Why not get somebody to work on the Washington Post editorial page who faintly knows what he or she is doing? Billmon bangs his head against the wall as he contemplates the situation:
Whiskey Bar: Dumb as a Post: When I was covering economics, the Washington Post was famous for having exactly one reporter who knew something about the beat (John Berry, now of Bloomberg News) amid a sea of economic ignorance spread throughout the rest of the newsroom. Now it just has the sea. An old financial journalism colleague of mine points out this claim from a June 19 Kerry-bashing Post editorial:
Jobs and Mr. Kerry: Now comes the next round of political gloom-mongering. Sen. John F. Kerry, the victor in the Democratic primaries, has been telling voters this week that although job creation may have recovered, wages are the real problem. "In the last year, wages have gone down, and prices have gone up," the candidate told an audience on Tuesday. Actually, hourly wages for non-supervisory workers have risen this year by 2.2 percent as of May, so they kept pace with consumer price inflation.
"What the hell is the matter with these guys?" my friend asks.
Well, for starters, they're having some problems with basic math. As best I can tell from the scant details the editorial provides to back up its claim, the writer appears to have compared the annualized growth in wages for the year through May with the percentage rise in the CPI over the past 12 months. (Annualizing is a way of converting changes over different time periods into a standard yearly increase or decrease. In this case, it's the annual change in wages that would result if wages grew for the rest of the year at the same rate they did in the first five months of 2004.) Since nominal (before inflation) wage growth and the CPI have both accelerated this the year, the Post's apples-to-oranges comparison appears to have given a definite edge to the wage side of the wage-price spiral. (Nominal wage growth is somewhat overstated; current inflation somewhat understated.)
In any case, the Labor Department's own figures show that the average hourly wage rose 1.23% in the first five months of the year (non-annualized) while the CPI rose 2.11%. Wages, in other words, lagged inflation.... Over the past 12 months, nominal wages have risen 2.16%, while inflation has risen 3%. In the most recent month - May - the gap was even larger, relatively speaking: nominal wages up 0.32%, inflation up 0.64%.
In other words, any way you slice it, Kerry is right: wages are lagging inflation. And as my previous post demonstrated, the trend isn't getting better, it's getting worse. Whether the job growth of the past few months will be enough to change that trend is unclear - right now, it looks like any improvement will be painfully slow.
Once again, the Post has managed to fall into the deep, deep waters of its own economic illiteracy.
I think that Billmon is wrong: the calculation that Billmon guesses that the Washington Post has done does not yield the results that the Post's editorial staff claims. From May 2003 to May 2004, non-supervisory nominal wages appear to have risen by 2.2% while consumer prices have risen by 3.0%. From December 2003 to May 2004, non-supervisory nominal wages have risen at a pace of 2.8% per year while prices have risen at a pace of 5.0% per year. From April 2004 to May 2004, nominal wages rose by 0.3% and prices rose by 0.6%. The 2.2% number the Post cites is the May 2003 to May 2004 wage-gain number. But there is no price increase number at all that the 2.2% "keeps pace with."
My guess? Somebody was told that CPI inflation was "2%," and so wrote--without checking the price number--that the 2.2% wage-gain number kept pace with it.
Now how long will it take the Washington Post to print a correction, and to say that John Kerry was right to point to declining real wages?
Posted by DeLong at June 21, 2004 05:47 PM | TrackBack | | Other weblogs commenting on this postok, I'll play
how long?
never for the op ed page
20:1 odds that the ombudsman will in next month
Is there an email address for the ombudsman, or the editors?
Posted by: Bernard Yomtov on June 21, 2004 06:03 PMThis is only tenuously related, but I think it's important to say. Brad, I don't know your schedule, but I can imagine that it's busy. Nevertheless, it would help if an economics bigwig such as yourself responded to the charges leveled by people like Don Luskin and Steven Antler and the people and publications they post on their sites. Luskin went so far as to post a link implying or calling all left-leaning economists dishonest, pathetic, and ignorant (because as we all know, the man who is a college dropout, among other things, has a lot for which to speak.)
I actually posted something like this a few days ago, but I don't think that it actually got put on this site. It must have been one of those damn errors.
Posted by: Brian on June 21, 2004 06:10 PMItalics off? Or is that just my browser (mozilla) acting up?
Posted by: BJ on June 21, 2004 06:15 PMBy the way, they have an ombudsman, Michael Getler, at ombudsman@washpost.com. Not sure whether he considers the editorial page his beat, but it can't hurt. Better yet, someone should write a good letter to the editor. (I'd do it myself, but I'm sorta economically illiterate myself and might mess it up.) Here's how:
Send e-mail letters to letters@washpost.com. Do not send attachments; they will not be read.
Letters must be exclusive to The Washington Post, and must include the writer's home address and home and business telephone numbers. (Letters via regular mail should also be signed.) Because of space limitations, those published are subject to abridgment. Although we are unable to acknowledge those letters we cannot publish, we appreciate the interest and value the views of those who take the time to send us their comments.
Posted by: BJ on June 21, 2004 06:24 PMBrian,
I ain't no "economics bigwig," but I think my response to the Luskin article you mentioned is pretty good:
http://ragout.blogspot.com/2004_06_01_ragout_archive.html#108762359806916587
Italics are broken; in the title of the article: <i>Post</a>
Posted by: Aaron Swartz on June 21, 2004 06:38 PMskipwalkdc, i think your odds are correct on the ed page itself, and too generous on getler, who has never responded to a single factual error that i've pointed out.
