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Lies, Damned Lies and Job Statistics

There has been quite a hullabaloo recently about the official unemployment numbers. There are a number of reasons for this – election year politicking, the general dubiousness of unemployment vs. underemployment distinctions, and so on – but none has captured the financial media as of late quite like a bigwig CEO questioning the veracity of recent numbers.

Former General Electric (NYSE:GE) honcho Jack Welch essentially came out and said the jobs numbers were incorrect – first in a Tweet that suggested President Barack Obama and his administration manipulated employment data for political gain, then with a follow-up opinion piece in the Wall Street Journal. 

So if the unemployment rate isn’t really 7.8% right now… what’s the real number? And who’s really behind these mistakes and revisions and sneaky reporting tactics?

Well friends, here’s the sad reality of all economic data: It’s imperfect, it’s often based on small and imperfect sampling and it is always subject to revision and open to debate.

There is no grand conspiracy here. It’s simply the way these things work.

My biggest beef with Jack Welch is not his questioning of the jobs data. That kind of critical thinking is crucial for investors these days, since there seems to be mixed messages on everything from corporate earnings to China’s growth. It’s the specious assumption that there is some deliberate book-cooking going on — primarily to support his own view of the world.

But often the simplest explanation is the most logical one – and the simplest explanation is that the Bureau of Labor Statistics staffers are human and that a small group can never stand in perfectly for the whole.

That is not proof of malice, simply proof that there are no easy answers.

What’s really mind numbing is that Welch seems to think he’s done us all a favor by casting doubt on BLS numbers. As a result, my eyes have been crossing with a steady drumbeat of jobs data and analysis over the last few days including:

  • A Financial Times report on underemployment and part-time employment and its overall impact on the economy – which turns out to be a negligible 0.2% to 0.5% of GDP according to the copious charts and data therein.
  • Poll firm Gallup has proposed a new way to measure unemployment that involves payroll to population numbers, measuring the number of full-time American workers as a percentage of the total population instead of trying to measure the number of the unemployed in a vacuum. It’s novel, but the downside is it would essentially throw all previous reporting out the window so there would be little context for economists and investors.
  • The Fiscal Times dives into the “demographic destiny” of America, and how the fact that older workers are staying employed longer and limiting opportunities for younger Americans is the defining issue of our labor market.
  • A Washington Post article on the rise in part-time employment, exploring how many of the 8.6 million part-timers in America (up from just 4.5 million in 2007) are there because they want to be as opposed to settling for something instead of nothing. The gist: While it may not be full time work, the majority of those extra 4 million PT workers are garnering between 30 to 34 hours a week – which isn’t ideal, but still darn near full time.

I could go on, but most of these article are incredibly cerebral and probably only interesting to me.

The point here is that economic data – particularly when dealing with something as fluid as the short-term change in jobs or employment – can be difficult to nail down.

I’m not pointing this out to give the BLS a pass on this report… Simply to remind investors that even when you hear numbers on jobs or inflation or GDP growth reported as “fact,” you have to take those statistics with a heaping spoonful of salt.

And above all else, don’t let your preconceived notions about the economy or politics or the stock market color your judgement.

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Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP. As of this writing, he owned a position in Alcoa but no other stocks named here.

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  • TimoMIA

    The data was evaluated as it has been for years and even the most conservative persons asked about the possibility the numbers were fixed in any way has responded that it would require the cooperation of two government agencies and literally hundreds of individuals who could make a killing to expose this ridiculous conspiracy theory.
    Instead of crying conspiracy, discussion about the process is fine. But this method of independent, serious government beurocrats who are not politically appointed has been the way these numbers are arrived at for a number of years, pre-Obama I might add.
    You’d think that we’d be celebrating any good news as people have been truly suffering, but no, we get the rabid Republicans discrediting any independent analysis regarding slow improvement in the economy.
    It’s un-American if you ask me and the hate for this President is sadly, the root of it all.
    Wake up! President Obama is not the enemy. If you must point fingers look in the mirror and you TV or radio/podcast spewing the propaganda that is brainwashing you (very effectively)!

    • rcaston

      Wake up, yes Obama IS he enemy and you would have to be blind not to see it. His plan for America goes against EVERY principle she was founded upon. This is THE most dangerous president to occupy the White House…….PERIOD!

  • Robert Clark

    Mr. Reeves, since you like looking at unemployment data perhaps you can look at this:

    Contrary to what most reports have been saying, this report says almost all of the 873,000 new jobs were full time! Many experts explained the discrepancy between the BLS household survey and its employer survey as due to the part-time numbers. But if in fact the household survey is also measuring full-time jobs, is nearly 1 million new FULL-TIME jobs in one month really believable? Why is the household survey new jobs count then eight times higher than the employer survey if they both are measuring full-time jobs? For statistical studies, when they most come under scrutiny is when they are INTERNALLY inconsistent.
    At the rate the BLS is claiming our economy is now “booming” we can match the Romney claim of 12 million new jobs over 4 years in just one year!
    I think you agree this number is not believable but that is indeed what the BLS data seems to be saying near the bottom of this table:

  • Erbjl

    Great article. You have put our finger on weakness of the statistical methods which seem to guide our national decision making.
    I am one of those part-time semi-retired people who is working that way by choice. I am retired on SS, and a company pension and working 20 to 25 hours a week, and am enjoying the freedom to do that. (Some of us like to think “outside the statistical box” but I guess we mess up the statistics).
    There is no way that a mere statistic can represent a total picture of what is going on in our multi-diversified economy, and, unfortunately, many conclusions drawn using them are, at best, only partially true, and at worst, completely misleading. Sadly, this is particularly true in our present political environment where the sound byte is like intoxicating drungs which everyone overdoses on to prove their own views of what is wrong with our society. (I will be glad when the election is over and we can get back to mere reality.) Thanks for a great article.

  • Earl

    There is going to be a lot of crow eating when after the election the numbers are revised to something realistic. 873,000 after the past ten months of reality. GIVE ME A BREAK