Paul Krugman jokes that if the Republicans were to proclaim today that the earth was flat, the leads of the stories tomorrow would be "Opinions of Shape of Earth Differ." It's very funny--in a way.
I'm here to say that the op-ed editors of the Los Angeles Times and of USA Today have just been tricked into playing the "Opinions of Shape of Earth Differ" game with respect to the state of the American labor market. They've been snookered by the Heritage Foundation's Tim Kane. It is funny. It's also very sad.
Here's the letter I wrote to the LA Times's Mike Kinsley when I thought that he was the only one who had been trapped:
Dear Mike,
With respect to Tim Kane's "Presto, A Better Jobs Picture" (August 25, 2004: http://www.latimes.com/news/opinion/commentary/la-oe-kane25aug25,1,5382332.story?coll=la-news-comment-opinions)...
Last February 11, in his Congressional testimony, Alan Greenspan gave his and the Fed staff's common view of the discrepancy between the (deeply depressing) payroll employment survey estimates and the (less, but still depressing) household employment survey estimates. Greenspan's and his staff's common view--which is the consensus view among competent, unbought economists who have looked at the issue--is that the principal cause of the discrepancy is not that the payroll survey is missing lots of newly-created jobs, but that the household survey is relying on estimates of immigration that are, since 911, much too high. As it was reported at the time:
'I wish I could say the household survey were the more accurate,' Alan Greenspan, the Fed chairman, said in congressional testimony on Feb. 11. 'Everything we've looked at suggests that it's the payroll data which are the series which you have to follow.'... The Fed's conclusion was that the household survey's results had been inflated by overestimates of population growth.... If the population estimate is too high, the estimated number of jobs will also be too high. The bureau bases its population estimate on the 2000 census, but it then updates that estimate yearly with data on births, deaths and immigration. But immigration numbers are largely guesswork, because so much immigration is illegal. Fed officials suspect the immigration estimate is inflated because it fails to reflect tighter immigration controls since Sept. 11, 2001, as well as declines caused by the economic slowdown...
After Greenspan's testimony, I (naively) thought that we would see an end to the political hacks claiming that the labor market and the employment picture are hunky-dory, and that the household survey numbers gave the more accurate picture of the labor market--I thought that this particular zombie had been staked. Anyone making the argument would have to answer the question, "Why does Alan Greenspan--who says that he wishes you were right--say you are wrong?" And they would have no answer.*
But I was naive. Here the zombie is again, like the last five minutes of a badly-written Buffy episode--back in the LA Times in a truly extraordinary piece of mendacious dreck: "the household survey should be seen as the standard for long-term analysis, and payrolls should be kept in perspective. If the economy is going to take center stage in the political debate, we need to ensure we're arguing from accurate figures.
Note that Kane does not dare claim that the factors he stresses account for all, or even much, of the discrepancy between household and payroll estimates. Indeed, he does not even dare give any numbers about the size of the discrepancy--currently running at about 3 million since the business cycle peak of 2001:
How much does job-changing distort payrolls? The BLS says it overstated payroll job losses by a quarter of a million, but it uses cautious assumptions. And let's not forget the fact that payrolls overlook many workers, as mentioned above. As a result, the study from BLS offers the lowest possible estimate of the overstated job losses. Its acknowledgment is just the tip of the iceberg.
But does it really matter how big the hole is in the side of the Titanic? The point is, the payroll survey is now officially suspect. At the very least, it shouldn't be viewed as superior to the other sources of economic data. Analysts have little choice but to reevaluate all their economic assumptions.
To add insult to injury, Kane is as deceptive on the sinking of the Titanic as on the state of the American labor market. The size of the hole in the Titanic mattered a great deal. Had the Titanic rammed the iceberg straight on, or had it suffered a single puncture, it would have stayed afloat: its internal watertight compartments would have preserved it as they limited the spread of water within the hull. The Titanic sank because it *almost* missed the iceberg, and as a result the iceberg cut a very long gash down its side that opened not one or two but many of its compartments to the sea. To claim that it didn't "really matter how big the hole" in the side of the Titanic was is to demonstrate a truly amazing degree of ignorance about that historical tragedy.
So, tell me: how does the LA Times get caught assisting in the game of "Opinions About Shape of Earth Differ"? And what institutional mechanisms exist in the LA Times to help you keep from being an unwitting participant in this game?
Come on guys: don't be such easy marks. Don't be such suckers. Don't be so easily gulled.
UPDATE: In his USA Today piece, Kane does make a claim in an attempt to answer the "Why doesn't Greenspan agree with you?" question. It's:
In his July 20 testimony to Congress, Greenspan cited measures from the payroll and household surveys. Then the Federal Reserve, led by Greenspan, voted unanimously to raise interest rates. It said the economy is "poised to resume a stronger pace of expansion" and noted that labor-market conditions continue to improve. It's no secret which survey would lead to that conclusion...
That last sentence is an... artful equivocation. Both the household and the payroll survey estimates report nearly identical changes in employment so far this year. It's no secret to anyone who knows the data that both surveys lead to the conclusion that labor-market conditions have improved so far this year. But Kane hopes that his readers (and editors!) will (falsely) think that he has said that only the household survey supports the Fed's judgment.
