DRI-324 for week of 7-14-13: The Short Lives of Truck Drivers and Other Lies Our Government Tells Us

An Access Advertising EconBrief:

The Short Lives of Truck Drivers and Other Lies Our Government Tells Us

Many of us are old enough to remember when the veracity of government was generally taken for granted. This applied particularly to statistics gathered by government or quoted by Presidents, cabinet members and heads of government departments. At worst, we might suspect that statistics were being chosen selectively. Never did we dream that politicians made up numbers out of whole cloth, quoted them in a completely misleading and unjustified way or carefully picked and chose statistics from dubious sources to buttress unjustifiable policies.

Perhaps we were inexcusably complacent. But it is certain that today’s politicians not only lie to us with statistics, but do so with shocking insouciance. The author of the website “Zero Hedge” chided the Bureau of Labor Statistics for failing to correlate two different time series, the monthly release of net new jobs created and the Job Openings and Labor Turnover Survey (JOLTS) series. His point was that when two results that should yield the same result consistently differ by 40% or thereabouts, it becomes all too obvious that one or the other is wrong. This, in turn, suggests that the BLS is cooking the books on its net new job creation numbers to make the Obama administration look good.

Another ongoing whopper has been the government’s straight-faced insistence that the life expectancy of U.S. commercial truck drivers is 61, at least 16years lower than the general population. Not content to strain public credulity, they insisted on hearing it snap when they maintained that this conclusion was the outcome of new research.

The perpetrators of the truck-driver life-expectancy hoax are government regulators. Accordingly, it comes as no surprise that regulatory incentives are behind the hoax.

Ray the Hood Gets Blogged Down in Traffic

On September 2, 2010, Department of Transportation Secretary Ray LaHood made a history-making entry in his blog, “Fast Lane.” LaHood claimed that the average life expectancy of a commercial truck driver is 61 years, some 16 years below the U.S. average. LaHood cited data from the U.S. government’s Centers for Disease Control as the source for his claim. “I think you’ll agree that gap is startling,” LaHood wrote.

“Startling” is certainly the right word for LaHood’s claim about truck-driver life expectancy. Two things happened more or less simultaneously. First, use of the claim that “truck driver life expectancy is 61 years” spread like a contagious virus. Second, industry observers demanded to know the basis for that claim.

The reaction of website findtruckingjobs.com was typical: “According to recent driver health studies, the average lifespan of a professional truck driver is 61 years of age.” LaHood had actually cited no studies, merely referring to CDC as the source of his claim. Notice the weight of authority carried by LaHood’s comments. He was a Cabinet Secretary, an important Government official. He invoked the authority of a prestigious government agency, repository of medical data. Surely there must be studies supporting this statistic. He spoke recently; therefore his information must up-to-the-minute and timely.

Doubtless emboldened by the fact that LaHood seemed to have escaped unscathed, Anne Ferro drew water from the same well the following year. Ms. Ferro, Chief Administrator of the Federal Motor Carrier Safety Administration (FMCSA), delivered a speech in which she repeated LaHood’s claim. “It [the 61-year old life expectancy] is a startling, frightening and frankly untenable figure,” she announced. Virtually everybody agreed with her characterization, but for completely different reasons. Those who took her statement on faith found its content shocking, while those who recognized its utter implausibility found it shocking coming from occupants of high government office.

A month after Ferro’s speech, Bloomberg website reporter Jeff Plungis referred to both LaHood’s and Ferro’s comments in an article on the government’s resolution of the long-simmering debate over the hours-of-service (HOS) regulation. In support of the statistic, Plungis reminded his readers that “trucking is the most dangerous profession in on-the-job fatalities and the eighth-most dangerous in deaths per worker, according to the Bureau of Labor Statistics.” It apparently didn’t occur to him to wonder whether there could be seven other professions with even lower life expectancies than 61 years.

