Yesterday the New York Times took yet another dive--degrading the quality of public discourse and the state of public knowledge--when they published a highly misleading column by Heritage hack Tim Kane yesterday. Here we have Heather Boushey and Dean Baker doing the Lord's work by explaining just how complete and total a hack job Kane's piece was:
Posted by DeLong at April 8, 2004 05:42 PM | TrackBack | | Other weblogs commenting on this postApril 7, 2004
Thomas Feyer
New York Times
229 W. 43rd St.
New York, NY 10036Dear Mr. Feyer:
We are writing because we object to your decision to publish Tim Kane’s column (“Labor’s Lost Jobs,” 4-7-04), which implied that the Bureau of Labor Statistics (BLS) payroll survey seriously understates job growth. This piece seems intended to create public confusion about basic economic data, when there is no foundation for such skepticism. Economists, regardless of their political leanings, would agree that virtually every claim in this article is either false or hugely exaggerated.
In his first claim, Mr. Kane argues that 1 million jobs have been lost in the establishment survey since 2001 because the rate of monthly job turnover has fallen by roughly 1 million, and that people are typically counted twice in the establishment survey when they change jobs. Presumably Mr. Kane knows that the survey asks employers about the number of workers on their payrolls during a reference week, not an entire month. This means that workers will only be double counted in the survey if they worked in two different establishments in the second week of the month.
Accepting that the rate of monthly churning has fallen by 1 million, this implies that the weekly rate of churning would have declined by approximately 250,000. Estimating conservatively that half of these job changers either take some time off between jobs, or at least work until the end of the week, the recession-induced reduction in churning would lead to a decline of no more than 125,000 in the number of jobs reported in the establishment survey since 2001.
Next, Mr. Kane points to other data in the BLS household survey suggesting a more robust labor market. He notes that the unemployment rate is low and then observes that “real earnings rose by 3 percent over the last three years. Jobless claims are 10 percent below their historic average, and that’s without adjusting for population.” While the average real hourly wage rose by 2.6 percent over the last three years, this is primarily due to strong wage growth coming out of the late nineties boom. More recently, real wage growth has slowed sharply -- exactly as would be expected in a weak labor market. In the last two years, average real hourly wage has grown at just a 0.2 percent annual rate. In the last six months, average real wages have actually been declining.
As Mr. Kane notes, jobless claims have fallen, which does suggest a recent pick-up in the labor market. Lower initial unemployment insurance claims are likely due to fewer lay-offs. However, continuing claims tell a somewhat different story. The share of unemployment insurance beneficiaries who have exhausted their benefits -- that is, they are no longer eligible because their time has run out -- was around 33 percent in 2001; it rose to 43 percent late in 2002 and has not come back down. This rise in the percentage of unemployed workers who have exhausted their benefits is not evidence of a strong labor market.
The reason that current claims are below their historic average -- another point made by Mr. Kane -- is that there has been a long-term trend of declining eligibility due to tighter restrictions. This tightening of eligibility requirements would ensure that unemployment claims are below their historic average except in the most severe labor market conditions.
Mr. Kane’s discussion of the current unemployment rate is also misleading. The BLS household survey shows that the number of people who say that they are looking for work but cannot find jobs is 5.7 percent of the workforce -- a relatively low level by the standards of the last three decades. However, this survey also shows that the share of the working-age population that is working has declined by 2.1 percentage points, a sharp drop of a magnitude that is only seen during periods of severe labor market weakness. The data in the household survey suggest that close to 4 million workers have simply given up looking for work, and the share of American men with a job is lower than it has been since 1988, both indicating anything but a bright labor market picture.
Mr. Kane then argues that the household survey shows an increase of 600,000 jobs since President Bush took office -- in contrast to the decline of 1.84 million jobs shown in the establishment survey. Surely Mr. Kane knows that this job growth is attributable to the fact that the BLS put these jobs into its count in the household data when it corrected for undercounting in the nineties (see http://www.bls.gov/cps/cpspopsm.pdf). The employment numbers in the household survey are entirely dependent on BLS assumptions about underlying population growth; the survey does not have an independent source for checking total employment numbers.
In contrast, each year, the establishment survey is benchmarked to an independent data source: the tax filings for state unemployment insurance. Since over 99 percent of employees nationwide are covered by this system, the benchmarking provides a virtual census of the U.S. workforce, guaranteeing that the establishment data cannot veer far from the true level of employment in the economy.
