Wall Street Journal editorial misled readers about state of the economy
Research ››› ››› DUNCAN BLACK
In an October 11 editorial titled "Missing Jobs Found," The Wall Street Journal misled its readers about the content and implications of the October 8 Bureau of Labor Statistics (BLS) monthly report on jobs in the economy by inflating the significance of an annual revision in the jobs data, even though the upward revision was below the historical average. The editorial also claimed that the BLS household survey of employment is more accurate than the BLS establishment survey because it counts an increase in the number of self-employed people, even though the household survey is widely considered by experts, including Federal Reserve Board Chairman Alan Greenspan, to be a less reliable indicator.
The editorial claimed: "The figure of 96,000 jobs created in September was below the expectations of many economists, but it remains a perfectly respectable showing." It is unclear how the Journal defines "respectable," but the 96,000 number cited is below the 135,000 to 150,000 new jobs that economists generally believe is necessary to keep up with the monthly growth in the working-age population of the United States.
The editorial continued:
Moreover, Friday's jobs data brought some new information that is far more interesting than the headline figure. The Bureau of Labor Statistics finally confirmed what we and others believed all along, that its "establishment survey" underestimated the number of jobs created from March 2003 to April 2004. The government bean-counters offered a preliminary upward revision of 236,000, and some believe the final correction early next year will be between 300,000 and 400,000 jobs.
The editorial attached significance to this upward revision that is not warranted. The BLS releases this preliminary revision of its employment data estimates every October, and there has never been a negative revision. In fact, this upward revision of 236,000, a 0.2 percent increase, is a smaller revision than the historical average of 0.3 percent, according to the BLS.
The editorial also suggested that the household survey is the more accurate survey, and therefore it is accurate to claim that two million new jobs have been created since before the 2001 recession:
But when a higher ratio of people make their livelihood as independent consultants to their old company, or as power sellers on eBay, they don't show up in the establishment survey that provides the most widely used employment figures -- at least not until the benchmark figures are revised long after the fact.
These jobs do, however, show up right away in the "household survey." The government collects this data from workers rather than companies, and while it is more volatile month-to-month due to the smaller sample size (60,000 households), over the past three years it consistently told us that something unusual is happening. If you believe the payroll figures, the U.S. still has to create 700,000 more new jobs before it will return to the peak pre-recession level of 2001. But according to what individual Americans are saying, we've already surpassed that level by two million jobs.
The household survey -- which showed that the number of jobs fell by 201,000 between August and September -- is considered to be less accurate than the establishment survey, which is derived from payroll data, for the purposes of measuring job growth. As New York Times reporter Edward L. Andrews wrote in a February 22 article:
''I wish I could say the household survey were the more accurate,'' Alan Greenspan, the Fed chairman, said in his testimony at a House hearing on Feb. 11. ''Everything we've looked at suggests that it's the payroll data which are the series which you have to follow.''
The Fed's conclusion was that the household survey's results have been inflated by overestimates of population growth.
Contrary to the Journal's assertions, the difference between the numbers found in the household and establishment surveys is not accounted for by an increase in self-employed workers, whose numbers grew by only 278,000 between February 2001, before the recession began, and September 2004, according to the survey the editorial promoted.
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