June 22, 2004

A Correction from the Washington Post

The Washington Post has retracted its false claim that John Kerry was wrong to say that real wages are falling:

MaxSpeak, You Listen!: From the print edition of the Washington Post:

CORRECTION: On June 19 we wrote that wage increases had kept pace with inflation in the year to May, and criticized Sen. John F. Kerry for suggesting that wages had fallen behind. We were wrong and Mr. Kerry was right: Hourly wages for non-supervisory workers rose 2.2 percent, while the consumer price index rose 3.1 percent.

Perhaps we can take a step further forward, and get corrections of some of the analytical (rather than merely the arithmetic) blunders in the Post's editorial?

Jobs and Mr. Kerry (washingtonpost.com): ...job creation, which appeared surprisingly weak a few months ago despite strong economic growth, is now healthy -- and statistical revisions suggest that it was robust as far back as March and respectable in January...


If Mr. Kerry's message seems exaggerated now, it will seem even less convincing soon. Job markets recover in three phases: As the economy picks up, employers ask workers to put in extra hours; when they've exhausted that option, they hire new workers; when new workers become hard to find, labor scarcity pushes wages upward. We are now well into the second stage and may be entering the third...

At least according to the employment-to-population ratio--which is, I think, the best yardstick because of the recent sensitivity of labor force participation to the state of the job market--we are very, very, very far indeed from a high-pressure economy in which strong labor demand pulls wages up significantly:

Why do I have the feeling that nobody writing editorials for the Washington Post knows or cares about figures like this one?

Posted by DeLong at June 22, 2004 02:22 PM | TrackBack | | Other weblogs commenting on this post

On the real wage correction - see Billmon's reaction complete with the most appropriate picture. Classic!

Posted by: Harold McClure on June 22, 2004 02:24 PM


You get the feeling that no one at the WaPo knows or cares only because by the evidence available to us, no one at the WaPo knows or cares....

Posted by: howard on June 22, 2004 02:33 PM


Wow, and right up there on page A16, too...

Posted by: Tom Marney on June 22, 2004 03:49 PM


That graphic is playing havoc with my browser. Oh, and chalk one up for Kerry.

Posted by: ack on June 22, 2004 04:08 PM


Look on the bright side. This places the Post above the editorial page of the WSJ.

Posted by: Rob on June 22, 2004 04:47 PM


Aha. A very illuminating chart. Actually, I think that chart may be the one that's more useful than anything, at least when you're talking about most labour related economic factors.

However, this line jumped out at me

"As the economy picks up, employers ask workers to put in extra hours; when they've exhausted that option, they hire new workers"

Somehow, that seems doubtful to me. What tends to happen these days, is that the employees who are burnt out get canned, and new fresh employees that can do extended workweeks (often at a lower wage), take their place.

Posted by: Karmakin on June 22, 2004 05:23 PM


What the US needs is a new paper of record. We really just have to leave the NYT and the WaPo behind entirely, and find a newspaper dedicated to real journalism.

Posted by: Josh Yelon on June 22, 2004 05:44 PM


I just had an interesting idea. You could create a website that "mirrors" the New York Times website and the Washington Post website, with the addition of inline annotations. The idea would be that users could read indirectly, via the filter, rather than directly.

Of course, a negligible number of people would use the filter. But it would almost certainly trigger a lawsuit, and the lawsuit would end up embarassing the Post and the Times.

This could be part of a larger campaign to humiliate them into fixing their reporting.

Posted by: Josh Yelon on June 22, 2004 06:02 PM


That's a good chart. I've hated the way all newspapers talk in raw numbers of employment gains, and net losses (after removing people who are no longer looking). I suppose it's partly due to the way numbers are presented by the reporting "agencies" but it give no perspective on what is good or bad. This chart shows that the current terrific job numbers are barely treading water with worker growth.

Posted by: Steve Holmes on June 22, 2004 06:32 PM


Is there any documented relation between labor participation and demographic trends like the one mentioned by the Census Bureau (which covers the period of the chart)? In essence, the retiree group grew less fast than the "productive" segment of the population in the 1990s, if I understand this correctly.

