Your Thoughts, Mr. Welch?October 11, 2012 @ 1:54 PM EST
This is a bit of “inside baseball” regarding the jobless claims numbers published this morning but we will try our best to keep this simple (and speaking of baseball, wasn’t yesterday one of the more exciting MLB playoff days/nights in a long time?... and today could be even better).
You will certainly recall the flap over the Non-Farm Payroll report of last Friday which raised some eyebrows, to say the least. Those numbers had three major headlines:
- An increase in jobs of +114,000, almost right on the consensus number of +113,000 (with a range of predictions of 75,000 to 162,000)
- A revision of the prior month’s report from +96,000 to +142,000
- A drop in the headline unemployment rate from 8.1% to 7.8%, against expectations of holding steady at 8.1% and a two-month drop from 8.3%.
This surprise drop in the headline number, and some of the internal numbers (especially on employment among 20-24 year-olds) created a firestorm in the press and among many market observers, and led to the controversy surrounding the ex-CEO of General Electric, Jack Welch.
Welch tweeted shortly after Friday’s report “Unbelievable jobs numbers..these Chicago guys will do anything.. can’t debate so change numbers.”
Welch was accused of the darkest of crimes, impugning the integrity of the Bureau of Labor Statistics and the Obama administration. He was not alone in his questions, but was hammered more for his language and its implications.
In fact, shortly after the release of the report, Barron’s reported:
“Today's report includes a surprise drop in the unemployment rate-but it is statistically questionable. Payroll numbers continued modest improvement. The unemployment rate unexpectedly dropped to 7.8 percent, following a decline to 8.1 percent in August.”
“Turning to the household survey, the unemployment rate drop reflected an 873,000 spike in household employment versus a 368,000 drop in August. The labor force rebounded 418,000 after a 368,000 decrease in August. The household survey is much smaller than the payroll survey and is more volatile. The smaller sample for the household survey can lead to notable swings in the unemployment rate.”
Welch’s comments drew some heavy support from the right, but according to Yahoo Finance, “drew days of withering criticism from both sides of the aisle…The insinuation, which Welch doubled down on after the fact, was that the President wanted to make the economy look healthier than it actually is heading into the November election”.
To make a very long story a bit shorter, Welch and his wife withdrew their joint column from both Reuters and Fortune, receiving especially harsh criticism from the Fortune managing editor, Andy Serwer.
Ok, not everybody out there may be into the NYC media scene as much as I am so let’s move on (by the way reports out that Welch will have an affiliation with the WSJ, not sure if that is new or not…but he defended his tweet there this week in an Op-Ed piece).
So that brings us to today’s report on Jobless Claims. The numbers came in with claims at 339,000 versus an expected number of 370,000. Barron’s said, “Big improvement in jobless claims may be tied in part to the week's seasonal adjustment and will in any case have to be confirmed by improvement in subsequent weeks”. Barron’s also had a note, “the best reading of the recovery!” which seemed a just a bit ironic in the way it was delivered in an otherwise dull factual report.
The “big improvement” has questions being raised again.
According to an AP report:
“A Labor Department spokesman cautioned that the weekly unemployment aid applications can be volatile, particularly at the start of a quarter. And the spokesman said one large state accounted for much of the decline. The spokesman did not name the state.”
New York Magazine weighed in with a pithy online post titled ”How Convenient: Jobless Claims Lowest Since February 2008”:
“The polls may have gotten scary as hell for President Obama, but a different set of numbers could be a good omen for him. A week after the unemployment rate fell to 7.8 percent, the weekly jobless claims — the number of people seeking unemployment assistance — has dropped to 339,000, its lowest level since February 2008, although the legitimacy of the report has yet to be confirmed by Jack Welch's gut instincts. Assuming the data isn't part of a vast bureaucratic conspiracy, it raises the question: Can the economy save Obama from himself?”
The entire election process has spawned a new term, “TRUTHERS”, referring to those who claim anything from election polls, to the facts regarding ‘ObamaCare’, to the employment numbers are somehow being manipulated behind the scenes by the administration.
We don’t know where “Truth’ really lies but do know there are a lot of silly arguments on both sides of every issue. As someone said the other day, “both sides are going to have both sides of their mouths exhausted by the end of this campaign.”
(And we certainly might have some of that in store tonight at the VP debate and its subsequent spin).
Be sure to follow David on His New Forbes Blog.
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