Beat the Press

Dean Baker's commentary on economic reporting

7/08/2006

Creative Stories on Wage Growth in the Washington Post


There was a larger than expected jump of 8 cents in the average hourly wage reported for June. This left some folks scrambling for an explanation. The Washington Post found a creative one, courtesy of “some analysts.”

According to these analysts, the more rapid wage growth in June is partly explained by a change in the mix of jobs, with the economy losing low wage jobs in the retail sector and adding jobs in the relatively high-paying manufacturing sector.

Okay, sports fans, let’s check the numbers. Employment of production workers (the relevant category) in the retail sector reportedly fell by 20,000 in June. Employment of production workers in manufacturing increased by 19,000. This gives a total change in composition of 39,000. This change in composition is equal to 0.042 percent of the total employment of production workers (92,700,000).

The difference in pay between manufacturing workers and retail workers is $4.25 an hour. This means that 0.18 cents of the reported increase in wages in June can be explained by this shift in the composition of employment. Some analysts should be happy that their names did not appear.

The more obvious explanation for the rapid wage growth reported for June was the slow wage growth reported in May. In the economy, the actual pace of wage growth generally does not change very much from month to month. When our surveys show unusually strong or weak growth in a given month, it is more likely due to sampling error than anything real in the economy. The May data showed the average hourly wage growing by just 1 cent. This was almost certainly slower than the true rate of wage growth in May. In effect, the June data was picking up both wage growth in June plus the gap between the true pace of wage in May and the reported rate. Some of us who watch the numbers were not surprised by the big June increase.

7/07/2006

The Coin of the Realm


The Washington Post had an interesting piece about whether it still makes sense for the government to mint pennies, given how much they cost to make relative to their value. The article might have asked the same question about the dollar bill. Coins are in general much cheaper to keep in circulation than bills, and given that a dollar today is worth about as much as a quarter was 35 years ago, it might be time for the switch.

Of course we do have dollar coins, but they rarely circulate. In this respect, it's worth noting that the last two dollar coins both feature women (Susan B. Anthony and Sacagawea [a native American woman who accompanied Lewis and Clark on part of their journey]). These are the only U.S. coins or notes to portray women.

The Washington Post’s Front Page Editorial on Mexican Elections

The lead headline of the Washington Post this morning was “Mexico Vote Tally Gives Free-Trader a Narrow Victory.” Wrong! Felipe Calderon, the candidate who is now ahead in the vote tally to be Mexico’s next president is not a free-trader. He has supported increasing copyright and patent protection and shown no special interest in removing protectionist barriers that obstruct free trade in the services of highly paid professionals (e.g. doctors, lawyers, accountants).

The Washington Post does not own the term “free-trade.” If they want to identify Calderon by his trade position, they can call him pro-NAFTA. It is more accurate and saves 2 letters.

New York Times Does PR Work for Brazilian Energy Company

Remember the good old days when newspapers didn’t just unquestioning print what the powerful tell them? (Okay, maybe they never existed.) Anyhow, a Times article this morning reports that Petrobras, the Brazilian energy company, has invested $50 billion in Bolivia.

How does the Times know how much Petrobras has invested in Bolivia? Did their reporter go around and price out the various wells and pipelines that the firm has constructed over years? Maybe the reporter talked to an expert who gave his/her estimate of the amount invested. While both of these are possibilities, the article doesn’t tell us the source of the $50 billion figure, leaving open the possibility that the Times just printed what the company told them.

This matters because, as the article reports, Petrobras is currently engaged in a dispute with the Bolivian government over its efforts to renegotiate royalty agreements. Petrobras’ moral, if not legal, claim is improved, insofar as it has invested heavily in developing Bolivia’s resources.

One reason for viewing the Petrobras claim with skepticism is that Bolivia’s GDP is currently $9.7 billion. This means that Petrobras is claiming to have invested a sum that is more than 5 times Bolivia’s current GDP (that would be more $65 trillion in the U.S.). Such claims should at least come with a source.

Addendum: The reporter apparently did not get the $50 billion figure from Petrobras, or at least not from its website. The website gives a somewhat more plausible figure of $1.5 billion. (Thanks to my CEPR colleague Ben Zipperer.)

7/03/2006

W.T.O. Mysteries in the Washington Post

Economists always like to talk about the ideal situation of perfectly competitive markets. This is the world in which there are vast numbers of buyers and sellers so that no individual buyer or seller can affect the price. In this world, every producer is a price taker. This means that the price is set by the market, and they can sell as much as they want to produce at the prevailing market price.

In the real world, this is not an accurate description of most markets, which have a relatively limited number of sellers. The one market that does seem to fit the competitive story reasonably well is agriculture. Farmers see a price in the market for corn, wheat, soybeans, etc. and they can sell as much as they choose at this price.

Unfortunately, the Post apparently does not believe that agriculture is a competitive market. It reports today that the United States is trying to open up markets in developing countries in order to give U.S. farmers something to offset the loss of subsidies in a new W.T.O. agreement. Sorry, this doesn’t make any sense.

Farmers can already sell all they want in the market today at the prevailing price. It is unlikely that farmers will feel any better if the wheat they sell at $2.50 a bushel is going to Zambia than if it’s going to Pennsylvania.

Perhaps the article meant that by opening up markets in Zambia, and other developing countries, the price of wheat would rise. It doesn’t seem very likely that the new markets would produce any substantial rise in price (the new entrants would be relatively small compared to the existing world market), but this would be a qualitatively different effect than simply an increase in the quantity of wheat sold. It would mean that all of us would be paying more for wheat. This could lead a more efficient world market, but it would also mean higher prices for consumers in the U.S. If this is the intended outcome from an new W.T.O. agreement, shouldn’t the Post be telling its readers?