The Real Talk About Data Manipulation
Sam Chandan Oct. 11, 2012, 7:15 a.m.
Last Friday’s jobs update showed the national unemployment rate slipped to 7.8 percent in September, the lowest level since the end of 2008. That result prompted former General Electric CEO Jack Welch to posit the Bureau of Labor Statistics numbers – the penultimate release in advance of the November election – had been doctored in the president’s favor.
Erstwhile responsible Senator John McCain gave indirect support to Mr. Welch’s musings saying, as part of a CNBC discussion of WARN Act violations, that he “would not put anything past this administration.” Congressman Allen West added, “Chicago style politics is at work here.” News of the data conspiracy has spread quickly across the Twitterverse. In the age of information, fact, fiction and baseless speculation are each accorded the same courtesy.
As it turns out, attempts to manipulate the jobs data for political advantage have at least one historic precedent. Under President Nixon, the White House compiled a list of Jews working at the Bureau of Labor Statistics. Nixon believed this group might be adjusting data in an effort to undermine his position.
In a July 1971 memorandum accessible through the Nixon Library, Fred Malek notes “it is interesting that of the top 17 positions, 10 are ethnics.” A few months later, several well-positioned individuals that might have been able to influence the data or its characterization were demoted or shifted to other roles. A September 1971 memo details that “a politically sensitive, loyal Republican will be selected for the new Deputy post.”
Controls designed to ensure the independence of the Bureau have been strengthened in the decades that have followed the Nixon administration. The current acting commissioner, Jack Gavin, is a career economist at the Bureau and not a political appointee. Until January, and so for most of the president’s term, the commissioner was a Bush appointee. Keith Hall was the chief economist at the Council of Economic Advisers, a decidedly political position, before assuming the Bureau’s top job in January 2008.
Apart from the Bureau’s leadership, it would be near impossible for the administration to penetrate the labyrinthine bureaucracy that feeds the jobs estimates without being implicated by hard evidence. In response to Mr. Welch’s current theorizing, economists and policy advisers from both parties have been fairly unequivocal in their statements. Paul Krugman wrote that the “sheer logistics would be impossible,” though some conspiracy theorists will take any comment by Professor Krugman as a validation of their suspicions.
The lower unemployment rate is less subterfuge and more a function of the labor math and the methodology of the data collection process. The revision process and the range of unemployment measures offered up each month by the Bureau itself are acknowledgements that the process is imperfect, whether or not an election is around the corner. Last Friday’s report was hardly an unequivocal endorsement of the administration’s jobs program. Among their alternative measures of labor underutilization, it showed its broadest unemployment metric was unchanged at 14.7 percent.
Where did September’s new jobs come from? According to the establishment data, the net increase in employment was disappointing at best. The private sector added just 104,000 new positions. Manufacturing declined; gains were concentrated in transportation and health care. In fact, the national statistics failed to make a strong case for an employment rebound. The president’s detractors need not resort to flights of fancy when making their case. The mixed results mean there is something in the data to serve every purpose.
Sam Chandan, Ph.D., is president and chief economist of Chandan Economics and an adjunct professor at the Wharton School.