outrage. 

Americans deserve a better news media.   

Clarence Swinney
Clarence Swinney

 Mitt Romney wants to give $5 trillion tax cut, averaging $250,000 to every millionaire in this America, including himself, while raising taxes on 18 million working families ending tax breaks for college, children and earned income.  He opposed the payroll tax cut for taxpayers and called President Obama’s payroll tax a “little Band-Aid.”  He grew debt in Massachusetts by 16.4 percent while raising taxes and fees by $750 million a year on middle-class families and businesses.  He said he’s “not concerned about the very poor.”  (Watch video here.)  He has proposed to overhaul the tax system so that the foreign profits of U.S. firms are not taxed in the United States.  To avoid paying taxes Mitt Romney has money in foreign banks including Switzerland, the Cayman Islands, Luxemburg, Ireland and Bermuda.  He wants to drop all tax rates by 20 percent, bringing the top rate, for example, down to 28 percent from 35 percent, eliminate capital gains tax for families making below $200,000 and cut corporate tax to 25 percent from 35 percent.

President Obama opposes cutting millionaires’ taxes, especially by eliminating medical research projects into things like cancer and Alzheimer’s disease, kicking children off of Head Start programs; asking students to pay more for college; or eliminating health insurance for millions of poor and elderly and disabled Americans on Medicaid.   He put a $1,000 back in the pockets of hardworking Americans by cutting payroll taxes, and he just extended it through 2012.  President Obama has no foreign bank accounts and pays federal taxes on his entire financial holdings.  He wants to raise taxes on the wealthy and ensure they pay 30 percent of their income at minimum. He supports extending Bush-era tax cuts only for everyone making under $200,000, or $250,000 for couples.

gussley
gussley

You see, TIME never got over their envy of the Newsweek "anti-Christ" scoop of November 2008. This is just them trying to make up for it. They'll do anything to get their mojo back. That is the real story here, not another millionaire bigmouth tweeting BS.

Dawn Berkley
Dawn Berkley

Of course they're  "Juicing" the stats.  Obama has been a dismal failure. All he has left are his lies and subterfuge. 

romerjt
romerjt

 Dear Dawn, You believe your first statement even though neither you nor anyone else has one piece of actual evidence of this charge.  You're willing to believe fact-less rumors because of your opinion contained in your second statement.  Dawn, this is not a good way to process information.  I have a feeling I know where you get your "news".

JZimm09
JZimm09

You really know nothing.

akpat
akpat

 The same calculation was used under Bush. Did you complain when 800,000 yes thats right 800,000 people were laid of every MONTH under him ??

mtngoatjoe
mtngoatjoe

You can't complain about Bush because he isn't Obama. First rule of the Right, "Thou shall not criticize the Republican overlord."

Trajan Saldana
Trajan Saldana

Welch and his ilk won't believe the jobs numbers because they do all they can to hoard cash and not create jobs so they believe all others in business do the same

marathag
marathag

 But it is 'their money'

If they want to put it in a Scrooge McDuck money bin, or burn it, that is their call to make.

romerjt
romerjt

The real problem is that people get to question this data in the NEWS without one speck of evidence.  The concept of a free press has responsibilities too and the people who put this on the air and repeat the baseless rumor are traitors to the idea and practice of freedom of speech and a free press.

Nonaffiliated
Nonaffiliated

I don't believe these numbers were fudged.  But, I'll give you 10-1 odds that the unemployment rate for last month gets 'adjusted' upward after the election.  That seems to happen just about every month.  Something is wrong with the model.

JZimm09
JZimm09

Jack Welch has broadcast to everyone now that he is old, extremely partisan, outmoded, outdated and from here on to be totally disregarded.  Very close to Clint Eastwood.

Douglas4517
Douglas4517

 Or George Soros.

Hollywooddeed
Hollywooddeed

What does Soros have to do with it?

Soros.

Drink.

rharris50
rharris50

 Hollywoodeed, don't bother trying to explain it to Douglas4517. If you have to explain to him that the "George Soros" card that those on the right have been playing for many years has become quite tiresome, it would be a waste of your time and his.  He either can't or won't get it.  The real irony with those nonsensical attacks is that the right wingers think that Soros is some kind of anti-capitalist,when in fact he has funded (among other good causes) a variety of economic education programs in the former Soviet states, in order to assist them in understanding western-style, market-oriented economics.  Sigh.

Douglas4517
Douglas4517

 Would you rather I had written "Warren Buffet?"

 If I have to explain this to you, you are beyond understanding and it would be a waste of my time and yours.

T Marq
T Marq

Tis the season

to be hired, Tra-la-la-la-la .. la,la .. la,la.

Unemployment

could be higher, Tra-la-la-la-la .. la,la .. la,la. 

Getting ready

for Christmas stacking,

Minimum wage or

maybe less.

Would employers

make a fortune

Or would they be

just like the rest?

