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Thursday, May 06, 2004

Economists Say...whatever the NY Times wants them to say

Nathan Newman praises a NY Times article that manages to include two of the things that most irritate me about that newspaper's economics coverage. And combines them in the same sentence, no less!

According to Amy Waldman, the article's author, "as both economic and population growth outpace employment growth, economists say, [India's] official unemployment figure of about 8 percent masks a far higher real rate." As I've blogged before, whenever the NY Times has a sentence with "economists say," the rest of the sentence is almost surely nonsense that no economist would ever dream of uttering (with some exception for direct statements of bald facts).

This sentence is no exception. Now, one could reasonably say something like, "as population growth outpaces employment growth, the unemployment rate will rise." But that is not what the "economists" say.

Instead, the economists allegedly point out that economic growth exceeds employment growth in India. While I'm sure this is true, all it means is that productivity is growing rather than falling, which is very very common, and hardly worrisome. Productivity does sometimes fall during recessions, but this is the opposite of what the "economists" are supposed to be saying.

And the "economists" don't say that unemployment is rising, they say that "true" unemployment is higher than the official rate, which is a complete non sequitur. Perhaps we're supposed to assume that an 8% unemployment rate is pretty high, and so unemployment must have been rising.

But that brings up the second thing that irritates me about the Times' economic coverage, which is that they constantly cite unemployment rates that just aren't believable. Usually, I don't believe them because the Times cites unemployment rates for countries that are probably too small and poor to collect them, at least on anything like a timely basis. Admittedly, I've never taken the time to check. Now, India is poor, but it's a big country, and so it's believable that they do run a large nationwide survey to collect the unemployment rate. But I spent some time looking up India's unemployment rate, and it turns out that the Times' figure is both misleading and wrong.

The figure is misleading, because India measures unemployment only once a year, and reports it only with a lag of several years. So the 8% figure is probably for June 2000, which are the most recent available data. Nowhere does the article say this, although every other figure seems to have a date attached to it, like India's 10.4% GDP growth rate in the last quarter.

Worse, it turns out that India reports several different unemployment rates, and Waldman's 8% is the wrong one. She's chosen a figure that counts part time workers as partly unemployed, and that is the highest rate India reports, but she hasn't chosen a figure that's comparable to U.S. rates. Instead, the unemployment rate in India [big document] (in June 2000) is 4.4%, when you choose the figure most like U.S. definitions. Since the current U.S. unemployment rate is 5.7%, India's performance doesn't seem bad at all.

Number 1 in Ragout Economics!

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