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Home Publications Blogs Beat the Press More Bipolar Economic Reporting at the Washington Post

More Bipolar Economic Reporting at the Washington Post

Saturday, 04 May 2013 08:03

The April Jobs report was better than most economists (including me) had expected. Better news is always better than worse news, but it was one report amidst a lot of other less than stellar news. Furthermore, it just was not that good.

Nonetheless the front page Post story hyped the good news in the report and told readers [in print edition only]:

"The jobs report could also have significant implications for the Federal Reserve's $85-billion-a-month stimulus program. .. The program is tied to the outlook for the labor market, and some officials have begun suggesting that job growth could accelerate enough for the Fed to begin winding down the purchases this year."

The Post, like most major media outlets have been shooting from excessive optimism to excessive pessimism about the economy consistently failing to keep their eyes on an underlying trend
of weak growth. (Neil Irwin's blogpost yesterday gets the story almost exactly right.) Just last fall the Post and other news outlets were filled with pieces about how uncertainty over the "fiscal cliff" was already slowing growth and deterring investment. Somehow the people doing the investment did not get the message, as investment rose at a 13.2 percent annual rate in the quarter.

In terms of current data, the Fed probably noticed that new orders for non-defense capital goods (excluding aircraft) were still almost 4.0 percent below their January level in March, even after a 0.9 percent increase from their February level. The March number is less than 0.2 percent above the year ago level. The Fed probably also noticed the construction data released by the Commerce Department last week which showed that total construction spending fell 1.7 percent in March driven by a 4.1 percent falloff in spending by the public sector.


The Fed has probably also noticed the GDP report. While overall growth was 2.5 percent, a full percentage point was due to inventory accumulations. Final demand grew at just a 1.5 percent annual rate. Over the last year, GDP has grown at just a 1.8 percent annual rate, well below the 2.2-2.4 percent rate that is generally viewed as necessary to keep the unemployment rate from rising.

The Fed is probably also aware of the fact that the numbers in the April jobs report were not especially positive. With an underlying growth of the labor force of 100,000 a month, the April rate would imply that we are reducing the number of unemployed at the rate of 65,000 a month. If it will take 2,000,000 new jobs to get the unemployment rate down by a percentage point to the Fed's 6.5 percent target for pulling back from stimulus (this assumes 500,000 return to the labor force), the April rate will get us there in the middle of 2016. Even if we take the 212,000 average growth rate of the last three months we would still be looking at December of 2014.

It is likely that the Fed (unlike the Post) noted the sharp drop in the length of the average work week. This led to a drop of 0.4 points in the index of total hours worked, tying for the largest drop since the recovery began. The Fed probably also noticed the 1.0 percentage point drop in the share of unemployment attributable to people who voluntarily quit their jobs, bringing it back near the lows for the downturn. This is an important measure of people's confidence in the labor market. 

In short, one hopes that the Fed would not allow itself to be too influenced by a single report that seems to conflict with the direction of a great deal other economic data. It is unfortunate that many reporters seem unable to manage this task.

Comments (5)Add Comment
Bipolar economists
written by Ellis, May 04, 2013 9:58
Where's the outrage? We're in a depression -- in this day and age! The jobs situation is a complete disaster. Millions of lives are being destroyed. And all economists can do is talk about the Fed, like somehow the Fed, an instrument of the banks, is about to rush to our salvation by printing a lot of money. Oh, please.

When economists get around to talking about what is behind the depression, they ignore the obvious that is staring everyone in the face: the fact that big business makes everyone pay for their record profits by cutting back on hiring and reducing pay and benefits using every trick in the book. At the same time, the corporate titans dictate government austerity measures so they don't have to pay any taxes, or else to fund their tax rebates.

Then, economists act surprised that there is little or no job growth. What else do you expect?

Remember, we are now in the recovery phase of the jobs cycle. This is probably about as "good" as it gets. Eventually, this "recovery" will give way to a new recession. When that comes, and it will, watch out.

We're being treated like suckers!
The Fed ...
written by this is me being generous, May 04, 2013 11:41
... could do more. Bernanke is being too cautious, not forceful enough. Same with Obama on the fiscal end. Ellis, don't let your outrage overpower your intelligence or use of mathematics. Record profits are being paid out if record piles of cash because there's nothing else to do with it (see Apple's problem)
Think outside the box
written by Ellis, May 05, 2013 10:07
The whole idea that companies don't have anywhere to invest their profits is patently absurd. Our society and economy have gigantic needs that are not being met. The fact that the profit motive stands in the way of using those cash hordes for the public good shows how downright barbaric and perverse the profit motive has become.

Remember: those profits were produced by the workforce. That workforce -- and not just at the particular company -- should enjoy the benefits of what they have done. But they don't. Not at all.
The Jobs Report
written by rickstersherpa, May 05, 2013 9:34
I also believe that the report showed "real" income has fallen over the last year. Another point is that Fed has been overestimating the economic recovery through this whole depression. The WaPo, Gray Laday, and the Murdoch Street Journal constantly fail to report this observation. http://advisorperspectives.com...asting.php
The next FOMC minutes
written by Procopius, May 05, 2013 10:43
are going to show a substantial part of the committee (I hope still a minority) saying this report proves that the time has come to end QE3 NOW NOW NOW! They will say that the jobs picture is improving so much that there's no point in waiting until the actual unemployment rate is down to 6.5%. After all, isn't 7.5% almost there? And besides, the danger of inflation expectations becoming unmoored is shown by the fact the PCE deflator is at 1.2%. And we can see from the behavior of the stock markets that we have serious market distortions that might lead some companies to reach for risk unless they don't. After all, we might overshoot the target of 2.0% (don't pay any attention to that old benchmark of 2.5%). No wonder they can't get any traction -- nobody believes they'll stay the course.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.