Who is Jack Welch? Well, I had never heard of the guy until recently, but according to Wikipedia he is worth around 700 million dollars and has probably earned himself the right to say what he likes. And good for him. He is obviously good at what he does and is an expert in his chosen field of making money. But is he really an expert on survey and statistical methods? Has he got a degree in statistics? Has he worked at a statistics institute and knows the effort and resources that goes into compiling estimates like this?
Probably none of these things based on his recent comment about the unemployment in the USA dropping to 7.8% in September from 8.3% in July over the last two months. Jack Welch was confident enough to come out and say recently “I was right about that strange jobs report”, and “Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers”. These are quotes referenced from the article linked below.
In the article he even states as evidence that he sat through some review of a dozen companies and suddenly a dozen companies are representative of the whole of the USA economy. That’s right. Twelve (12) companies and this guy thinks he is suddenly an expert on what the unemployment number should be for a whole economy?
“I sat through business reviews of a dozen companies last week as part of my work in the private sector, and not one reported better results in the third quarter compared with the second quarter. Several stayed about the same, the rest were down slightly.”
Well lets look at some of the actual data rather than rely on clouded personal perspectives.
Grabbing the data from here we can do a few simple things. Warning: for the crackpots out there who just write meaningless words and don’t know how to do any statistics, hold on to your chair as this means actually looking at data in an unbiased way, doing a histogram (look it up if you don’t know what it is) and we’ll also do some trend analysis.
So, firstly a histogram of the percentage point changes in the unemployment rate. What does this tell us? Well, since January 2002, there have been 12 times that the month to month movements have been -0.2 percentage points, and 4 times where the percentage point movements has been either -0.3 or -0.4 between consecutive months. So it is not unusual over the history of this series to see the unemployment rate move a similar magnitude to what was seen between July and September 2012. The spread of the historical percentage point movements in the month to month estimates is below, and you can see that they vary (as you would expect) and they have an average and median month to month movement of around zero.
Back to the actual published unemployed percentage estimates. They are plotted in the graph below. Back in April 2010, the unemployment rate was 9.9%, then 9.6% and then in June was 9.4%. A drop of -0.5 percentage points over two months. Similarly, back in November 2010, the unemployment rate was 9.8, and it went to 9.4 and then 9.1 in January 2011. Again, a drop of -0.7 percentage points over the space of two months! So the most recent movements are certainly not out of the ordinary, particularly when you consider the last two years of this series.
This is all shown by the seasonally adjusted and trend estimates on the graph below. In fact the trend is a better indicator given the recent volatility of this series and that has been on a downward slide since early 2010, and more recently from July 2011.
So, the data looks like the unemployment rate has been recovering for a while now. This is why that firstly its best to look over a few months figures (more than two), but secondly data needs to be gathered about the whole economy. Which is exactly what a statistical organisation is best placed to do. And in the end, isn’t some good news actually good?