September 23, 2024
We know that most people say that they think the economy has performed poorly under the Biden-Harris administration. However, we also know that by standard economic measures, the administration has been an incredible success story.
We saw the longest stretch of low unemployment in 70 years. Unemployment rates for Blacks, Black teens, and Hispanics all hit or tied record lows. While taking a dip in 2021-2022, real wages have bounced back and are above their pre-pandemic peaks, especially for workers at the bottom end of the wage distribution.
There has been a record pace of new business formation. Workers report record high levels of workplace satisfaction. The number of workers who can work from home has increased by almost 20 million. And more than 14 million homeowners were able to refinance their mortgages, either getting cash out for other purposes or saving thousands of dollars a year on interest payments.
This was in spite of a worldwide pandemic that initially sent employment plummeting, and then inflation soaring, as supply chain bottlenecks created shortages of many goods. The US recovery has been by far the strongest of any wealthy country, and its inflation rate by many measures is now below the average for other rich countries.
That story should give the Biden-Harris administration much to boast about in discussing its economic record, However, this is not the case. We can debate how much the media have contributed to this negative assessment, but there are any number of cases where they have reported things that are either simply not true or sufficiently distorted that they give people an entirely inaccurate picture of the state of the economy.
Since I have nothing else to do this fine Monday afternoon in Astoria, I thought I would go through my six favorites.
Number 1: The New York Times Picks an Atypical Worker to Tell a Story About a Divided Economy.
This one was really mindboggling to me. The piece is headlined “America’s Divided Summer Economy is Coming to an Airport or Hotel Near You.” The subhead pressed the case further, telling us, “The gulf between higher- and low-income consumers has been widening for years, but it is expected to show up clearly in this travel season.”
The problem is that this story is 180 degrees at odds with reality. The fastest wage growth in this recovery has been at the bottom of wage distribution, with workers in the bottom decile seeing wage gains that outpaced inflation since the pandemic by more than 13.0 percent. Workers in second quintile (going from the 20th to the 40th percentile of the wage distribution) saw real wage gains of 5.0 percent compared to 2019.
So how does the New York Times deal with a reality that is directly at odds with the story it wants to tell readers? It finds an atypical low-wage worker to profile as a representative of the low-wage economy more generally:
“Recent economic trends could exacerbate that. Lashonda Barber, an airport worker in Charlotte, N.C., is among those feeling the pinch. She will spend her summer on planes, but she won’t be leaving the airport for vacation.
“Ms. Barber, 42, makes $19 per hour, 40 hours per week, driving a trash truck that cleans up after international flights. It is a difficult position: The tarmac is sweltering in the Southern summer sun; the rubbish bags are heavy. And while it’s poised to be a busy summer, Ms. Barber’s job is increasingly failing to pay the bills. Both prices and her home taxes are up notably, but she is making just $1 an hour more than she was when she started the gig five years ago.”
As I noted when I wrote this piece up two months ago:
For a typical worker at Ms. Barber’s point in the income distribution, nominal wages (before adjusting for inflation) rose 30.4 percent over the last five years. This means that if she were representative of this group of workers, she would have seen a pay hike of around $5.40 an hour rather than the $1.00 increase reported in the article.
Incredibly, the article actually acknowledged this point.
“While that is not the standard experience — overall, wages for lower-income people have grown faster than inflation since at least late 2022 — it is a reminder that behind the averages, some people are falling behind.”
So, the New York Times deliberately found a worker who it recognized was atypical in order to tell a story about the low-wage workforce more generally that it knew was not true? What the fuck?
You can see why this gets the number 1 position on my list.
Number 2: It’s Hard for Recent College Grads to Find Jobs Even When Their Unemployment Rate is Near a Twenty-Year Low.
This one is delicious both because the theme is so obviously wrong and the error proved to be contagious. It started with a New York Times column titled “Why Can’t College Grads Find Jobs? Here Are Some Theories — and Fixes.”
The problem with the column is that it is reporting on research that finds that unemployed recent graduates have a hard time finding jobs, not recent college graduates in general. The overwhelming majority of recent college graduates are not unemployed, so this piece is telling us about the experience of a small minority of recent grads and telling us that the problem of high unemployment applies to the group as a whole.
If we look at the situation of recent college grads as a whole, it is 180 degrees at odds with what the column told readers. The unemployment rate for college grads between the ages of 21 and 24 had been below its pre-pandemic low-point, although it has inched up in recent months. Nonetheless, it is still near twenty-year lows, which makes a column telling us it is difficult for young college grads to get jobs rather odd.
Strikingly, this tidbit of misinformation spread to the Washington Post. Less than two weeks later it ran a news piece headlined, “Degree? Yes. Job? Maybe Not Yet.”
In spite of its headline, this piece was clearer that the problem was the re-employment of workers who report being unemployed. It noted that the unemployment rate for young college grads was 4.3 percent, which is pretty low by almost any measure.