This is Heritage Foundation-quality work.
FURTHER UPDATE: Prometheus Six was on the case two days ago...
Posted by DeLong at August 27, 2004 04:46 PM | TrackBackhttp://www.epinet.org/content.cfm/webfeatures_econindicators_income20040826
EPI's own analysis of the data released today reveals another critical dimension of the labor market difficulties facing working families: the decline in annual hours worked per year in middle-income families (i.e., after summing annual work hours across all working family members). Over the last expansion, between 1994 and 2000, middle-income families increased their work hours by 5.5%, or 163 hours, from 2,975 hours per year to 3,138 hours, representing an extra month of full-time work. Between 2000 and 2003, however, family work hours declined by 5.5%, or 173 hours, reversing the gains over the boom. This decline in hours fully explains the 2.2% real drop in the average income of the middle-income family that occurred between 2000 and 2003.
The weak recovery in the labor market is also reflected in the Census data on year-round, full-time workers. The share of these workers in 2003 was the same as in 2002 (remaining at 73.0% for men and 58.7% for women in 2003, a rate that was marginally higher than the 58.6% of women in the full-time labor force in 2002). Given that 2003 was the second year of an economic expansion, and that jobs started growing in September 2003, one would have hoped for a robust expansion of year-round, full-time work. Earnings for full-time, year-round workers did rise for men, up 0.8%, but fell for women, down 0.6%. Productivity grew by 4.5% in 2003, a further indication that the recovery's benefits have not filtered down to workers.
The overtime rules should have a further negative effect on the income of the working classes. Even if hours worked rise, a significant number of people will receive much less money for the lost hours of their lives.
Posted by: masaccio at August 27, 2004 06:01 PMHas Kane argued elsewhere on the payroll side when it suited his thesis of the moment?
Posted by: alabama at August 27, 2004 06:10 PMJFTR the proper formulation is "Shape of Earth: Views Differ"
Posted by: praktike at August 27, 2004 06:30 PMThanks for this post. I was going to make a special request for a comment on Kane's letters.
If I understand the figures correctly, Kanes interpretation of the BLS study explains about 8.3% of the iceberg. So He needs to tell us what accounts for the rest needed to reconcile the two figures. I am assuming there won't be much coming out of the household survey.
I didn't read both letters and assumed that they were the same. In the letter I read closely (well, semiclosely), he focused on double counted job changers as the important factor in payroll survey overestimates. I don't see that discussed here. Or did I misread the letter? Or are the the factors of immigration, population growth and rate of job changing related?
I'd also like to hear the Prof's constructive views on social security/medicare, possibly as related to Greenspan's tesimony.
Posted by: jml at August 27, 2004 06:42 PMBrad,
What is the evidence that the figures for immigration are wrong? And by how much? I noticed a certain lack of specificity in your letter.
Not to be too much of a semi-flat earther, but is it not reasonable that neither survey is perfect? Am I to assume you will never discuss the unemployment rate again, as it comes from the worthless household survey?
By the way, calling Kane a "hack" and suggesting he is incompetent and bought off add nothing to the strength of your argument.
Posted by: Pete at August 27, 2004 06:46 PMLet us know if Kinsley replies.
You'd think he'd be too smart to fall for this stuff. Perhaps it's in his contract that he has to publish a certain percentage of crap.
Posted by: Kuas at August 27, 2004 11:30 PMYou are too kind to Kane "It's no secret which survey would lead to that conclusion" is a lie, because Kane is carefully guarding the secret, which is, as often occurs given the vigilance of editors, hidden in plain view, like the purloined letter.
"I'll let you guess which survey would lead to that conclusion" would have been would have been artful equivocation
See Dr Kane it isn't that hard to mislead without lying. Try to do better next time.
Posted by: Robert Waldmann at August 27, 2004 11:59 PMI like the distinction Prometheus 6 makes between Type I and Type II economists, but Pete thinks this is heavy-handed. The recent poll showing the Nobel economists all for Kerry brought to mind the list of economists that Brad started some time ago. Is that an active list I wonder? Are any of the undecided economists closer to making a declaration?
Posted by: calmo at August 28, 2004 12:30 AMTo be honest, it is heavy handed, and intentionally so.
I'm NOT an economist, I just started really studying, on my own, based on syllabi linked to here. The Type 1 and 2 distinctions help me give the proper weight to each presentation (study and knowledge = +1, rant and spew in the newspaper = -1).
I'm a student of "what we need to understand" and because all the major decisions in this natiion…maybe everywhere now…are being rationalized with economic arguments economics is important. Tim and his peers DONOT MAKE IT EASY and NEED TO BE RHETORICALLY SLAPPED. Regularly.
Brad, I think part of the problem here is that someone's applying the wrong tools to the job at hand.
Stakes work well on vampires; dismemberment followed by burning is the preferred method for disposing of zombies.
It surprises me that anyone uses Heritage Foundation input without thorough checking; it's well documented that they're right-wing extremists.
Why do responsible journalists (including NPR) rely on them?
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