Now's the time

to increase staffing,

Making them

work for half the pay,

Then once the holidays

are over,

Unemployment

climbs again that day.

LoudRambler
LoudRambler

 No, it isn't.

 Case closed.

 Next question?

sixtymile
sixtymile

It's not actually ironic that someone who cooks their own statistics for gain assumes others would do the same.

Robert Williams
Robert Williams

If you think that the new employment stat isn't "juiced up", you haven't been paying attention to the Obama administration...

Hollywooddeed
Hollywooddeed

No, I'm just not looking at conspiracy theories.

mwehlinger
mwehlinger

Jack Welsh is just a side show.  He doesn't represent mainstream Republicans or conservatives.  But he becomes a convenient target for people who don't want to talk about all of the other government economic statistics and indicators which run contrary to the recent 7.8% statistic, or at least make it appear to be a statistical anomaly.  Isn't it just amazing how little discussion there has been about the final second quarter GDP revision of 1.25%(rounded up to 1.3%).  Both of these statistics should, and eventually will, assume their proper importance, given a sufficient period of time and nonpartisan analysis.  In the meantime, why give so much attention to the comments of  individuals with celebrity status?  And why not question the overemphasis of the headline U-3 employment statistic, which has acquired its own celebrity status and near exclusivity contract with the mainstream media?

superlogi
superlogi

We have the fewest people in the job market since 1981 (source BLS), fewer people gaining employment in the month than can keep up with the population (source BLS), and E-6 number that's unchanged (source BLS), economic expectations which were wildly inaccurate (8.2% instead of 7.8%) and an enormous increase in readjusting past economic numbers,  coupled with 1.3% economic growth.  All,  based on a telephone poll of 60,000 households and justification that the decrease in unemployment is attributed primarily to temporary employment.  I guess, I'm a bit skeptical myself.

rharris50
rharris50

Actually, the number of people in the job market (the labor force) has gone up nearly 50% since 1981.  I think what you are referring to is the labor force participation rate, which is the proportion of the population in the labor force, not the number of people.  That rate has been declining pretty steadily for roughly a dozen years (through parts of the Clinton,Bush,and Obama administrations), for a variety of reasons, so there is nothing unusual about the current situation. 

superlogi
superlogi

The fewest percentage of work age people is the term I should have used.  And, of course, the actual number of employed has gone up with the population since there were about 90 million fewer people in the work force in 1981.  If it hadn't the country wouldn't exist.  And, of course, it's an unusual situation.  As I said, it's the lowest it's been in over 30 years as are the other statistics I've mentioned.  If it weren't no one would be discussing them.  But, hey, this election gives you the perfect opportunity to maintain Obama's miserable track record.  Go for it.

superlogi
superlogi

"That has been true of virtually every year in recent history--through three Presidential administrations, we have experienced the lowest rate in decades nearly every year."

The above is, simply, an obfuscation.  Job participation peaked at the end of the Clinton Administration. And, you know what that makes you?  As I said, the simple fact is, it is lower today than at "any time" previous in over 30 years.  You can spin that any way you want, but that is a fact.  It is also a fact, which you conveniently seem to forget, that economic growth is at 1.3% after juicing it with $5.5 trillion in borrowed money and that E-6, the real unemployment number hasn't changed at 14.7%.  Now, while you may sit there and tell the country it's doing just fine, the country knows better.  Furthermore, your boy ran on the certainty he'd fix the economy, not make it worse.

superlogi
superlogi

That has been true of virtually every year in recent history--through three Presidential administrations, we have experienced the lowest rate in decades nearly every year."

The above is, simply, a lie as job participation peaked during the Clinton Administration.  And, you know what that makes you?  As I said, the simple fact is, it is lower today than at "any time" previous in over 30 years.  You can spin that any way you want, but that is a fact.  It is also a fact, which you conveniently seem to forget, that economic growth is at 1.3% after juicing it with $5.5 trillion in borrowed money and that E-6, the real unemployment number hasn't changed at 14.7%.  Now, while you may sit there and tell the country it's doing just fine, the country knows better.  Furthermore, your messiah ran on the promise of making things better, not worse.

rharris50
rharris50

 Actually, as I said, the labor forced participation rate has been declining steadily for a dozen years, so obviously it is not unusual for this year's rate to be the lowest in decades.  That has been true of virtually every year in recent history--through three Presidential administrations, we have experienced the lowest rate in decades nearly every year..  However, if I were in politics trying to support the opposition, I wouldn't mention that either; I would simply point out that this year's rate is down, as if that is something new.  It sounds more convincing to suggest that this year's rate is unusual. 

Dr_Jack0040
Dr_Jack0040

It's not that the numbers were manipulated by the government, it's the sample of households interviewed that is skewed. The probability of the unemployment rate dropping that much when the establishment survey and the household survey are in such contrast with each other is highly unlikely.   This is most likely a result GIGO (garbage in garbage out)

java_jack
java_jack

I don't know if the numbers are false or not.  8.1 to 7.8 is a significant drop to say the least.  When looking at the net jobs created over the past 12 months, it doesn't seem to make sense.   Perhaps the issue here is the number of people that are underemployed or those that have just given up and removed themselves from the job hunting process. 

