Government reporting tricks don’t create jobs, reducing tax and regulatory burdens will

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The last official monthly unemployment report will be issued four days before the election on Friday, November 2. But can we really trust the government’s statistics?

The creative gyrations coming from the California state agency that sends unemployment claims data to the federal Bureau of Labor Statistics suggests that Americans ought to be skeptical of the last few pre-election jobs reports due from the government, both the weekly ones and the last monthly one.

The reason for the skepticism can be seen in the weekly unemployment report issued October 18, when a supposed glitch in California’s numbers pushed new claims for unemployment compensation to 388,000, the highest level in four months. This, after last week saw the lowest level of unemployment claims in more than four years — a report that had a direct bearing on the race for the White House as headlines proclaimed: “US weekly jobless claims plunge” (AFP), “Jobless claims hit four-year low confirming a brightening employment picture” (Examiner), “Weekly jobless claims at 4 1/2-year low” (Reuters).

There was only one problem: the claims dropped to a four-and-one-half year low based on the non-reporting of a “large state” that, a week later, was revealed to be California. This is especially interesting as The Wall Street Journal asked California if it was the non-reporting state, to which California’s Employment Development Department issued a strongly worded one-page denial calling the rumors of their non-reporting “bogus” and “irresponsible.”

So much for the truth from our public servants.

Now that the government’s rosy employment data appears to be falling apart under the weight of fact, the headlines have shifted. AP noted in an understated October 18 headline, “Weekly jobless claims drop proves to be short-lived.”

All of this matters, of course, because America’s unemployment statistics have become a central theme in the race for the White House. This causes every unemployment report to take on tremendous political significance. When the federal government reported a drop in the nation’s official unemployment rate from 8.1% to 7.8% on October 5, two days after the first presidential debate, a separate debate erupted over the report’s credibility.

Former GE CEO Jack Welch famously went on Twitter to speculate, “Unbelievable jobs numbers. these Chicago guys will do anything..can’t debate so change numbers.”

Mr. Welch was greeted by a critical firestorm. Six days later he took to the pages of The Wall Street Journal to defend his jobs report skepticism, writing:

Imagine a country where challenging the ruling authorities — questioning, say, a piece of data released by central headquarters — would result in mobs of administration sympathizers claiming you should feel “embarrassed” and labeling you a fool, or worse.

Soviet Russia perhaps? Communist China? Nope, that would be the United States right now, when a person (like me, for instance) suggests that a certain government datum (like the September unemployment rate of 7.8%) doesn’t make sense.

Unfortunately for those who would like me to pipe down, the 7.8% unemployment figure released by the Bureau of Labor Statistics (BLS) last week is downright implausible. And that’s why I made a stink about it.

Welch further stated the obvious, that the economy would “need to be growing at breakneck speed for unemployment to drop to 7.8% from 8.3% in the course of two months.”

As if on cue, the weekly unemployment numbers came out just as Mr. Welch’s piece in the most important paper in the English-speaking world made its appearance, and the news was great — except that, as we know now, California, home to 12 percent of America, didn’t report its numbers.

While most of the major media dutifully headlined the good jobs news, a few news outlets did some old-fashioned reporting. Fox Business reported in a story titled, “Jobless claims data skewed downward,” that, “A sharp drop in the number of weekly jobless claims filed last week was caused by the failure of one large state to report all of its claims.”

What’s this? A widely reported drop in the important weekly unemployment claims might have been a mirage? What state failed to report?

Alarmed that the truth might leak out, Media Matters, a left-wing blog, weighed in with heavy ridicule to keep the press in line, labeling skepticism of the government’s numbers “Jobs Trutherism,” while going after Fox Business anchor Stuart Varney for “echoing a conspiracy theory pushed by the right last week accusing the Obama administration of manipulating unemployment data.”

It looks like Media Matters owes Mr. Varney an apology for actually reporting the truth.

As a former member of California’s investigative legislative committee, I wonder if the California Employment Development Department’s strong denial of unemployment data manipulation, proven untrue in exactly seven days, will get a pass from Gov. Jerry Brown and my former colleagues.

In the meantime California, which is running a $16 billion deficit and is in desperate need of another federal bailout, has one more well-timed chance to skew the weekly first-time claims for unemployment report that will be issued the day before the national unemployment report on November 2.

Imagine what California policymakers could do on the job-creation front if, instead of focusing on cooking the unemployment books, indulging in creative government accounting, hiking taxes, and imposing steep fees on greenhouse gasses, they lowered taxes and kept job-killing regulations in check.

Sadly, what’s been largely lost in the discussion over the official unemployment rate is that welfare rolls have spiked 32 percent over the past four years as people have gotten discouraged from looking for work, with the official barometer of unemployment resting at 14.7 percent when Americans with part-time jobs are included in the calculation.

It’s no coincidence that the one state with consistently strong employment growth since the recession is low-tax, light-regulation Texas.

Chuck DeVore is Vice President of Communications for the Texas Public Policy Foundation and served as a State Assemblyman in California from 2004 to 2010.

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