"While the median age increased by nearly two and a half years
between 1990 and 2000," said Campbell Gibson, a senior Census Bureau
demographer, "the growth of the population aged 65-and-over was by
far the lowest recorded rate of growth in any decade for this age

The median age (meaning half are older and half younger) rose from 32.9
years in 1990 to 35.3 in 2000. The rise reflects a 4-percent decline in
numbers among 18- to 34-year-olds and a 28-percent increase in 35- to

The most rapid increase in size of any age group in the profile was the
49 percent jump in the population 45-to-54-years-old. This increase, to
37.7 million in 2000, was fueled mainly by the entry into this age group
of the first of the "baby boom" generation (those born from 1946
to 1964)."

Posted by: walons on June 22, 2004 07:05 PM


As a counter factual, if one extrapolates the approx. 67.1 % employment to population ratio from the peak of the business cycle, we can argue that labor force would be some 2.7 million larger today. Factor in those missing workers/job seekers and we're almost back at 1970s stagflation unemployment rates.

Posted by: Adam on June 22, 2004 07:46 PM



Posted by: bakho on June 22, 2004 09:23 PM


Is walons suggesting that the ratio chart is a reflection of the passing boomer demographic slice and that this (dive) would have happened under anyone's watch? The claim minimally is that the spike (up) is due to the small retirement-age segment and that this 'hill' would have been flatter with a more evenly spread demographic.
Does this hold true for other countries ( Canada, Britain, Germany )?
This not only suggests that Bush was working ( ok presiding over) a non-level playing field, but also that field is not going to get any more level for the next few decades. ie expect that dive to continue.

Posted by: calmo on June 23, 2004 05:00 AM


The chart is a good one, but do we really need it to skewer the silly WP piece? We are "well into the second (hire new workers) stage" when firms have reported net hiring for 9 whole months? When hiring has been adequate to absorb new job market entrants, plus a bit, for 3 months? I must ask, how brief is this "second stage" thought to be, if we are already far enough into it that the reporter can smugly assert that Kerry's message "will seem even less convincing soon" because wages will accelerate due to labor scarcity. There is always the possibility that somewhat faster wage gains may show up whenever the mix of jobs in a given month shifts toward hire wage industries - which would not be evidence at all that we have entered the WP's third stage.

Posted by: kharris on June 23, 2004 06:19 AM


Why isn't the Post writing about that? Because nobody cares. People aren't sitting around their kitchen tables in the evening, yelling "Oh my God - the employment-to-population ratio isn't as high as some think it should be!!"

Maybe it's sign of economic strength that so many members of the population are choosing to not work? No, that can't be it!!

Posted by: Edwin McCarrollton on June 23, 2004 06:37 AM


Professor. Re the Employment/Population Ratio, is this normalized for demographics and average retirement age? If not, should it be? Just wondering.

Posted by: Lawrence on June 23, 2004 06:40 AM


On the one hand, the big Euro countries (UK, France, Germany, Italy--dramatically so) have ratios lower than the US. They also happen to be somewhat older. The ratio in the US was below 60% in the 1960s and 1970s, and half of the 1980s. Given these big variations across countries and across time, I would be careful with conclusions. There was inflation in the 70s despite the lower employment/population ratio.

Posted by: walons on June 23, 2004 08:03 AM


Could it be that Bloomberg is an insidious threat to public understanding of economic issues? Berry left the WP completely without an economics writer. In Brad's post on Niskanen, he notes that Art Pine has left the LA Times for Bloomberg. Is Bloomberg hijacking all the good economics reporters at paycheck point? That would be good for people with access to Bloomberg news, but bad for the country in general. Could the nation really be so short of good economics reporters that Bloomberg could wipe out the last vestiges of generally available daily economics coverage just by beefing up its own newsroom?

Posted by: kharris on June 23, 2004 08:04 AM


Hey, that chart says the ratio never even got down to the level of the '91 recession.

But everyone's been telling me this has been the worst labor market since Hoover.

Doesn't anyone pay attention to these things?

Posted by: Jim Glass on June 23, 2004 08:11 AM


Why is the WaPo not writing about Brad's chart?

1. The people covering this beat for the WaPo do not understand much about basic economics.

2. Mr Bush and his politicos do not understand basic economics, so they cannot explain this to the press.

3. Those in the Bush administration (Mankiw, Friedman (is he still alive?)) have gone silent. Obviously they have been told to shut up after the Mankiw outsourcing fiasco.

4. Reporters are covering what the candidates say on their stump speeches, not their actual (Bush) or proposed (Kerry) policies or the effects on America.