Brian, Luskin is such a completely dishonest hack that i can't imagine taking the time to read him any more, much less respond.
Posted by: howard on June 21, 2004 07:01 PMBut there is no price increase number at all that the 2.2% "keeps pace with." ...
Core CPI is up 1.7% over the last 12 months (http://www.bls.gov/news.release/pdf/cpi.pdf)
Of course, most workers do buy food and energy. So this isn't too great a victory.
But, more seriously, "real hourly earnings" ("average hourly earnings for productiona or nonsupervisory workers" / CPI-W) is not the greatest measure of real wages. It peaked in 1973. Does anybody think that is right?
The more comprehensive real hourly compensation in the nonfarm business sector (http://www.bls.gov/news.release/pdf/prod2.pdf)
is up 2.7% from a year ago and 0.9% at an annual rate from the previous quarter.
So, the Washington Post editorialist is very sloppy, but he has a point.
Posted by: pi on June 21, 2004 07:35 PMFortunately for Kerry, the voters do not read Washington Post editorials, they just look at their checkbook.
Posted by: Joe Davidson on June 21, 2004 08:22 PMIf only Brad DeLong could be both editor of the Washington Post and President of the United States, all would be well. For shame.
Posted by: Freddie Jones on June 21, 2004 08:42 PMwait but Billmon said 2.6 and 3, and the Prof said 2.2 and 3. Not so different.
Posted by: asdf on June 21, 2004 09:05 PMAtrios has a good catch from the WaPo: news article that electricity production in Baghdad is down vs. editorial that is up, with the eternal question, Do the editors read their own paper?
Posted by: Brian Boru on June 21, 2004 09:23 PMThe more comprehensive real hourly compensation in the nonfarm business sector (http://www.bls.gov/news.release/pdf/prod2.pdf)
is up 2.7% from a year ago and 0.9% at an annual rate from the previous quarter.
But we don't have any ECI data for the second quarter yet. Given the underlying trend in wages and inflation since March, it doesn't seem likely the situation is going to look as rosy as the numbers you cite, although at least it probably will still be positive.
Do the editors read their own paper?
No. It's called the Wall Street Journal Syndrome.
Odds of Getler addressing factual error if doing so reflects badly on Dear Leader?
I wish I booked bets
I'd be rich
And believe me
Rich is better
pi wrote, "But, more seriously, 'real hourly earnings' ('average hourly earnings for productiona or nonsupervisory workers' / CPI-W) is not the greatest measure of real wages. It peaked in 1973. Does anybody think that is right?"
It's not unthinkable---IIRC a greater fraction of women work now than before. This would increase the supply of labor, which would help decrease the cost of labor.
"The more comprehensive real hourly compensation in the nonfarm business sector (http://www.bls.gov/news.release/pdf/prod2.pdf)
is up 2.7% from a year ago and 0.9% at an annual rate from the previous quarter."
But does that figure include *supervisory* workers? Furthermore, it probably includes health care benefits, and it's not clear to me whether the other stat does. (Now, I know, health care is something of economic value, but given how absurdly inefficient health care delivery is in the US---costing perhaps twice what it does in many European countries measured as a % of GDP---it's not clear how to really value it.)
Well, now there's a correction up on the WP website, at least.
Posted by: pogo on June 22, 2004 05:33 AMThe wedge between compensation and hourly earnings is part of the problem.
Compensation is what labor costs looks like to the employer, but hourly earnings is what labor returns to the employee.
Moreover, the primary reason that compensation is higher than wages is health care costs. If you want to make the case you want to use compensation you should deduct the additional share of health insurance that is being passed on to employees to see how there real income is
after paying more for insurance.
In the investment community, at least, the very high cost of compensation is believed to be a major reason employment growth has been so low.
Firms to not want to take on the responsibility to pay all the fringe benefits.
My reaction to the article is to look at the missery index -- unemployment plus inflation
It is now 8.6% vs 6.7% at the election. The election guide that has worked every time is that if the missery index is above where it was at the last election the incumbent, or his vice president loses the election.
I don't doubt that the Wapo newsroom is ignorant of economics. This post seems to show that they also can't do arithmetic. I think they will need to master that before learning economics becomes feasible (a point often make by Mr. Krugman).
Posted by: Jonathan Goldberg on June 22, 2004 05:51 AMMaybe they should have given John Berry a large salary increase to keep him from going over to Bloomberg. Now WaPo is getting a reputation only Rich Lowry could appreciate.
Posted by: Harold McClure on June 22, 2004 06:10 AMKerry was lying, no matter how you look at it. The Post's inability to calculate Y/Y changes is beside the point. He didn't say real wages were going down. He said, "In the last year, wages have gone down, and prices have gone up." He is clearly implying that not only have nominal wages fallen, but prices have also risen, so real wages have taken a double hit. This is a lie. No measure of nominal wages has fallen.
Posted by: Bill on June 22, 2004 07:54 AMThe print edition has a correction. I don't see anything on the web site.
I take it back. It's here:
http://www.washingtonpost.com/wp-dyn/articles/A59154-2004Jun21.html
It's not easy to find unless you know it's there.
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