The figures of conspiracy

So the jobs report is out this week.  The numbers themselves are actually kind of crappy.  But because they are not catastrophically crappy, they are taken as a hopeful indicator, particularly with regard to individual expectations as reflected in the household survey. 

Recent data offers other evidence that consumers are feeling better about the state of the economy: The Conference Board’s consumer confidence number rose to 70.3 in September, from 61.3 in August, and the University of Michigan’s consumer sentiment survey showed a similar rise. Combined with strong gains in the Labor Department’s survey of households, that points to an improvement that ordinary Americans are seeing that is not visible in the slower but more reliable data on production and output.

And, indeed, that is reflected in the survey of employers on which the payrolls numbers are based. The 114,000 net new jobs reported by that survey — too few to bring the unemployment rate down over time — was dragged down in part by a 16,000 drop in manufacturing jobs, a sector that has been weak in recent months.

Nothing unusual there.  For various reasons, the payroll survey, where, for example, PBS might report to us that they have fired Big Bird this month, produces a different (usually gloomier) set of data than the household survey, where Big Bird may report that his imaginary friend Suffleupagus is working as a freelance anxiety counselor.    Obviously these surveys are going to produce divergent results.  The gap between them can be considerable and difficult to interpret. 

We're talking a gap that ranges in scale from hundreds of thousands of jobs to over a million jobs. It's a very large gap. And unfortunately for analysts, it's not a stable gap either. It looks a little bit like labor market booms—as in the mid-sixties or the late-nineties—cause the gap to close, but it's quite noisy on a month-to-month basis and seems to have other mysterious sources of variation.

Anyway, so this month's report is notable for three reasons. First, it is characterized by a spike in this always volatile gap in the numbers produced by the household and payroll surveys.

Depending on which Labor Department survey is used, employment in the U.S. either surged the most in 29 years or grew the least in three months. 

Employers added 114,000 workers to payrolls last month, the fewest since June, according to the Labor Department’s survey of employers released in Washington today. A separate poll of households showed hiring surged by 873,000, the biggest gain since June 1983 excluding annual Census population adjustments.

Second, the "normal" U3 unemployment rate calculated from this data is 7.8%.  This is an incredibly crappy number, but as Ezra Klein says here, it carries a certain "psychological" significance. 

We’ve seen drops like this — and even drops bigger than this — before. Between July and August the unemployment rate dropped from 8.3 percent to 8.1 percent — two-tenths of one percent. November-December of 2011 also saw a .2 percent drop. November-December of 2010 saw a .4 percent drop. This isn’t some incredible aberration. The fact that the unemployment rate broke under the psychologically important 8 percent line is making this number feel bigger to people than it really is.

Thirdly, because the "psychologically" important 8% threshold has been crossed one month out from the Presidential election, it has created something of a stir among the psychologically fragile.  
 

Unless, of course, you were hoping for bad news. And apparently quite a few of President Obama’s critics were — so much so that they suggested the Bureau of Labor Statistics was part of a vast conspiracy.


The leader of the “job truther” movement: former GE CEO Jack Welch.
“Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers,” he said on Twitter.

He had some friends in Congress too. Rep. Allen West (R-FL) tweeted “I agree with former GE CEO Jack Welch, Chicago style politics is at work here.” He added on Facebook that the jobs report was “Orwellian to say the least and representative of Saul Alinsky tactics from the book ‘Rules for Radicals.’”

And it just snowballs from there with various other nuts tossing in their own crazy bits.  Now I enjoy a good conspiracy theory as much as the next guy and, frankly, I don't think the idea that administrations can and do "cook the books" with regard to politically sensitive statistics if and when they can pull such a thing off is inconceivable.  It just clearly isn't what's happening with this non-aberrant and still pretty gloomy jobs report.

On top of the fact that the data is unexceptional and bad, there's also the matter of a Bureau of Labor Statistics operating without a political appointee at its helm.  Obama's appointment there has run up against a whole other set of crazy and ugly allegations and has yet to be confirmed by the Senate.

But more than anything else this is probably a case of Jack Welch (who set the whole "controversy" in motion this morning) maybe projecting a little.

You have to wonder why, if the Obama administration were going to fake numbers, it would choose the less-widely watched household survey. And you have to wonder why anyone would think the bureaucrats in the Bureau of Labor Statistics would follow such orders without any leaks from whistle-blowers.

Actually, it should come as no surprise that Mr. Welch would think bureaucrats would willingly change numbers. That evidently used to happen routinely at G.E. As I wrote in a 2009 column quoting James Martin, a Jesuit priest who found his calling after graduating from the Wharton School and working at G.E. in the early 1980s:

“The primary task of my first job was to issue very long, monthly statistical reports,” he wrote in his book, “In Good Company: The Fast Track From the Corporate World to Poverty, Chastity and Obedience.” “The first month,” he recalled, “I informed one executive that our results were coming in low” because of losses in overseas operations.

“So what?” replied the executive. “Just reverse a few journal entries.” Corporate headquarters, he explained, would come down hard on them if they missed the numbers.

Another boss told him he was “taking those accounting courses way too seriously.”

And this is why people like Welch keep insisting that we get ourselves a government that really does "run like a business."  We'll have no more need for conspiracy theorists since everyone will just assume all the numbers are bullshit as a matter of course.