If you are like me, you’re finding media reports on the state of the U.S. economy far from clear.
One major problem is that most of what we know about the economy comes from numbers (unemployment, Gross Domestic Product) that are released by various government agencies. There is very little independent reporting done about the macroeconomic trends: most stories include the government statistics with perhaps a few comments from economists.
Context? Not likely. Let’s take unemployment. In September, when the August unemployment numbers were released the prevailing media narrative was one of surprise. The New York Times reported: “August brought no increase in the number of jobs in the United States, a signal that the economy has stalled and that inaction by policy makers carries substantial risk. Reuters called the report of continued 9.1 percent unemployment “unexpected.” Bloomberg News agreed: “Employment in the U.S. unexpectedly stagnated in August…”
But wait! Clear thinking requires us to ask some questions:
- Why was the unemployment report “unexpected”?
- Do the job numbers truly indicate that the economy has “stalled” or is “sputtering out”?
- Are there ways to put the jobs picture in better context?
If August’s bad job news was unexpected, it’s because reporters are paying attention to economists who have proven they have no real idea about what the unemployment rate is going to be.
Need proof? Just consider what economists have been saying over the past few months. In July, Nigel Gault, chief U.S. economist for IHS Global Insight, was quoted as saying: “The June jobs report was a shocker. It was far worse than expected, and weak on all key dimensions — job creation, unemployment, the length of the work week, and hourly earnings.” In August, when the July unemployment rate dropped to 9.1 percent, Jim O’Sullivan, chief economist at MF Global told USA Today that the report “should lessen fears that the recovery is truly faltering.” In September, Nariman Behravesh, chief economist at IHS, was gloomy about the August report: “This is further evidence that the economy is very close to stalling if not having stalled.”
Behravesh copped to having forecast August job growth of 15,000; other economists had predicted some 60,000 additional jobs in the month.
So the Labor Department report was deemed “unexpected” because economists who have never demonstrated that their models work predicted job growth that didn’t happen. Bloomberg had surveyed 86 economists and found a range of estimates for July payrolls “from a decline of 20,000 to a 160,000 increase.”
A better measure, and one that puts the job picture in better context, can be found with Gallup’s daily employment survey. While it isn’t adjusted for seasonality, I think it’s a much better portrait of who has work and who doesn’t in the U.S.
Gallup’s numbers for August showed worsening unemployment from July and underemployment (the percentage of workers who are unemployed with the percentage working part time but wanting full-time work) at 18.5%.
Anyone who monitors the Gallup survey would not find the August numbers “unexpected” or be surprised by less than stellar job growth.
As to whether the economy is “stalled out” or “sputtering,” I think the only realistic answer is: we don’t know.
And, placing the job numbers in perspective, the historical record shows that when a recession is triggered by a financial crisis, the recovery is long and slow. That’s an insight that should be more widely reported.
Jefferson Flanders is president of MindEdge. He has taught at the Arthur L. Carter Journalism Institute at New York University, Babson College, and Boston University.
Copyright © 2011 Jefferson Flanders