Theory of cooked jobs data makes no sense

Rigging the unemployment rate is a lot harder than you might think.

By Jonathan Berr Oct 5, 2012 5:43PM

Image: Handshake, Image Source Black, Jupiterimages,Attention conspiracy theorists who hate Barack Obama with passion and members of the tinfoil hat brigade: the president didn't manipulate the unemployment data for his political advantage.  

 

Yes, I know that's what former General Electric (GE) CEO Jack Welch said an a Tweet that's gone viral (See Bloomberg's coverage) but he's dead wrong.

 

Here are my reasons why:

 

First, the planning --  Such a conspiracy would have to been hatched at the highest levels of the government and would have made Watergate look like a third rate burglary. 

 

It would need to involve at  least the Secretary of Labor, the Secretary of Treasury, the head of the Bureau of Labor Statistics (BLS),  members of the  White House staff along with scads of civil servants.  These are people who can't agree on what to order for lunch let alone do something as complex as market manipulation.  Even if they did agree to commit a felony,  odds are the scheme would be leaked to the press because publicity can be as addicting as heroin to some public officials.

 

Then there's the practicality -- The conspirators couldn't just hack into the BLS's computer network and change the unemployment rate figure on a press release.  Now, that would be too easy.  Unemployment is calculated through huge surveys covering 141,000 businesses and 60,000 homes.   Schemers would need to manipulate many data sets to get their desired results. But how would they know which ones to change and how far to change them without arousing suspicion?  These numbers are often revised, which would complicate the process further and  wouldn't the people who collect the data notice?

 

And another thing --  If this data was faked, the schemers were not ambitious.  Though the 7.8% jobless rate was better than expected, the gain of 114,000 jobs in September on a seasonally adjusted basis came in below forecasts. The jobs gains is nothing special and economists are wondering if gains seen in areas such as education are sustainable.  

 

The sad aspect about "Neutron Jack's" claims is that there is some basis for them. Some countries such as Greece routinely fudged economic data for years so that they would appear more financially stable.   Many suspect China may be doing the same thing as investors grow worried in about a slowdown in the most populous country.  There is no evidence anything of the sort has happened in the U.S., although some experts including MSN Money's Anthony Mirhaydari have found some anomalies in the data. But that happens all the time, which is why the numbers are revised. It is not the sign of a conspiracy.

 

Jonathan Berr does not own shares of the listed stocks. Foliow Jonathan Berr on Twitter@jdberr.
Tags: GE
69Comments
Oct 5, 2012 8:04PM
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If it takes 150, 000 jobs a month to keep up with population growth - then how can 114,000 jobs drop the unemployment rate by .4%???
Oct 5, 2012 6:07PM
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If you believe that numbers in a survey could not be easily changed perhaps you also would be interested in a bridge I have for sale.
Oct 5, 2012 8:49PM
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Speaking of conspiracy theories, remember the huge media promotion of the anti-Muslim film trailer as the sole cause of the Middle East uprisings? Well we know how that turned out. It was one great big cover up. You can also throw in the Fast and Furious debacle. I don't trust anything coming from this bunch in charge especially when the mainstream media has done everything in their power to cover for Obama. All you has to do is turn the news on tonight to see that. Nope, the swamp is stinking big time. When the numbers don't quite match the claim and jobs are on the line, it automatically raises suspicion.

If the situation were reversed, you can bet the house that Dems would be saying the same thing.

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They just revised the numbers for July and August. Isn't that proof that they can revise September later?
Oct 6, 2012 11:55AM
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Anybody remember reading "1984"?   Orwell warned us.  If you raelly believe that 7.8% is a real number and not an effort by this administration to manipulate the election then you have way too much faith in a corrupt, massive, evil, out of control government.
Oct 5, 2012 7:16PM
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114,000 new jobs will not reduce the unemployment rate  period.  I said several months ago this would happen.  I was out with my wife today and I can not even begin to tell you how many people we saw who said they were out of work, working parttime or had just received a notice of a layoff.

 

Chicago style politics at its best.

Oct 5, 2012 6:51PM
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Berr, we know where you stand-----a pure Obamanite.
Oct 6, 2012 1:22PM
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Why are the job numbers always revised lower.
Oct 5, 2012 6:18PM
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Well, isn't that convenient? The Obama campaign desperately needed the last employment report to be released before the election to show that the unemployment rate had fallen below 8 percent, and somehow it magically happened. Even though non-farm payroll employment only increased by 114,000 last month (not enough to even keep up with population growth), the official unemployment rate fell from 8.1 percent to 7.8 percent. So how did that happen?

Well, the unemployment number is not based on the survey of employers that showed that 114,000 jobs were added to the economy last month. Rather it is based on a survey of households. And that survey showed that the total number of Americans employed last month increased by a whopping 873,000 – almost eight times the number that the employer survey showed. That figure for September (873,000) was the biggest one month increase in 29 years. And it just happened to come at the exact perfect time for Barack Obama. So was there a jobs report conspiracy? Examine the evidence and decide for yourself.

