Barrons on NYT lying about the economy (and then, being a source for people "trashing" the Bush administration).
October 7th, 2002
Signs of the Times: Twisted Data on Jobs
By GENE EPSTEIN
In a recent interview with ABC News, Senate majority leader Tom Daschle
remarked that more Americans are among the "long-term unemployed" than at
"any time in the post-war period." Former Vice President Al Gore observed
Wednesday in a speech about the economy that "long-term unemployment has
more than doubled."
I also heard the moderator of a soon-to-be-televised roundtable discussion remark
that long-term unemployment has "climbed to a level more typical of a deep
downturn." She added, on another note of bad news, that while employers added
39,000 jobs in August, the "entire gain came from the hiring of new airport
security guards and other government workers."
I happened to be a participant in that show, so when she asked me what I made of
these unfortunate trends, I said, "What it boils down to is that to find out what's
happening in the labor markets, you should quit reading the New York Times."
Daschle's staff members must have fed him the fake data from the article in the
newspaper of record, assuming they didn't glean it from another source that
picked up the story. Gore's people must have been doing the same research.
The TV-show moderator told me she had based her comment on long-term
jobless on the Times article, but that the remark about the 39,000 jobs came from
a New Jersey paper, which in turn must have lifted it from that same
unimpeachable source.
So when it's published in the New York Times, the news does tend to spread,
which can only mean it's past time to speak up. As it happens, all this
misinformation came from the same journalist. But from my experience, others on
the staff are capable of similar gaffes.
Start with the article about the August employment report (Sept. 7), which did
find that the "entire gain" of 39,000 jobs "came from the hiring of new airport
security guards and other government workers." The journalist could have written
that if it hadn't been for the airport security guards and the other government
workers, there wouldn't have been a 39,000 gain overall. But as written, the article
gives the average reader the false impression that no other sector or industry
added jobs that month.
It would have been just as accurate to say that the 39,000 gain came from the
temp industry, which tacked on 51,000 jobs, or that most of it came from
construction, which added 34,000. If this same reporter gets transferred to the
sports section, watch him write that the Oakland A's won their division by a
four-game margin, and that all four games were won at the beginning of the
season in the team's home stadium.
What the Labor Department actually reported was that the manufacturing and
retail sectors shed jobs that month, while other sectors and industries gained jobs
-- including health services, temp workers, construction, local education, and,
yes, airport security and other federal agencies. The net of "wins" and "losses"
came to a positive 39,000, with every "win" deserving its share of the credit.
Percentages Preferred
Now take a story which made a key statement that was false in the strict sense. In
that widely cited article about the long-term unemployed (Sept. 9), the reporter
wrote that "the number of people who have been jobless for months has climbed
to a level more typical of a deep downturn." Notice that Daschle rendered it as
more than "at any time in the postwar period," which made it sound even more
ominous -- and it was even more untrue.
Now, when somebody uses a number instead of a percentage in this context, you
already know he's up to something.
Based on numbers alone, I could say that unemployment is running higher than in
the early years of the Great Depression. The labor force has been expanding
steadily through the postwar period, so you have to cite percentages to compare
one period with another.
But as it turns out, the rate of long-term unemployment was so much higher
during past downturns, even the sheer numbers were a lot higher. At the time the
article was published, the Labor Department reported 1.474 million folks
unemployed six months or longer. Soon after the deep downturn of 1981-82, the
same measure reached a high of 2.885 million; and not long after the shallow
downturn of 1990-91, the high was 2.194 million. And, of course, the disparity is
much wider if you divide those numbers by the number in the labor force during
each of those years.
Gore's statement, also gleaned from the article, was true but quite misleading.
There was a doubling in long-term unemployment, just as he said, but from an
exceedingly low base. The long-term unemployment rate -- the number of folks
jobless for more than six months divided by the total number in the labor force --
reached 1.0% in August, up from 0.5% in July '01. It also stood at 1.0% in July
'96, the sixth year of the expansion, and no one complained at the time that 1.0%
was too high, least of all Gore.
The Times article really goes off the tracks when it does cite percentages. The
caption accompanying a chart reads, "The percentage of unemployed [italics
mine] who have been out of work for more than six months is as high as it was in
past recessions."
That measure might be useful for some purposes, but it's totally misleading for a
comparison with past recessions. The percentage of the unemployed accounted
for by the number of people jobless for more than six months is crucially
determined by another percentage that may be unrelated to the trend in long-term
joblessness -- the percentage of the unemployed who are jobless for less than six
months. If that percentage falls, the other rises, which is exactly what has
happened.
Even the writer reports that the rise of the temp agencies and the Internet has
reduced the share of short-term unemployed. He might have added that because of
a more accurate method of counting introduced in 1994, some of those who
would have been listed as short-term unemployed are now counted as long-term.
So the long end accounts for a larger share of the total number of jobless mainly
because the short end has been declining -- and for reasons unrelated to what's
been happening to long-term joblessness. You avoid that confusion by measuring
the long-term unemployed against the labor force -- which, as noted, shows no
great sign of rising distress.
By the way, that aforementioned television show will start airing on New Jersey
PBS (NJN) in four consecutive half-hour segments beginning Sunday, Oct. 20, at
9:30 a.m. and on Saturday, Oct. 26, at 11:30 a.m.
Let's hope that blasphemous statement about the New York Times didn't get cut.
Meaningless?
Not to kick it while it's down, but the employment report for September lent
another lie to that same Times story about the employment report for August. The
August reported showed a decline in the unemployment rate to 5.7% from 5.9% in
July, which the Times called "almost meaningless," since the experts said the
jobless rate was on the rise.
Well, we learned Friday that unemployment had ticked down even further in
September, to 5.6%, which does tend to confirm that far from being meaningless,
the fall from 5.9% was no mirage. Those analysts who still regard it as a fluke
believe it's inconsistent with the weekly figures for new unemployment- insurance
claims. According to them, when claims run above 400,000, that signals an
imminent rise in the unemployment rate, not a fall.
But the "neutral" level on claims is not 400,000, it's 430,000, and since the average
for the most recent two weeks is 412,000, a small decline in the unemployment
rate is being signaled, not a rise. These analysts put the neutral level too low
because they forget to scale new unemployment-insurance claims to the number
of folks in the labor force -- the same fallacy I cited earlier. Since the labor force
has grown, 400,000 is not what 400,000 used to be.
Payroll employment fell in September by 43,000, but that was more than offset by
revisions to July and August, which brought the net change to a positive 12,000.
Over the five months since April, payroll employment has grown by an average of
35,000 a month, which is still rather weak.
Those figures come from what's called the Establishment Data. According to the
Household Data, from which we get the unemployment rate, total employment has
been rising by an average of 215,000 a month since January. I've yet to hear an
adequate explanation of just why this happens, but strength in that measure of
employment has generally signaled strength-to-come in payroll employment.
E-mail: gene.epstein@barrons.com
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