Number 3: The Two-Full Time Job Measure of Economic Hardship
This was another gem of misinterpretation which also became contagious. The Washington Post discovered in the summer of 2022 that a record number of people reported working two full-time jobs. (A job is classified as full-time if it is more than 34 hours a week.) It decided that this was an important measure of economic hardship, since it meant that people had to work two full-time jobs to make ends meet.
There were three big problems with this new measure of hardship. The first is that it only applied to a tiny share of the workforce. Even at the all-time high reached that summer, we were only talking about 426,000 people, or 0.26 percent of the workforce.
The second problem is that if we looked at this number as share of employment, it was not a record high. There were other points in the past where it was almost exactly as high, and one time where it was clearly higher. That undermines the crisis story.
The third and most important problem is the time when the share of people working two full-time jobs hits its peak was July of 2000. This was at the peak of the 1990s Internet boom., which was widely viewed as the economy’s most prosperous period in the last half century.
Ironically, rather than being a sign of a bad economy, it looks like this measure is actually pro-cyclical. The number of people with two full-time jobs rises when the economy is healthy. We also saw peaks comparable to the 2022 level in 2018 – near the peak of the last business cycle – and in 2006, before the housing bubble burst and we got the Great Recession. It seems that the reason these people are working two full-time jobs is because they have the option to do so, which is apparently easier when the economy is strong than when it isn’t.
This confusion spread to Marketplace Radio the following week. It also reported on the large number of people holding two full-time jobs as evidence of economic hardship.
Number 4: The Retirement Crisis
The run-up in the stock market and house prices has meant that people approaching retirement have far more wealth than they did before the pandemic. According to the Federal Reserve Board, the median wealth of near retirees, people between the ages of 55 and 65, is more than 45 percent higher in 2022 than it was in 2019. (The survey is only done every three years. With the further rise in the stock market, the gains since 2019 would be even larger.)
This reality didn’t prevent CNN from doing a major piece on the retirement crisis. To be clear, there are millions of older workers who are poorly prepared for retirement. However, this number is almost certainly considerably lower than it had been before the pandemic when CNN was not warning about a retirement crisis.
Number 5: The Collapsing Saving Rate
One line that has been repeated in a number of places is the sharp decline in the saving rate, which is supposedly because people are having trouble making ends meet. Marketplace Radio gave us a recent example. The problem with this story is that it is driven by measurement error, as I explained on Beat the Press.
We have a gap of 2.7 percentage points of GDP between the output side measure and income side measure. These are definitionally equal, so this extraordinarily large gap can only be due to measurement error.
While I have no idea which side is closer to the mark, either a downward revision to output or an upward revision to income will almost certainly mean a rise in the saving rate. On the output side, a downward revision almost guarantees less consumption since it is 70 percent of output.
If the income side is revised up, then it almost certainly means more income. Since saving is defined as disposable income minus consumption, an upward revision to income would also mean a higher saving rate.
This means that however the statistical discrepancy is resolved, it will increase the saving rate. The amount at stake is large enough to bring it back to its pre-pandemic level. In other words, the idea that savings are falling because hard-pressed families can’t make ends meet is one more bad economy story that doesn’t correspond to reality.
Number 6 : Young People Will Never Be Able to Own a Home
There has been an endless stream of articles and news stories telling us the sad news that many young people have given up on the idea that they can ever share in the American dream and own a home. They were very touching – and also completely unconnected to reality.
Homeownership rates for households under the age of 35 actually rose in the pandemic. People with cash from pandemic payments, and relatively secure employment once the Biden recovery package kickstarted the economy, bought homes in large numbers.
The ownership rate for this group peaked at 37.6 percent in the fourth quarter of 2019. It had risen to 39.3 percent by the third quarter of 2022. At that point higher house prices and the surge in mortgage rates began to push the ownership rate down. However, even in the second quarter of this year it was 37.4 percent, which is higher than for any full year since the collapse of the housing bubble.
Furthermore, virtually no one expects mortgage rates to stay at their peaks (they have already come down by more than 1.5 percentage points), so writing news stories that seem to imply high mortgage rates in perpetuity was incredibly irresponsible. No one did this in the 1980s inflation era, when mortgage rates soared to more than 18.5 percent. It’s hard to understand why so many reporters seemed to think it was reasonable to make this blatantly unreasonable assumption about the future course of mortgage rates now.
The Big Six and the Endless Tales of the Bad Economy
Those are my six favorites, but I could come up with endless more pieces, like the CNN story on the family that drank massive amounts of milk who suffered horribly when milk prices rose, or the New York Times piece on a guy who used an incredible amount of gas and was being bankrupted by the record gas prices following the economy’s reopening.
There are also the stories that the media chose to ignore, like the record pace of new business starts, the people getting big pay increases in low-paying jobs, the record level of job satisfaction, the enormous savings in commuting costs and travel time for the additional 19 million people working from home (almost one eight of the workforce).
The media decided that they wanted to tell a bad economy story, and they were not going to let reality get in the way. People can speculate about motives, but the evidence speaks for itself. (I make this argument in a bit more length in a recent New Republic piece.)
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