Is Jack Welch “Ignorant” and “Reckless” in Questioning the Government’s Official Unemployment Rate?

That is what Peter Orszag, Obama’s first Budget Director, calls Welch for doubting the Labor Department’s drop of the unemployment rate from 8.3% to 7.8% in only two months. Other commentators have huffed about how the Labor Department officials who compile the statistics are “professionals”– how could Welch attack their impartiality?

None of the articles have discussed the real issues. The DOL employees are professionals, but they use  techniques and assumptions which change. There was a great deal of change under the Clinton administration in particular and there were well founded worries at the time that the changes were politically motivated. One thing we do know: it all depends on how you calculate. If you include those who have stopped looking for work in the last two years and those who are part time but want to be full time, the number is much higher, around 15%. If you calculate unemployment the way it was done during the Great  Depression, current levels are still at depression levels. This last point is missed by almost everyone. Article after article notes that the current economic malaise is much better than the Depression, when unemployment reached levels almost three times higher. Well, no. We have just moved the goalposts.

An excellent source on this is business economist  John William’s shadowstats.com, which we have mentioned before. Williams currently pegs the real unemployment rate at 22%.

Jack Welch did the country a service by shining a spotlight on the way all these numbers are calculated. As you will see from shadowstats.com, the current inflation and growth numbers are also calculated in ways that were changed markedly under Clinton and which, not surprisingly, make them look better.

Click here for Welch’s op-ed in the Wall Street Journal.

Click here for for Bloomberg.com’s take.