Stewart Levy of corporatewellnessmagazine.com apparently brought the epidemic of imitative citation to an end in his February, 2012 piece entitled “America Crisis: Health of Our Nation’s Truck Drivers.” Levy not only cited both LaHood and Ferro, but also speculated at length on the dietary, nutritional and behavioral shortcomings of the average truck driver. He offered gratuitous advice on improvement – not surprising in view of his professional status as a wellness consultant. The unique datum here, though, was the source he cited for the 61-year life expectancy – not CDC, but a 2005 study by the well-known consulting firm Global Insight.

Pushback

Sources friendly to truck drivers, including Truckinginfo.com (the website of Heavy Duty Trucking Magazine) and Land Line Magazine, the organ of the Owner Operator Independent Drivers’ Association, were openly skeptical of the LaHood/Ferro life expectancy claim. They wanted to see an actual study that reported a 61-year life expectancy for truckers. After long and diligent search, they found one – sort of.

A document called the Roemer Report quoted a scientist named Charles Moore-Ede, described as a “Toronto researcher,” who supposedly performed a “new study” showing “that truck drivers have a 10-15 year lower life expectancy than the average American male, who lives to age 76.” (The quotation is from an article by Land Line editor Sandi Soendker.) The word “supposedly” is the tipoff; when located, Mr. Moore-Ede identified this information as an online hoax. He is not even from Toronto.

The closest thing investigators could find to a study actually reaching a conclusion involving a 61-year age was a study published in 2007 in Environmental Health Perspectives. But the study followed 54,000 employees of four national trucking companies during the years 1985-2000. The employees were hired at varying points going back to the 1960s. Not surprisingly, the study calculated the mean and median age of death of the subjects, not their life expectancy. Surprisingly, drivers had longer longevity (61.9 years) than non-driver employees (59.9 years).

Apparently, one or more studies of commercial truck-driver mortality are now underway. Pending these results, the best chance to learn something cogent on the subject is probably insurance-company actuarial tables, which should seemingly yield useful occupational data on this subject.

We can safely rest content, then, that the 61-year-old life expectancy claimed for commercial truck drivers has no credible support and is wildly unlikely on its face.

How Do We Know That the 61-Year Life Expectancy Claim Was Not Merely An Honest Mistake?

Anybody can make a mistake. How do we know that LaHood, Ferro, et al were cynically trying playing politics rather than honestly trying to improve the health and well-being of American truck drivers, as well as safeguarding the safety of the nation’s highways?

We can tell. There are ways.

An honest mistake is made up of two components – error and good faith. Honesty implies the absence of deliberate prevarication and incompetence. Alas, both are evident in the composition of LaHood’s original statement.

The incompetence arises from the use of the term “life expectancy.” The word “expectancy” invokes the notion of relative frequency probability and an expected-value or mean outcome – what an ordinary person would call an “average.” A “life” denotes an entire lifespan, from birth to death. Sometimes the concept is modified by starting the clock later in life; “life expectancy at age x” is a common modification. But the elements of the concept always include numerical starting and ending points, whether birth- and death-year or otherwise.

It is easy to see that the term “life expectancy” does not adapt to professional or occupation categories, where there is no common start date corresponding with “birth (0)” or (say) “age 65 (retirement).” That is why professional and occupational studies usually substitute terms like “mean (or median) age at death” for life expectancy.

There may be a very superficial resemblance between the two terms, but concentrated thought demonstrates the unbridgeable gulf between them. Life expectancy deliberately incorporates all influences on longevity over the course of a lifetime – those operating at birth, in infancy, childhood, adulthood and old age. When we investigate “life expectancy of a commercial truck driver,” we are still incorporating all those influences in our study – but we almost certainly have no interest in anything that happened before our subjects began their professional careers as commercial drivers. Do we care that a truck driver smoked cocaine in high school, thereby damaging his heart and shortening his lifespan? No, not unless truck drivers are occupationally prone to have done this – and they aren’t.