The reality is the number has never been an accurate reflection of the employment rate.  Now, I would suspect it would be a bit challenging to falsify the numbers, I would not say it is out of the realm of possibility either. 

I think the author of this article is taking a very naive view of things and too easily discounts things.  Whistle blowers are not praised and don't get 15 mins of fame.  More often than not they are criticized and demonized for trying to do the right thing.  Therefore, there is not much incentive for anyone to come forward.  Therefore, there is significant upside to fudging the numbers for the govt. 

However, it is a risk but 3rd party independent sources could do their own reporting on the numbers.  If enough people challenge the numbers, this could raise serious questions about the validity of the numbers and the BLS management.   Such activities would not reflect well on the the President. 

To say the numbers could never be cooked is wrong.  To say definitively without evidence that the numbers are cooked is equally wrong.  The reality is we don't know for sure if they are or are not cooked. I do think that it is a big move from 8.1 to 7.8 and I don't see anything in the net job creation that would explain it.  However, that does not mean they were cooked.  A more detailed explanation would seem to be in order on how the number was reached.

Jim Satterfield
Jim Satterfield

A major part of the drop comes not just from the September results but the upward revision of previous months.

bcfred
bcfred

You hit it squarely on the head with your first paragraph.  There were only 114,000 jobs added in September; the improvement in the unemployment rate is due to people stopping looking or taking part-time jobs.  114k is fewer than were added in August, which in turn is fewer than were added in July.  Only a politician could spin declining new jobs into a positive trend.

mdb51
mdb51

The sample size of this statistic is 60,000. The 8.1% to 7.8% change, 0.3% over 60,000 amounts to 180 new jobs. Easy to make a mistake in surveys with this small a sample size: the result is not statistically significant, especially since the US has 6,000+ counties. This change amounts to 1 new job in 3% of the counties. 

Dr_Jack0040
Dr_Jack0040

I agree with you java-jack. Since the number was based in large part on the household survey, it would seem appropriate to release data from each state and major city where collected to reassure Americans of the validity of the survey.  

That being said, I still think the results are based on a skewed sample. If right, the next report will shoot the number back up.

Tom_Bombadil
Tom_Bombadil

http://shadowstats.com/ the real unemployment rate is actually near 22-24%  

rharris50
rharris50

 Actually, the official rate is the real unemployment rate.  There are offsetting problems with the official rate that people like to cite selectively to make political points.  Since the rate includes only those who are looking for work, it excludes those who are not trying to get jobs, either because they gave up, have retired, or simply do not want to work at current wages.  When critics want to argue that the rate overstates the problem, they point out that sometimes 3-4 people in a family hit the market when the primary breadwinner loses his/her job.  That exaggerates the problem.  When the same critics want to argue that the problem is worse, they stress the fact that many people have given up looking for work.  However, the BLS (and other economists) do not try to second-guess people's motives.  That's why we use the official rate, regardless of whether a Republican or Democrat is in the White House.  It isn't perfect, but unlike the alternatives, it gives us a consistent measure from year to year of how many people are actually looking for work relative to the whole labor force.  Those arguing that the unemployment rate is 20+% today are simply playing politics.  Ironically, those same conservatives who today are arguing that the unemployment rate is roughly triple the official rate are the same ones who usually argue that we inappropriately include people getting unemployment compensation as unemployed, even if they are not serious about finding jobs.  That is  a problem, but there is no objective way to decide who is serious and who is not, in order to exclude those who don't want a job.  The official rate is the one that we always use, and it gives us consistency over time, rather than the nonsense of hearing that it is either too high or too low, depending on which interpretation makes your political candidate look better.  Check it out:  every labor economics textbook explains it clearly and succinctly.

miki801
miki801

I've been retired since 1998.  I guess my husband and I are counted in your unemployment statistic.  We are some of theose discouraged workers who have stopped looking for work, and only 79!  Talk about cooking the books.

Douglas4517
Douglas4517

 That would be because you do not understand the U2 unemployment rate and category.  Or this:

"Total employment rose by 873,000 in September, following 3 months of little

change. The employment-population ratio increased by 0.4 percentage point to

58.7 percent, after edging down in the prior 2 months. The overall trend in

the employment-population ratio for this year has been flat. The civilian labor

force rose by 418,000 to 155.1 million in September, while the labor force

participation rate was little changed at 63.6 percent. (See table A-1.)"

http://www.bls.gov/news.releas...

You might want to get the facts and not be so willing to believe political hype and distortion.

Nonaffiliated
Nonaffiliated

 I think you misunderstand the terminology.  These long-term discouraged workers are people who say they would like to work.  Does that apply to you?