5. Covering what Mr. Bush says is not way to get at his policies. It was clear from the 2000 debates that Mr. Gore knew more about the Bush fiscal proposals than Mr. Bush himself did.

Molly Ivins wrote that with Mr. Bush:
"What you see is not what you get.
What you hear is not what you get.
What you get is all you get."

The takehome from this is clear. Trying to cover Bush policy by quoting him or through photo ops will not work. A different strategy that focuses on "what we got" is necessary. The Bush administration is not forthcoming on "what we got". Therefore it is entirely up to Kerry and independent analysts to tell the real story. However, the President is so high profile, he overshadows other speakers.

Posted by: bakho on June 23, 2004 08:22 AM


Jim, no one has said, "worst labor market since Hoover".

The claim is the first president to preside over net job loss since Hoover. Labor market is not good.

Posted by: bakho on June 23, 2004 08:26 AM


Gee, no one seems to have noticed that "this dive" began in the Clinton Admin.

Posted by: Patrick R. Sullivan on June 23, 2004 09:42 AM


Nope. Peak was under Clinton. What is noticable is lack of response by Bush with a credible jobs program.

Posted by: bakho on June 23, 2004 09:57 AM


Here's the chart all the way back to the 40s, and it makes a verrrry different impression:


Posted by: Patrick R. Sullivan on June 23, 2004 10:05 AM



That chart does make a very different impression. Wow, what structural changes have taken place over the last half century! Behavior has really changed. We need 6 to 8 percent more of our population drawing paychecks to maintain our standard of living now than we did in the 1950s through the mid-1970s! If one clicks on the 10-year button, rather than the "max" button, one gets a good impression of the range of labor market participation rates that workers now strive toward, and the steep decline that took place in the last few years.

Posted by: kharris on June 23, 2004 05:18 PM


I'm sure we could google for this, but...

Is "population" the head count of ALL adults or only citizens and legally admitted and employable aliens? Does the job count count all jobs or only those paying FICA?

If non-citizen job-seekers enter the market faster than the legal employers create jobs, then the curve will trend down. If FICA-paying jobs are diverted to black-market uncounted "payrolls", the curve would trend down even if population was steady.

Brad, you've been hammering on this problem for nearly a year. You've said this is the kind of trend you should understand. Are you making any progress?

Posted by: Pouncer on June 24, 2004 12:18 PM


"We need 6 to 8 percent more of our population drawing paychecks to maintain our standard of living now than we did in the 1950s through the mid-1970s!"

You think our standard of living is the same today as it was 30 years ago?

Posted by: Patrick R. Sullivan on June 24, 2004 01:24 PM


Gee, no one seems to have noticed that "this dive" began in the Clinton Admin.

Posted by Patrick R. Sullivan at June 23, 2004 09:42 AM
Nope. Peak was under Clinton. What is noticable is lack of response by Bush with a credible jobs program.

Posted by bakho at June 23, 2004 09:57 AM


um, bakho, you're agreeing with me. The peak was under Clinton, AND the "dive" started with Clinton. It's very clear from the nice picture that Clinton inherited an improving economy and bequeathed a faltering one to W.

Posted by: Patrick R. Sullivan on June 24, 2004 01:30 PM


As usual with respect to such graphs, I'm skeptical of your analysis. Why is this measure important, when there is just a 4% range in values over almost 15 years? That seems very stable. The differences are just highlighted due to the expanded and cut-off scale. Why is a 2% change from the mean significant?

Moreover, what does Employment/Population ratio mean? The percentage of people in the US working? What about those unable to work or unwilling to work? How does that take into account the number of people in their ideal jobs verses those in jobs of necessity? (Cheap shot warning) You need to explain things better for those of us who are not sheep!

Posted by: Jimmy Cerra on June 24, 2004 02:39 PM


This is cute: the dive started /the peak ended. Let's skip straight to the lag time between policy and practice. So how many seconds do you give it Pat?
And after nearly 4 yrs, what do you think? Trash the graph as noise ( like Jimmy-no-sheep) or blow it out of the water with demographic insuation?

This is an optimistic view of employment that hides the reality that real wages have declined despite record increases in profits. It counts the 'second choice' (generally service sector) jobs that replaced better paying jobs in the manufacturing and professional sectors. The 'dive' is a gentler, kinder ( couln't resist) snap shot of the broader picture.

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