The category of “life expectancy” is crucially affected by deaths at birth and in childhood; indeed, one of the major components of the increase in 20th-century life expectancy is the reduction in stillbirths and childhood mortality. These factors will affect a true “life expectancy” calculation for truck drivers (or any other profession or occupation), despite the fact that they are not what we want to get at when we probe the matter. What we really want to know is how commercial truck-driving per se affects longevity. What happened before the driver’s career is almost completely irrelevant, although post-career events are relevant since they are affected by the driver’s behavior and environment during his career.

It is now clear why the B.S. detector of every thoughtful and numerate person within earshot should have redlined the moment Ray LaHood opened his mouth on truck-driver “life expectancy.” He compared the alleged truck-driver life expectancy of 61 years with the 77-year life expectancy of the general population. But the category called “general population” counts everybody, including a fair number of people who died in childbirth, youth and adolescence. Because the United States encourages heroic measures to preserve the life of premature babies, deaths of “preemies” artificially lower our life expectancy number (and raise our infant mortality number) compared to that of other countries. This insures that, ceteris paribus (all other things equal), all professional and occupational categories will tend to reflect higher longevities than the general population. After all, a profession includes zero people who died at birth, in childhood and in adolescence – otherwise how could they have attained professional status? Yet Ray LaHood expects us to believe that truck drivers’ lives average 16 years shorter than those of the general population?

To be sure, all other things are decidedly not equal for truck drivers, who suffer relatively high rates of accidental death. (Similarly, taxi-cab drivers fall prey to the bullets of armed robbers and coal miners succumb to black-lung disease.) And this tends to offset the bias introduced in comparisons with the general population. As a first approximation, whether commercial truck drivers actually live shorter or longer lives than ordinary people will depend on the relative strength of these two effects on the truck-driver result – the average-shortening effect of accidental deaths vs. the average-lengthening caused by removing early deaths from the calculation. When we examine the paucity of genuine research on the subject, we will see that the issue remains an open one.

Recall also that LaHood cited the CDC as his source. Medical professionals for whom statistical data and analysis are life’s blood would never commit the amateur blunder of applying life expectancy to professional or occupational longevity. And they would not compare truck-driver longevity to that of the general population without qualifying the comparison as was done above.

No, Ray LaHood has carelessly let his mask slip, revealing Ray the Hood, dedicated to untruth, injustice and the un-American way. What were the ulterior motives that underlay this crude deception? Before proceeding to the answer, we must glance in the rear-view mirror at the original truck-driver health scare ginned up by Obama Administration regulators: sleep apnea.

The First Truck-Driver Health Deception: Sleep Apnea

Since 2009, the Obama Administration has consistently supported mandatory sleep studies for truck drivers to test for the presence of sleep apnea. Based on one study of fewer than 1,400 truck drivers located within a 50-mile radius of the University of Pennsylvania, the Administration claimed that 28% of truck drivers have sleep apnea. Not only was the study extremely narrow in design and scope, the government had to distort the study’s procedures in order to obtain the vaunted 28% figure.

The website askthetrucker.com (written by Allen and Donna Smith) examined the Pennsylvania study in some detail. While the study drew upon 1,391 truck drivers located close to the university, the actual sleep apnea examinations were conducted upon a smaller subset of this population. The original sample was screened to determine the most promising candidates for sleep apnea diagnosis. The sub-sample of 406 candidates was then tested. In and of itself, this procedure is unexceptional, because testing the original sample would have tripled the cost of the study.

The problems of interpretation came from what happened next. Some 36% of this sample was diagnosed with sleep apnea. Most of these drivers had mile or moderate disease; only a tiny fraction was considered to be severe sufferers. Another sample of 778 was developed from a second screening, of which 28% were diagnosed as apnea-positive. Once again, the overwhelming bulk of these were mild or moderate sufferers, not severely afflicted.

The Smiths rightly questioned the propriety of calculating the percentage of apnea sufferers using the screened sample as the base rather than the original sample of 1,391 drivers, in which case the calculated percentages would have been much lower. Really, no national extrapolation of the incidence of sleep apnea should have been made on the basis of this single, highly flawed study. At least one other study has found no difference between the incidence of sleep apnea among truck drivers and the general population.

