Believe it – Employment Numbers Were Ginned

Bruce Bialosky

10/15/2012 12:01:00 AM - Bruce Bialosky

A couple weeks ago, this column analyzed the inflation rate reported by the Bureau of Labor Statistics (BLS), and concluded that you should rely on your common sense when the government reports questionable statistics. If they don’t make sense based on what you see, experience, and hear from your friends, then they’re probably wrong. Last week’s unemployment number – which decreased to a still-dismal 7.8% – should not only make no sense to you, but should have never made sense to the BLS and therefore should never have been issued.

So am I just popping off or is there a factual basis for this claim? Statistical analysis has to pass a smell test, and the BLS should have known that what they presented did not. Their own web site states that “The unemployment rate declined by 0.3% to 7.8% in September. For the first 8 months of the year, the rate held within a narrow range of 8.1% to 8.3%.” Nowhere is there any explanation of why this anomaly occurred.

You, sitting at home without a degree in statistical analysis, look at the statement from the BLS and scratch your head. Did something happen in the last month that radically changed our economy? If there were only 114,000 new jobs reported, how did 873,000 more people report being employed? If you were running the BLS, you would likely tell the people who brought you this nonsense to go back and check their figures. Or you might ask: if this is correct, have the numbers been wrong for the past year?

Then you would start to search for correlating information. Let’s see, the average work week increased by 0.1 hours. Yes, that’s six minutes – not exactly steamrolling. Then you would see that the underemployment rate remained steady at 14.7%, and you would recall that just a week ago, the anemic economic growth of 1.7% for the second quarter was revised even lower to an abysmal 1.3%. You might ponder the whole matter, take a break, drive to lunch, see that gas prices are astronomical, and come to the conclusion that this unemployment number is just nuts.

Arriving back home after having lunch (which cost a few bucks more than a couple of months back), you begin to do a little research. You review the comments made on September 13th by the Chairman of the Federal Reserve, Ben Bernanke. He spoke of the continued weakness in the U.S. economy, and, in fact, the entire justification for his QE3 announcement – made just three weeks before the BLS announced the surreal dip in the unemployment rate – was the weak job market. Was Bernanke just totally out of touch? Then you remember that right after Bernanke’s QE3 announcement, the survey of America’s CEOs reported that their level of confidence in the economy plummeted to the lowest level since the third quarter of 2009. These are the folks who actually hire people for jobs.

You now apply some common sense to this entire situation. You see that the labor force participation rose a meager 0.1% from the prior month – observing with frustration that if it were the same as it was in January 2009, the unemployment rate would be 11%. You also notice that the number of long-term unemployed remains at 4.8 million Americans.

You eventually discover that the unemployment rate is determined by a household survey of a very small proportion of the population. And then it hits you – the BLS merely spoke to a few Americans who have been unemployed for what seems like forever, who in quiet desperation told the BLS that they started a home business. Of course, the BLS doesn’t ask “and how is that going?” They just mark that person down as employed. Poof: 873,000 fewer unemployed Americans.

We interviewed Jim Borbely, an economist, of the Current Population Survey department of the BLS. He indicated they perform a monthly survey of 60,000 homes that rotates every four months. I asked him whether anyone looked at the numbers, noticed what appeared to a major statistical anomaly, and said “Boy, we gotta do this over; it just doesn’t make any sense.” He told me that no one did that – they just applied the same procedures that they’ve been using for sixty years. When I pointed out that the numbers made no sense mathematically or scientifically, he just stuck to his endorsement of their process. The most I could get him to admit was that “It could be a statistical anomaly that could correct itself next month.” When I stated that this could potentially have a significant impact on the presidential election, he replied “We are not a political organization.”

Which is, on the face of it, an utter fallacy; any branch of government is political. More importantly, Obama appointed a new Director of the BLS – Erica Gorshen, a Harvard graduate with a PhD in Economics, a former union member, and the teacher of a class called Statistics for Economists: Trade Unions, Collective Bargaining, and Public Policy. She claims that she is nonpartisan, but who in their right mind would conclude that she is anything other than a member of the left-wing “intelligentsia”?

The question we’ll never get answered is who ultimately approved the release of these errant numbers? Of course, no one had a political agenda; but, if that were true, why didn’t Obama appoint someone from the Heritage Foundation? They have some pretty qualified folks over there.

Or there is the other possibility. The BLS operates within the Department of Labor, whose Secretary is Hilda Solis, easily the most partisan member of Obama’s cabinet. That’s hard to believe, what with Eric Holder and Kathleen Sebelius floating around, but it’s true. Then we have a President who just offered to cover the legal costs of defense contractors who break the law by not sending out legally-required notices to employees 60 days before anticipated layoffs. Then you think: could these be manipulated numbers? You betcha! There is another way to gin numbers than changing them around. You can gin them by ignoring significantly invalid numbers and treating them as real. Either way it is still ginning.

What’s amazing is that they think we’re stupid enough to believe this pile of cow manure. America was stupid enough to put this crowd into office; I guess they believe that they can sell us anything.