The number of Americans with a job fell in July.

Then it fell by in August.

But somehow in September it miraculously exploded in the other direction and 873,000 jobs were added to the economy?

If you believe that, I have a bridge that I want to sell you.

Somehow, the largest increase in jobs in 29 years happened just when Barack Obama needed it the most.

Nah, that doesn't sound fishy to me at all.

We are being told that a big reason for the huge increase was the number of Americans working part-time for "economic reasons". That number surged from 8.0 million in August to 8.6 million in September.

Why the sudden jump?

Nobody can really explain it.

And if you look at the U6 unemployment rate, nothing has really changed at all. U6 is still at 14.7 percent just like it was last month.

But the media is not going to talk about the U6 rate. Instead, all of the headlines are going to be about "7.8 percent".

According to the survey of employers, the U.S. economy added fewer jobs in September than it did in August, and it added fewer jobs in August than it did in July.

Oct 6, 2012 6:59AM
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I think everyone understands the numbers are only estimates and are subject to revision. But the number I find very difficult to grasp is this..."the unemployment rate drop resulted from the largest one-month gain in jobs in 29 years". Come on guys. Make no mistake, the labor dept can make changes to the number even into next year. As I predicted six months ago, somehow Obama will get the number below 8%. Mark my words now... the final number published by the Labor Dept early next year will increase unemployment (sorry for the poor estimate earlier). But by then the election is over, and no one will notice any upward revision in umemployment by that time. I am not stupid folks!
Oct 5, 2012 6:37PM
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Disagree -- it is very EASY to manipulate. Anytime the current administration wants the unemployment numbers to look better than they are, they simply perform system maintenance making it is impossible for the unemployed to log in.  If large numbers of people are unable to log in for 2-3 days at a time, then large numbers of people cannot be counted in the statistics.  Isn't that convenient! Been there, done that. By the time the unemployed are able to log in, the numbers have been released and then the restated numbers aren't reported by mainstream media.   
Oct 5, 2012 7:33PM
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Cause and effect. It works everytime. A + 200,000 jobs won't get you this kind of swing. A survey of employers showed adding 114,000. A survey of households showed adding 873,000. So, you plug in the bigger number and it looks impressive. Which is right or is it just changing how things get reported? I'm apt to trust the employer more than Gladys on the phone? 1 hour of reportable work will get you out of the stats.

Oct 5, 2012 7:20PM
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Remember FACTS do not count this time around . . .
Oct 6, 2012 12:48PM
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If anyone has any experience at all with Chicago politics you would not over look anything.

Just a thought:

So by adding 114,000 jobs the unemployment rate drops .3 %? Ol' Leroy claims to have added 5 million jobs to date.

Using his numbers not mine, by the .3%  multiplied by 114,000 equals approx 1%?,   He has decreased unemployment by 14-15%? The numbers don't add up. Something smells rotten.

Oct 5, 2012 7:46PM
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When he was head of G.E, did Jack Welch fudge his numbers to make him look good?.  Takes a thief to know a thief!
Oct 6, 2012 3:12PM
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Hahaha...you're in the tank for Obama?!? 
Oct 8, 2012 10:12AM
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The Household Survey and Payroll Surveys come from two very different population samples. During normal times, the results of the two tend to converge (come together). What is surprising about this month's is the wide divergence in numbers - the Household of 873,000 and the Payroll of 114,000!

 

BTW, the UE rate is determine from the Household. In any case, these numbers can be very volatile from month-to-month! If I was Obama, thnk God I'm not, I wouldn't hang my hat on this data.

 

What I find interesting is if you use the number from these three groups:

 

1. Those who want a job but aren't looking

2. Those who only have part-time work

3. Those who want a job and ARE looking

 

You get nearly 15% which is terrible!

Oct 6, 2012 11:27AM
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next time you talk to him ask him what happened to his former employer's stock
Oct 6, 2012 6:54AM
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I know of no other time that the DOL used household surveys opposed to employer's reports? I'm not really sure they'll ever do it again? Once you do it, you would have to plug in that number and continue to use it. The first time that you go back to employer reports the unemployment rate will jump dramatically. It's either household surveys from now on or it goes back to the old formula after the election. A real issue would be---did BO use taxpayer monies for the count or was it paid for with campaign funds??? That will get you in a ton of trouble at the state level.
Oct 5, 2012 9:19PM
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There are headcases out there that believe that the fed provided the funds to secure these equity positions from the open market (thus manipulating the share prices of these financial institutions) and parked them in a state pension fund favorite known as:  SSgA.  It's almost as if these nuts come up with a new conspiracy theory with each sunrise.  Either that or they skip too many hedmed dosages.  :P
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