Even more pertinent is the fact that no studies have found a correlation, let alone causation, between sleep apnea incidence and automobile crash incidence. And it is highway safety, after all, that is the supposed pretext justifying truck-driver regulation.

Businessmen Maximize Profit; Regulators Maximize Regulation

For far too long, government regulation has gotten a free pass from academic economists and the general public. The inherent regulating forces of free markets have gone unnoticed and unstressed. Meanwhile, the practice of regulation has been presumed to be benign at worst and highly beneficial at best.

One of the culprits in this litany of oversight has been the practice of what Nobel laureate Ronald Coase has called “blackboard economics.” When drawing diagrams on the classroom blackboard, academic economists have anointed themselves omniscient philosopher kings, with infallible knowledge of business costs and consumer benefits and unlimited power to enact regulatory changes that fine-tune away market failure and deliver optimal outcomes.

In real life, it is regulators who administer the programs ostensibly charged with achieving these blackboard results. The regulators know little or nothing about the actual costs and benefits and lack the power to make the changes necessary to produce the outcomes called for. Since the costs and benefits are not known anyway – by regulators or economists – we can’t even be sure that the blackboard results would work the way they do on the blackboard.

The blackboard only serves to provide cover for what regulators are really up to – which is achieving their own aims and those of their political sponsors. The academic economics is what justifies setting up the regulatory apparatus in the first place. Once securely in place, the regulatory agencies then proceed to get markets in a stranglehold by forcing businesses to comply with an unending regime of rules.

Economists have rightfully emphasized the deregulation of price and entry in trucking starting in 1978. But safety regulation has remained in place, allowing the Department of Transportation and its subsidiary agencies like FMCSA to hold trucking companies and drivers under the regulatory thumb.

Readers may object to such a pejorative take on the regulatory function. How do we know that regulation isn’t exactly what it purports to be – the diversion of selfish private actions toward the public interest? How do we know that regulators aren’t what they seem to be – noble public servants sacrificing their incomes and egos to the greater glory of social welfare and social justice?

When the goals of regulation are defined in terms of grandiloquent holisms like social welfare and social justice, it becomes impossibly nebulous. There is no “social” welfare apart from the individual welfares that comprise a nation; any specification simply substitutes the designer’s own concept for the welfare of “society.” Society is not an organic unity with its own independent existence, the protestations of socialists down through the centuries notwithstanding.

When the definition becomes specific – regulators should keep businessmen from raising prices “too high;” keep profits from growing “too large;” keep product quality from growing “too poor,” “too coarse” or “too fine;” keep technology improving steadily or stop it from going too fast – it turns out that people want regulators to do what only markets can do and, for the most part, already do.

And if it should turn out that markets aren’t doing such a good job of those things, after all? Anybody who thinks a regulator heading up a government agency can run an industry from the outside better than businessmen can from the inside is smoking illicit substances. Markets process a staggering flow of information about prices, costs, inputs and technology. Regulators have no way to obtain all that information and no incentive to pass it along to society even if they could get it.

Indeed, incentives are another glaring difference between marketplace competition and regulated industrial life. Competition provides the incentives for consumers to shop carefully to maximize their own well-being and for producers to minimize cost in producing products and adopt technological innovations at a suitable pace. There is no incentive for regulators to improve on the results obtained through unhampered markets even if they knew what they were doing.

Instead, regulators have every incentive to serve the interests of their political patrons, the politicians who appointed them. Regulators are paid according to the size of their agency and its staff, so they have every incentive to grow the size of government. Is it any wonder that government agencies have multiplied in number beyond our power to enumerate them?

Regulators’ Attitude Toward Trucking Regulation: Use It Before They Lose It

From Inauguration Day to date, the Obama Administration has used trucking regulation as a tool for achieving its political aims. For example, industry figures have predicted reductions in capacity and higher freight rates as outcomes of regulatory actions ostensibly intended to improve highway safety and information available to shippers. These would be rewards for political support and contributions.

