Unemployment rate tampering? Why conspiracy theorists went wild.(Read article summary)
Retired GE CEO Jack Welch saw Friday's jobs report, with its 7.8 percent unemployment rate, as 'unbelievable.' Others on the right piled on, suggesting Obama administration tampering. But the jobs number in question has been known to vary widely month to month.
Just a month before the election, did the White House “cook the books” to get the unemployment rate down to 7.8 percent in September?
“Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers,” said the missive from his Twitter account after the latest jobs report came out Friday from the Labor Department.
Mr. Welch’s tweet has set off a firestorm of activity in the virtual realm. Conspiracy theorists jumped on board as if the Obama administration had hidden reports of UFOs landing in the Rose Garden.
And Rep. Allen West (R) of Florida, a favorite of the tea party, tweeted, “I agree with former GE CEO Jack Welch, Chicago style politics is at work here….”
Democrats quickly tweeted right back.
“love ya jack but you’ve lost your mind,” wrote Austan Goolsbee on Twitter.
Welch is best known for making GE into a corporate dynamo. When he retired, he also became known for collecting a pension that many thought was excessive. In addition to collecting $933 million, he got an annual pension of $10.5 million and a chauffeur and use of the GE corporate jet for life. As if that were not enough, GE also agreed to pay his dry cleaning bills.
In Welch’s case, Labor Secretary Solis appeared on CNBC to refute allegations that any massaging of the data had occurred.
“You know I am insulted when I hear that because we have a very professional civil service organization where you have top economists working" at the Bureau of Labor Statistics (BLS), she said. “It is really ludicrous to hear that kind of statement.”
When it reports the unemployment data each month, the Labor Department looks at two different surveys. The first survey asks 141,000 businesses and government agencies if they have hired anyone in the past month. This is called the establishment survey, and it showed that only 114,000 people had been hired by businesses in September, compared with an average of about 140,000 per month so far this year.
At the same time, the BLS contracts out to the Department of Census to call 60,000 people every month to ask if their employment situation has changed. This household survey determines the unemployment rate.
Using the household survey, the BLS estimated that last month 873,000 people had found work. After estimating the number of people who got fired or laid off, the bureau, using that survey, said that the number of unemployed people dropped by approximately 456,000.
It is not unusual for the number to vary greatly month to month, notes economist Joel Naroff of Naroff Economic Advisers in Holland, Pa. For example, in April the BLS reported that 342,000 fewer people had found jobs and in May it reported that 642,000 had found work.
“The unemployment rate will probably go back to 7.9 percent or maybe 8 percent next month,” he says.
This is not the first time aspersions have been cast on the Bureau of Labor Statistics, according to Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank in Washington. In 1971, President Richard Nixon was angered when the BLS attributed a drop in the unemployment rate from 6.2 percent to 5.6 percent in a month to a statistical fluke, says the EPI website.
Timothy Noah, writing in Slate, published excerpts from White House tape recordings in which Nixon and an adviser, Charles Colson, decide that a Jewish cabal at BLS is trying to undermine the president's economic policy. “Well, listen, they are all Jews over there?” he asks Colson. Then, in an official act of anti-Semitism, Nixon tells Colson, “All right, I want a look at any sensitive areas around where Jews are involved, Bob. See, the Jews are all through the government, and we have got to get in those areas. We've got to get a man in charge who is not Jewish to control the Jewish … do you understand?”