Next Mr. Kane focuses on the fact that the establishment data does not count self-employed workers. He argues that the modern economy provides for a wide variety of work relationships that would not be picked up as jobs in the establishment survey. The quality of these non-standard work situations can be debated, but the number is reasonably well measured in the self-employed category of the household survey. This category shows a drop of 164,000 between March of 2001 and March of 2004, a number that should be added to the job-loss shown in the establishment survey.
Finally, Mr. Kane does correctly note that the establishment survey can be in error when the economy reaches a turning point. (This is due to the fact that it does a poor job of picking up job creation in new firms.) It substantially overstated job growth as the economy slipped into a downturn in 2001 and again in 2002, and it understated job growth as the economy began to recover in the early nineties. However, the 900,000 understatement in 1992 cited by Mr. Kane was primarily attributable to a one-time technical error in the method used for counting workers at temporary employment agencies (since corrected), not an inherent flaw in the survey design.
If the economy is in fact recovering strongly, then it is likely that we will see some upward revision to the number of jobs, but based on past history, the revision is more likely to be in the neighborhood of 200,000 to 400,000 for the year through March of 2004, not enough to change the basic picture. And contrary to what Mr. Kane asserts in the article, we will not have to wait until next January; BLS should provide this data in August -- plenty of time for us to know the employment situation by the November election.
Many people have difficulty understanding economic concepts and data. The New York Times does not serve the public when it publishes a column that seems deliberately designed to increase this confusion.
Sincerely,
Dean Baker
Co-Director
Heather Boushey
Economist
The Heritage Foundation: We Know the Answer Before
We Hear the Question!
The Heritage Foundation. We know the answer before we hear the answer.
Posted by: Knut Wicksell on April 8, 2004 06:21 PMDid the NYT publish this letter? I read that crap kane wrote. I can't find this letter on-line at NYT though.
Posted by: stevelc on April 8, 2004 06:57 PMI find Dean Baker's summaries of economics reporting to be useful.
http://www.cepr.net/Economic_Reporting_Review/2004_04_05.htm
Posted by: bakho on April 8, 2004 07:04 PMPublish it? Heck, no. It's too long.
Posted by: Tom Marney on April 8, 2004 07:37 PMMr. Kane ...then observes that "real earnings rose by 3 percent over the last three years...." While the average real hourly wage rose by 2.6 percent over the last three years, this is primarily due to strong wage growth coming out of the late nineties boom. More recently, real wage growth has slowed sharply...
~~~~~
So wage growth continued throughout the recession, if only because it was still "coming out of the late nineties boom". (Like it doesn't count because of that?)
Fine. But wouldn't one expect wage growth to falter at some point in response to a recession?
I suppose it's impolitic around these parts to note that, as recessions go, this one has been very mild on employees.
While profits as a portion of GDI fell by 35%, compensation rose by one-and-a-half percentage points -- we didn't see any such increase in compensation share during the '91, '82 or '80 recessions. With profits being 6% of GDI in 2001, that increase equaled 25% of corporate profits.
Today total employee compensation is up 16% over 1997 in real dollars, corporate profits only 7.5%.
This comment by Jim Glass is so completely out of tune with reality it's really unbelievable anyone even wrote it.
"I suppose it's impolitic around these parts to note that, as recessions go, this one has been very mild on employees."
Astonishing really. Where do you get your numbers for income? I've read a lot on this recession and haven't seen these number anywhere. Did you talk to Tim Kane before you wrote this?
"This comment by Jim Glass is so completely out of tune with reality it's really unbelievable anyone even wrote it... Astonishing really. Where do you get your numbers for income?"
From that out-of-tune-with-reality, unbelievable, astonishing source known as the Bureau of Economic Analysis, http://www.bea.gov/
Eg: From the national income accounts, 1997 dollars:
Employee Compensation
1997: 4661.7
2003: 5406.5 +16%
Corporate profits
1997: 868.5
2003: 933.3 +7.5%
Gross Domestic Income
Profits:
1997: 9.2%
2001: 6.0%
Compensation:
1997: 56.7%
2001: 58.2%
Feel free to look the rest up on your own.
"I've read a lot on this recession and haven't seen these number anywhere. Did you talk to Tim Kane before you wrote this?"
Nah. I avoid getting info from op-eds and blogs, as we all tend to select the ones that tell us what we want to hear.
I much prefer to get my info from primary sources -- they often are astonishing.
Perhaps you shouldn't choose 97 as your baseline date.
Posted by: Ian Welsh on April 8, 2004 11:16 PMShorter Jim Glass:
"If I include the Clinton Presidency, Bush's economic record looks much better!"
Posted by: strawman on April 9, 2004 05:01 AMShorter Jim Glass:
"If I include the Clinton Presidency, Bush's economic record looks much better!"