But the purpose behind the wildly unlikely claims about truck-driver health and longevity made by regulators almost certainly trace to the other category of incentives faced by regulators. Regulation itself constitutes an income-earning, wealth-building asset to regulators. It is the source of their income, wealth and prestige. If that asset is faced with depletion in the future, regulators have an incentive to use it now, before its value vanishes.

That is the case with truck-driver regulation. Today, federal transportation regulators spend a vast amount of time, energy and money regulating truck drivers. But the profession of truck driver is an endangered species. Self-driving vehicles are now a reality. Innovations like this usually come to fruition first in their highest-valued use. Because trucks carry two-thirds of the nation’s freight, including many highly valued cargos, trucking will be the vanguard of self-driving vehicle adoption. While humans may accompany the vehicles, particularly in the early stages of adoption, the profession of truck driver as we know it is in its last years. The only remaining question is how long this period of obsolescence will last.

When human truck driving comes to an end, so will the period of truck-driver regulation as we have known it. Of course, regulation will still exist for the vehicles – regulators have seen to that by preemptively staking their claim and demanding control over the adoption of self-driving vehicles. But vehicles will not present the bonanza for health and safety regulation that now exists.

Meanwhile, regulators must milk the possibilities of truck-driver regulation for all it is worth. The aging population of truck drivers presents intriguing possibilities. Truck drivers smoke more than average. They eat on the go, guaranteeing that their diet will be nutritionally incorrect. They spend long periods sitting down in truck cabs, suggesting that their level of exercise may be less than optimal. All this allows regulators to accuse them of being health scofflaws.

Why isn’t this exclusively the business of truck drivers themselves? What makes it the business of transportation regulators? Regulators must make a connection between poor truck-driver health and public safety. If they do, this will provide the needed pretext for the blizzard of rulemakings, mandates and dictates that are the raison d’être of regulation and the bane of the regulated.

That is the purpose of the manufactured campaign designed to persuade the public – or at least create the necessary breath of suspicion – that truckers disproportionately suffer from sleep apnea. Sleep apnea makes truckers sleepy – so the regulators’ argument goes – which causes them so fall asleep on the road, which leads to accidents.

The more recent round of trash talk about truck-drive life expectancy caters to the popularity of paternalistic government. If we can have ordinances limiting the size of soft drinks sold in restaurants, it’s not much of a stretch to say that we can regulate the health of truck drivers. After all, not only would these regulations protect truck drivers from themselves, they would also protect the motoring public. Fewer truck drivers would suffer heart attacks and strokes on the job, making it safer for other drivers.

Where truck-driver regulation is concerned, the operative maxim among regulators is “use it before you lose it.” Regulators have little to lose from exaggerating their case for regulation, since their regulatory mandate is eventually going away anyway. They might as well grab for all the regulatory gusto they can while the grabbing is good.

Of course, all this desperate striving is inconsistent with scientific objectivity. It is unseemly for high-level government officials to lie and distort statistics like tabloid newspapers or snake-oil salesmen. Then again, government regulation never really had much to do with science or objectivity. The urgency created by the impending demise of truck driving has led to the destruction of regulation’s façade of respectability.

DRI-330 for week of 10-14-12: The 7.8% Unemployment-Rate Controversy

An Access Advertising EconBrief:

The 7.8% Unemployment-Rate Controversy

On October 5, 2012, the Bureau of Labor Statistics released estimates on employment and unemployment in the United States for the month of September. BLS does this every month, and these data are usually a source of interest but only rarely a source of controversy. This release was different.

The Bureau announced that its estimate of unemployment had fallen to 7.8% from its previous level of 8.1%. This came as a big surprise to economic forecasters and analysts, who had expected the rate to remain the same or even rise. The source of controversy was the magnitude of the decrease and its rationale.

