Thursday, October 23, 2014

BLS | Boy Cries "Wolf" Again on Unemployment Data

Funny... but unfair. (Washington Post cartoon, 2011)
Onto her 23, 2014–A New York Post columnist yesterday wrote that Los Angeles, "the city known as America’s story factory", is "making up Census data".

This is a reprise of a challenged report last year  emanating from Census worker Julius Buckmon that the BLS had been "faking" the unemployment numbers in Philadelphia in 2012 to make President Obama look good for his reelection.

The columnist, John Crudele, says the new whistleblower reports that Census workers in the Los Angeles region have been manipulating economic data and that she is now coming forward because she “applauds” whistleblowers in Denver and Philadelphia.

Crudele's report last year was in support of former GE CEO Jack Welch, a self-identified Republican who publicly criticized the BLS in September 2012 when the U.S. unemployment rate dropped to 7.8 percent from 8.1 percent. Welch tweeted:
Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers.
His tweet was widely critiqued by people who noted GE's own reputation for earnings manipulation. Sample conclusions:
  • In the AtlanticJordan Weissman argues that poor survey data wouldn't make much difference. He says the unemployment data historically mirror the payroll-jobs data, which are more broadly based. 
  • The Census Bureau’s Office of Inspector General looked into Buckmon's report and concluded:
Our investigation did not find any evidence to support allegations that supervisors in the Philadelphia Regional Office manipulated, or attempted to manipulate, the unemployment rate prior to the 2012 presidential election.
  • Commerce Inspector General Todd Zinser found wrongdoing on the part of Buckmon, but not his supervisors.
The reason for public concern is that the Census Bureau conducts a survey of about 60,000 households each month to find out who is working and who is unemployed. These surveys are turned over to the Bureau of Labor Statistics, to compute and estimate the monthly unemployment rates, which are usually reported on the first Friday of every month and are closely watched by Wall Street and politicians contemplating reelection.

The LA whistleblower brings to four the number of regions where survey problems are alleged by Crudele - Philadelphia, Chicago, Denver and now LA. (No problems have recently surfaced in the other two regions, New York and Atlanta.)  Each region is divided into Field Service Areas (FSAs) with 10-15 field reps reporting to one supervisor. The BLS requires a 90 percent success rate for interviews to be included in the Current Population Survey. The LA whistleblower told The New York Post:
There are some FSAs that month after month had a 100 percent response rate. That alone should raise flags! I can understand an occasional 100 percent response rate but you have to raise an eyebrow when some FSAs have 100 percent every month.
At any rate, the unemployment rate was just reported as having fallen in September to 5.9 percent, below the benchmark 6 percent rate - historically considered the rate below which inflationary pressures are supposed to start. So the decline in 2012 was certainly not off the trend line.