Posted by: strawman on April 9, 2004 05:01 AMJim Glass data-- 1997 was the peak in corporate profits so the comparisons is from peak data to mid-cycle data.
However, I do not get the same results when I do the calculations of compensation and profits growth.
employee compensation
1997 = 4664.6 2003 = 6198.1
A 32.9% GAIN
PROFITS AFTER TAX WITH iVA & CCAdj
1997 = 622.4 2003 = 845.0
a 35.7% gain
the various other definitions of profits show almost identical percent gains.
Are you deflating both series with the same deflator?
Posted by: spencer on April 9, 2004 06:07 AMThere was a similar article in the Financial Times,
Today the FT published a letter to the edit from an MIT economist showing how the original article was using incorrect data and otherwise spinning the concluions.
About a year ago the times published a similiar article where the Rebublicans were making great claims about job gain under Reagan.
I wrote a short letter pointing out that the data they cited did not agree with the data published by the BLS. The letter also pointed out that while employment growth (as a rate)
under Reagan was beter than under every other modern Republican president, it was worse than under every modern Democratice president.
The letter was not published.
It is like now I hear all these people say to vote for Bush because he will be good for stocks.
But the S&P is still more than 15% below when
Bush took office. He is the first President since Hoover to run for reelection with the market below where it was when he first took office.
But you still hear claims every day that Bush will be good for stocks.
Don't bother me with the facts, my mind is made up does not only apply to the members of the Bush Administration
Posted by: spencer on April 9, 2004 06:22 AMUncle Tom Sowell weighs in:
"According to the March 22nd issue of BusinessWeek magazine, "almost all" of the decline in the number of people seeking work "has occurred in the 16- to 24-year-old age group." Labor force participation among people older than that has continued to be what it usually is."
"In other words, people who have to support themselves and their families were not the ones dropping out of the labor force. When things get tough for younger people, they can turn to mom and dad. Others turn to the taxpayers."
"There is another aspect to this, however. Jobs have long been harder for young people to find. Some might say that this is due to their lesser skills and experience. But there is no inherent reason why low-skill people should be any less employable at low wages than high-skill people are at high wages."
"The difference is that the government sets a lower limit to the movement of wages and also mandates working conditions and other benefits that are the same for everyone. All these things cost money and in effect make the minimum wage higher."
http://www.townhall.com/columnists/thomassowell/welcome.shtml
So there you have it. Those dropping out of the labor force are just slackers who have decided to return home and live with mom and dad and they too could find work if the minimum wage were abolished.
Posted by: Kosh on April 9, 2004 07:45 AMThere are lots and lots of jobs:
http://www.nytimes.com/2004/04/09/nyregion/09massage.html
Women Complain of Hellish Life at Upscale Spa
By NINA BERNSTEIN
To its customers, reviewers have raved over the years, the Osaka Zen Spa is a place where New York meets nirvana. Into the wee hours, at two locations in the heart of Midtown, it offers corporate warriors, Broadway stars and savvy club hoppers alike the bliss of shiatsu-Swedish massage in the ambience of an ancient Asian monastery.
But as four former employees describe it in a lawsuit to be filed today in Federal District Court in Manhattan, working there is more like a long season in hell.
The employees, four immigrant Hispanic women, said they were required to toil more than 100 hours a week for as little as $250 and to live at the spas, with no place to sleep but the massage tables and bosses who woke them with insults and confiscated their tips. Besides having to give massages and clean the premises, they had to pickle cabbage to make Korean relish and haul stones from New Jersey for a serenity fountain.
The spa's owners and operators, Bok Sil Lee and her daughters, Myung-Hi Sonserai Lee and Dr. Nam-Hi Lee, deny that the workers were mistreated or underpaid.
"There's no human rights violations here," Myung-Hi Lee said yesterday when asked about the allegations. "They agree to the terms of working and being trained."
But lawyers say that this case, like recent prosecutions of grocery chains that underpaid immigrant deliverymen, reveals the underbelly of the service-rich, round-the-clock lifestyle New Yorkers love....
Posted by: anne on April 9, 2004 10:28 AMhttp://www.nytimes.com/2004/04/04/national/04WAGE.html?8bl
Altering of Worker Time Cards Spurs Growing Number of Suits
By STEVEN GREENHOUSE
As a former member of the Air Force military police, as a play-by-the-rules guy, Drew Pooters said he was stunned by what he found his manager doing in the Toys "R" Us store in Albuquerque.
Inside a cramped office, he said, his manager was sitting at a computer and altering workers' time records, secretly deleting hours to cut their paychecks and fatten his store's bottom line.
