Last week, after the U.S. Bureau of Labor Statistics announced an unexpected decline in September’s unemployment rate, former General Electric Co. CEO Jack Welch questioned the credibility of the data.
In an attempt to influence the presidential campaign, he suggested, the Obama administration must have manipulated the bureau’s report, which showed the jobless rate at 7.8 percent, a statistically significant drop from 8.1 percent in August. “These Chicago guys will do anything,” Welch wrote in a Twitter message, “can’t debate so change numbers.”
Welch’s comments demonstrate a stunning degree of ignorance and recklessness, and impugn his own credibility.
If he had been better informed, he might have said something useful about the data. Drawing from his own experience, he could have raised a legitimate point about how the employment statistics might be improved.
As CEO of GE, Welch increased the use of real-time statistics to improve GE’s products and services. Such an approach could be used to strengthen our measures of the labor market and other macroeconomic indicators.
To be sure, the bureau’s estimates, while unbiased, could be substantially improved. Every month, the agency gathers data from about 140,000 businesses and government departments as well as 60,000 households. Yet this is an outdated approach to compiling macroeconomic information; relying on household and business surveys means that we are not taking advantage of the commercial, administrative and other data being collected at an exploding rate.
The problems with the bureau’s current approach are well-known. The BLS itself has trenchantly analyzed the shortcomings of its various labor-market surveys, and regularly revises its estimates -- for instance, as more accurate unemployment-insurance records become available.
The agency has also published detailed statistics about the margin of error in its conclusions. One of the employment figures Welch focused on has a 90 percent confidence range amounting to more than 1 million people.
Join PBN for the best networking event and party of the winter - January 15, 2015 - the Book of Lists Party at the Providence Public Library. Reserve your spot by December 31st and get a holiday gift from PBN!
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.