Saturday, August 21, 2004

In his latest New Republic column, Daniel Drezner makes the following claim:

...there is a significant lag between the reporting of good economic news and the internalization of that news by Americans. Earlier this month, an Associated Press poll found that 57 percent of respondents believed the nation has lost jobs in the last six months, even though 1.2 million jobs had been created during that span.
The data does not demonstrate what Drezner thinks it does.

According to the CIA World Factbook, the US population grows at 0.94% per year. Thats about 2.7 million people per year.

Job growth of 1.2 million jobs per 6 months actually trails population growth.

Now Drezner is right of course that the absolute number of jobs has increased. But people's perception of the labor market tracks how difficult it is for them to find a job, which depends on how many people compete for those jobs; not simply the absolute number of jobs.

Obvious, one would think.

Given that job growth has trailed population growth, the reason people have not absorbed the good news is that there aren't any.

5 Comments:

At 8:51 AM, Blogger Daniel said...

That's actually an interesting point. I do recall seeing some sort of technical analysis supporting Drezner's point, somewhere, sometime a long while ago. I'll see if I can dig it out to find out whether they control for reasonable points like yours

 
At 11:47 AM, Blogger alex said...

Interesting...I'd love to see it if you come across it.

I think the main claim is true, that is, there is a significant delay until people internalize economic news. But using this to explain why people don't have a positive outlook on job growth is wrong-headed because job growth has been pretty anemic.

 
At 6:25 PM, Blogger Daniel said...

No time to re-read it right now (so I'm not even sure if it's relevant) but some cryptic scrawls in my studying-for-generals notes suggests this is the citation I'm remembering: Nadeau, et al. 1999. "Elite Economic Forecasts, Economic News, Mass Economic Judgments and Presidential Approval." Journal of Politics 61(1). There's also an article by MacKuen, Erikson and Stimson cited on the same page. I'll take a look sometime soon, but thought I'd give you the cite now. Sorry if it turns out to be a poor match.

 
At 1:10 AM, Anonymous Anonymous said...

Without knowing more about the A.P. poll, I would have to disagree with your assessment. It didn't say the respondents were personally looking for work, so we can't assume they are job-seekers, or even that they know any job-seekers, so their perceptions on how difficult it is to find a job *might* be based merely on impressions garnered from mass media. I, for example, would have no first-hand knowledge of how tough the local job-market is since I have been steadily employed for a long time. Nor do I know anyone looking for work. All my jobs data has to come from elsewhere.

--David

 
At 12:18 PM, Blogger alex said...

Daniel: thanks for citation!

David,

Even if you assume that people's views on the economy come entirely from the news media, Drezner's point is still wrong headed. Job creation numbers make a splash the day they are announced, but are not usually the main point of emphasis in later coverage - especially if they are neither great nor terribly bad, but are just below population growth. Most news coverage now is focused on outsourcing, the stock market's current state and future predictions, which sectors are expected to improve and which are not, and so on. Its still unreasonable to cite people's negative outlook on the economy as due to propagation delay from (below population growth) job numbers.

 

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