Welch’s criticism of jobless-rate drop brings a backlash

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It may have only been a bit of bad-mouthing typical of fans rooting for their home team, but former General Electric Chairman Jack Welch stirred up a hornet’s nest of criticism from fellow businessmen and professional economists when he accused the White House of engineering a big drop in the nation’s unemployment rate just a month before the presidential election.

“Unbelievable,” Mr. Welch remarked in a now-famous tweet on the drop from 8.1 percent to 7.8 percent last month, reported by the Labor Department on Oct. 5. “These Chicago guys will do anything … can’t debate, so change the numbers.” Mr. Welch later defended his Twitter remarks in a Wall Street Journal op-ed piece as an exercise of his First Amendment right to question governmental authorities. He said he only regrets not putting his remarks in the form of a question rather a flat assertion that, he admitted, he could not prove.

But the suggestion took on a life of its own, being broadcast nationally on Fox News and CNBC, among the major networks, and being cited and repeated by conservative pundits and critics of President Obama. While top aides to Republican presidential nominee Mitt Romney have dismissed talk of a conspiracy to cook the numbers, some GOP members of Congress have demanded a recalculation of the unemployment rate.

The incident left fuming professionals who make a living dissecting the economic figures produced by the government each month.

Several former heads of the Bureau of Labor Statistics, which produces the monthly jobs report, defended the integrity of the agency’s staff. Nonpartisan economists pointed out that the dramatic drop in one month’s jobless rate might have been fluky, but the October result was consistent with the declining trend in unemployment in the past year.

Labor Secretary Hilda Solis gave a spirited defense of the integrity of the numbers produced by her department during a visit to the Midwest shortly after the surprising drop was announced.

“You can’t penetrate that system,” Ms. Solis said, according to an account in the Kansas City Star. “It follows through on a method laid out for the last 70 years. It’s ludicrous to suggest manipulation, and you can quote me on that.”

A few prominent business leaders, notably Clyde Prestowitz of the Economic Strategy Institute, were so outraged that they called on Mr. Welch to apologize for misleading the public — something he refused to do. Mr. Prestowitz and others questioned whether the accusation reflected on Mr. Welch’s own handling of GE’s books, while he was chief executive, to make the company’s earnings look consistently good from quarter to quarter, thus turning the company into a darling and legend on Wall Street during his long tenure as CEO.

A few Welch defenders dismissed his off-the-cuff tweet as the typical partisan banter and hyperbole seen during the heated final weeks of the presidential campaign. But businesses and analysts who depend on the government reports to do their jobs were quietly concerned that normally reliable and noncontroversial economic figures had become so politicized.

“When Jack uses cynical innuendo to suggest conspiracy and corruption at the heart of our political system, he not only undermines a president whom he obviously doesn’t like. He undermines public trust in the system itself,” said Mr. Prestowitz in calling for an apology from the iconic corporate chieftain.

No apologies

Mr. Welch shunned any suggestion of an apology, and said he was glad he provoked a discussion of the accuracy of the employment figures.

“I’m not sorry for the heated debate that ensued. I’m not the first person to question government numbers, and hopefully I won’t be the last,” he said.

Donald Grimes, a researcher at the University of Michigan, said the “hullabaloo” over the employment report prompted him to investigate the matter. The big drop in unemployment seemed incongruous to some outside observers, he said, because households surveyed by the department reported finding an eye-popping 873,000 jobs during September — at the same time that businesses had reported in a separate survey that they created only 114,000 jobs.

Mr. Grimes found that such disparities between the business and household surveys have happened before, and in fact have occurred about once every three years since 1970.

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