The unemployment rate itself is estimated using a survey of roughly 60,000 U.S. households. The results of that survey have been quite volatile in recent years – last month, for example, they showed a seasonally adjusted decline of 119,000 in the number of those working. But the September survey estimated an increase of 870,000 employed. This was a staggering result – the largest total in this category since January, 1990 (1,251,000) and June, 1983 (991,000). (Two larger totals were attained earlier in the millennium, but BLS adjustments in the data make these totals non-comparable with others.)

This was the kind of increase in employment normally associated with rip-roaring growth in economic activity. In June, 1983, for example, annualized growth in GDP was 9.3%. In January, 1990, it was 4.2%. But here in 2012 it is a puny 1.3%. This seeming paradox raised suspicions in the minds of some people.

Much has been made during President Obama’s tenure that no U.S. president has ever been reelected with an unemployment rate above 8%. Conservative talk-radio host Rush Limbaugh went so far as to predict that the Obama administration would somehow contrive to bring reported unemployment down below 8% prior to the election – implying that deception might be involved.

In the face of the decline in the reported unemployment rate, former CEO of General Electric Jack Welch sent a text message to friends in which he directly accused the Obama administration (whom he characterized as “Chicago guys”) of somehow manipulating data to produce this result.

Tons of ink and reams of paper are consumed writing about markets and their misfortunes. Virtually nothing is said about the collection, preparation and presentation of economic data. This time is ripe for that discussion.

Political Theater vs. Political Economy

The brouhaha over the BLS’ handling of this data release is ironic. While clear wrongdoing occurred, it has been virtually ignored throughout the controversy. Public debate has instead focused on a hypothesized conspiracy to invent or distort data, to “cook the books.” As is so often the case, battle lines have been drawn along political lines. Meanwhile, the news media has been perfectly willing to dramatize the conflict as an exercise in political theater while ignoring the underlying issues of political economy.

The BLS, and particularly Director Hilda Solis, plays a key role in the drama, but that role has been miscast by both political factions. The right wing has cast the agency as accomplice and co-conspirator. Defenders of the administration have portrayed the BLS as staffed by politically independent professionals, completely devoid of political sentiment and as behaviorally pure as Ivory Snow.

In reality, the agency is a branch of the “permanent government,” the bureaucracy that keeps rolling along like Old Man River through Democrat and Republican administrations alike. Its only inherent goal is to maintain its existence, size and power. Ms. Solis is a political appointee, named by President Obama in 2009. As such, she has divided loyalties.

As political appointee, she owes her position to the President. The temptation to hew her actions and public pronouncements toward the positions of the administration is ever-present. This would be true regardless of her personal sympathies, but since presidents usually choose department heads whose views dovetail with their own, the sympathies of a director typically reinforce the incentive to side with the administration.

But as chief administrative officer of a federal bureaucracy, she is the only person capable of steering that agency away from its normal self-serving goals and toward the objective of serving the broad general interest. As far as the American public is concerned, that is her only valid function – to steer the agency between the Scylla of toadying to the administration and the Charybdis of bureaucratic inertia.

In this case, Hilda Solis failed miserably. That is the wrongdoing – indeed, the tragedy – of the 7.8% unemployment controversy.

Friday Morning, 8AM, October 5, 2012

On the morning of the announcement, Ms. Solis was presented with the statistical reports prepared by her staff. In order to contrast what she should have done with what she actually did, we must take a critical look at those reports. The BLS takes two surveys of employment that attract widespread public attention.

Its payroll survey uses payroll records of 60,000 businesses to estimate new hires during the target month. The results of this survey tend to be relatively stable. The September report not only presented results for that month but also upward revisions for the previous months of July and August. Payroll jobs for July were revised up to 181,000; the August estimate was revised up to 142,000. The September estimate was a job gain of 114,000.

The first thing to notice about this survey is the downward trend. This, combined with the fact that unemployment has long been considered a lagging indicator, influenced the expectations of many economists who expected the September unemployment rate to rise slightly. While there is no general agreement among economists, it would be fair to state that 142,000 jobs is close to a tipping point when it comes to lowering the unemployment rate – it is either barely adequate to nudge unemployment down or not quite enough, depending on how responsive one finds the labor force to be.