"I told him, `That's not exactly legal,' " said Mr. Pooters, who ran the store's electronics department. "Then he out-and-out threatened me not to talk about what I saw."
Mr. Pooters quit, landing a job in 2002 managing a Family Dollar store, one of 5,100 in that discount chain. Top managers there ordered him not to let employees' total hours exceed a certain amount each week, and one day, he said, his district manager told him to use a trick to cut payroll: delete some employee hours electronically.
"I told her, `I'm not going to get involved in this,' " Mr. Pooters recalled, saying that when he refused, the district manager erased the hours herself.
Experts on compensation say that the illegal doctoring of hourly employees' time records is far more prevalent than most Americans believe. The practice, commonly called shaving time, is easily done and hard to detect — a simple matter of computer keystrokes — and has spurred a growing number of lawsuits and settlements against a wide range of businesses....
Posted by: anne on April 9, 2004 10:29 AMThis issue has been resolved too many times to count. Anyone who relies on the household survey to claim robust job growth is a partisan HACK. (See the link above, or this one: http://bigpicture.typepad.com/comments/2004/03/bls_on_payroll_.html)
And its pathetic the NYT are so clueless about economics. If you don't understand the subject, ASK someone who does to vet a piece before it goes into print . . .
John Irons said it best:
"I used to say that the quickest way to throw one's credibility out the door on economic matters was to call oneself a "supply-side economist."
I think I have to modify my theory.
I now think a faster way to show that you have lost all credibility and that you never intend to be taken seriously ever again is to claim that either 1) the household survey is a better measure of employment than the payroll survey, or 2) that "economists disagree" about which survey should be used.
The payroll survey is better, and it is what everyone uses - there is as much disagreement on this as there is on the question of whether or not the earth is round.
Would these people really be running around talking about the weaknesses of the payroll survey if for some reason it showed job growth? I don't think so."
http://www.argmax.com/mt_blog/archive/000446.php#000446
pathetic
Posted by: Barry Ritholtz on April 9, 2004 12:59 PMa simple check of the BEA statistics reveal some interesting tidbits. I did a simple analysis of the available data on employee wages starting at 1950. I did not go back farther simply because I am too lazy and did not bother to check for earlier trends but I did find that a comparative analysis shows real annual wage growth from 1997 thru 2003 is, in fact 32.88%. This is really skewed because it includes the period from 1997 thru 1999. However it must be noted that at no time since 1950 has there been such pathetic wage increases as during the current administration. using a 3 year average including the current year and the two prior years average increases we find: the 2003 3 year to be the lowest on my record. In fact at 1.76% (that is not an error) it is second only to 2002 with a 3.02% (this does give him the benefit of the year 2000 with it's 8+% which we should attribute to the prior administration (if we are going to argue that presidents actually have that much impact on the economy). In that case the last time an administration came close would be the 1993 average but that would be attributable to, oh yeah, Bush. Well overall there has not been a 3 year period since 1950 that has had more than one year below 3%. In fact it (the annual wage growth) has only been below 3% five times since 1950 strangely three of the five have been since 2000! things that make you go hmmmmmm.
Posted by: Phester on April 9, 2004 06:56 PMThe link to my op-ed in the New York Times is here:
http://www.nytimes.com/2004/04/07/opinion/07KANE.html?n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fContributors
I find it curious that Brad declined to engage in any of the actual economic points and instead chose to call me a hack. Twice. We can only wonder why Brad posted a multi-paragraph response to an op-ed, with not a single sentence or link to the op-ed itself.
I sent Brad a copy of the original economic research last month (http://www.heritage.org/Research/Labor/CDA04-03.cfm), asking for his comments.
There is good reason to doubt the payroll survey, and objective economists actually agree that quality of sample matters. We can debate the size of the jobless illusion due to payroll turnover, but why won't Brad even acknowledge that the problem exists?
Posted by: Tim Kane on April 10, 2004 12:10 PM"Economists, regardless of their political leanings, would agree that virtually every claim in this article is either false or hugely exaggerated."
Um, someone should tell these clowns that Tom Nardone, the BLS economist in charge of labor force statistics, doesn't agree that the article's main claim is false or hugely exaggerated. See the article "Examaning the Discrepancy in Employment Growth Between the CPS and the CES" by Nardone et al. In that article he said that rising labor turnover likely accounted for a good part of the higher establishment payroll growth in the 1990's relative to the household count.
Posted by: Bill on April 12, 2004 11:31 AMOnline Casino Directory
Posted by: online casino on June 23, 2004 05:46 AM