The 114,000 jobs chalked up in September, though, are not enough to make a dent. That is why the result of the other employment survey, the telephone survey of households conducted by BLS, created such a stir.

The household survey purported to locate a total of 873,000 new jobholders in September. Of these, some 582,000 were supposedly part-time jobs. The fact that this total had been exceeded only twice since 1983 – and both times when the economy was growing at elevated rates – made many anti-administration partisans doubt the veracity of the figures.

These job numbers were not only dubious on their face. They were also blatantly at odds with everything else we knew or conjectured about the state of the economy. Growth had begun the year promisingly but had stalled and slowed to an annualized pace of 1.3% in the second quarter. World trade slowed. Recession loomed in Europe.

Some good news tempered the general mood of gloom, but it was measured. Consumer confidence rose somewhat, perhaps buoyed by a stock market rally – but the rally was dampened. Labor force participation increased after steady decreases – but the increase was slight.

In order to believe in the veracity of the household survey’s jobs estimate, we would have to believe that the labor market had suddenly, inexplicably become the leading indicator for a roaring expansion that as yet had no other harbinger – that the household survey was telling us the truth while all other indices were lying, or at least keeping mum.

Historically, the household survey was known to be volatile. The previous month, August, it had recorded an estimated job loss of 119,000. Thus, the variance between the two surveys was still three times greater in September.

The only reasonable conclusion seemed to be that the household survey was wrong. “Wrong” doesn’t mean faked or fraudulent. It doesn’t mean that BLS employees didn’t make the survey calls, or didn’t record the answers correctly. It certainly doesn’t mean that somebody hid the results in the dead of night or bribed the BLS to suppress them.

All experienced economic forecasters and statisticians know that formulating estimates from sample data is far from an exact science. It is like dining out every night – sooner or later you’re going to get hold of something dreadful that needs to be purged. And that is exactly what statistics textbooks advise students to do with obviously aberrant values in a data set – omit them.

The argument for omission is fairly straightforward. The most basic type of statistical estimation technical, called linear regression, tries in effect to draw a straight line through a collection of data points for the purpose of estimating the course future data will follow. The line is an attempt to capture the central tendency of the data. Including a wildly aberrant value will pull that line off course and make the future estimation process less accurate.

What BLS Director Solis Should Have Done

For practical reasons, it may be difficult or impossible to simply cancel or postpone the release of the household survey and associated unemployment rate. This is an eagerly awaited statistic that is followed closely by analysts throughout the world. Regardless of any good reasons advanced for cancellation or postponement, such an unusual procedure would itself be suspect – people would wonder what the authorities were hiding.

Of course, that argument cuts both ways. The world isn’t waiting breathlessly in order to receive estimates that are worthless or downright misleading. Then there is the little matter of a Presidential election that probably won’t – but just might – turn on the result of these estimates.

What Hilda Solis should have done is: 1. order a double-check of all relevant figures and calculations in the household survey; 2. assuming the results check out, announce at the press conference that the data release contains survey data and a consequent estimate that defy common sense; 3. advise the general public that no weighty conclusions be drawn from the suspect estimates, since they are unsound; 4. invite all interested parties to inspect the Bureau’s data, methods, calculations and results.

She should have done this because the purpose of government is to aid and inform the American public, not to serve the political interests of any administration or the economic interests of bureaucrats. By presenting the data but warning the public, she would be telling the truth, the whole truth and nothing but the truth. She would be allowing anybody who still wanted to accept the figures to do so, but at their own risk. And she would be putting everybody else on notice. She would be behaving the same way as a fiduciary – a professional who has the legal duty to put the client’s welfare above all else. That duty covers both commissions and omissions; it is the obligation to place the full range of professional expertise at the service of the client. In this case, the client is the American people.

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What Hilda Solis Actually Did

What Hilda Solis actually did was to release the household survey and unemployment-rate estimate without warning the public. Indeed, she not only refused to supplement the data release with a warning – she passed up opportunities in subsequent interviews. An interviewer from Bloomberg questioned her three times about the dubiety of the 7.8% unemployment rate and the 870,000 job gain in the household survey. She defended the household survey, citing job gains among 16-24 year-olds. At no time did she back away from or otherwise express reservations about the household survey.

Ms. Solis’s act had the effect of inviting the public to take the dubious household-survey results at face value. Some people did that. Others were shocked by the extremity of the 870,000 job-gain and 7.8% unemployment-rate figures. Still others were outraged by what seemed altogether too fortuitous a coincidence – that a bureau in the Department of Labor, long dominated by the Democratic left wing, would produce a wildly extreme employment report favoring a labor-union-supported Democratic incumbent on the eve of a presidential election.

But the people in the best position to evaluate the report were professional economists and forecasters. Here is a representative selection of their characterization of the two disputed estimates – the 870,000 September job gain and the 7.8% unemployment rate: “”Must be an anomaly;” “statistical anomaly;” “just a fluke;” “statistical quirk;” “implausible;” “almost certainly a statistical fluke;” “huge statistical outlier on the upside;” “not reality;” “an aberration.”

All of these comments came from respected economists, forecasters and consultants. One of them is a former director of the Congressional Budget Office. Some of them are known to be supporters of the Obama administration. None are rabid anti-administration partisans. Clearly, they all knew statistical salmonella when they saw it. Yet none of these people criticized Director Solis’ decision to release the estimates without warning or qualification.

The Harm Caused by the BLS Acts of Omission

The news media covered the issue as an exercise in political theater. They pitted right-wing claims of conspiracy against indignant denials and claims of pristine innocence on the left. When the conspiracy angle petered out for lack of evidence, the story died.

The real harm caused by BLS wrongdoing is much more mundane, but more hurtful than any partisan conspiracy. It concerns the day-to-day functioning of government, not the crimes of individuals. The unemployment rate is used by analysts throughout the world as a barometer and index of the U.S. economy. Investment company owners and fund managers use it to calibrate the timing of investments. Financial planners use it to manage their clients’ money. Large corporations use it to gauge the direction of consumer demand. Commercial and investment bankers use it; business and economic forecasters use it; employment agencies and corporate headhunters use it. Even small businesses use it.

All these people suffer when information disseminated by the federal government turns out to be disinformation. When people discover that they have been fooled, they will take the index less seriously in the future. As a result, their job performance will suffer. And their cynicism about government and the rule of law cannot help but harden – after all, they are already suffering their fourth year of being fed false information about interest rates by the Federal Reserve. The Fed’s QE series of government and private securities purchases is openly and deliberately designed to hold interest rates artificially low by increasing the supply of money. Interest rates are even more ubiquitously used and useful than government economic data.

The Enablers

The people best equipped to understand the abdication of professional responsibility by Hilda Solis and the BLS are the premier economists, forecasters and statisticians. They know that the household survey’s September estimates should have been released – if at all – with a stern caution to the general public. This is directly analogous to the warning labels that government regulators require private businesses to stick on products that present a potential hazard to consumers. The 7.8% unemployment-rate and 870,000 job-gain estimates were no less hazardous to the financial, intellectual and political health of the American public.

The quoted comments above demonstrate that these financial experts recognized this danger quite well. But while they noted it in casual asides and obiter dicta, they refused to take the obvious next step. They refused to call Director Solis and BLS to account. They refused to alert the American people to the true nature of the wrongdoing. They refused to limit the damage done. And they lost the opportunity to deter future episodes of misconduct.

The 7.8% Solution

The real wrongdoing in the 7.8% unemployment-rate controversy stems from negligent omission, not active conspiracy. It is patent in the reactions of professional economists and forecasters. The permanent government was derelict in its responsibility to aid and inform the American public. Instead, it catered to political and/or bureaucratic interests. That is not the kind of dramatic, theatrical conspiracy that attracts the attention of news media. But the failure of day-to-day government to do its job grinds down our living standards, morale and respect for law.