Beat the Press

Bad European Growth Numbers in the NYT

Newspapers should try to report economic data in ways that are clear to their readers. That should not be a debatable point.

The NYT badly failed in this task in an article on European economic growth. The headline told readers that "Economy Grows Nearly 1% in Europe." Before anyone bemoans poor European growth, it is important to realize that the 1.0 percent is a quarterly growth rate. In other words, Europe's economy grew by close to 1.0 percent in the second quarter of the year. This translates into close to a 4.0 percent annual rate.

Is Europe Hiding Its Productivity?

The Wall Street Journal has an interesting piece today on how France Telecom is trying to set up its workers in their own business as a way of getting around restrictions on layoffs. The story itself is interesting -- it�s an innovative initiative that would seem to produce win/win outcomes. But the discussion also raises another serious question about excess labor in France and other countries with restrictive laws on layoffs.

Alan Greenspan and the Stock Bubble

The biggest sin that the Greenspan sainthood proponents must sweep under the rug is his failure to do anything about the stock market bubble. There are 3 questions here that the critics and worshippers must address:

1) Could it have been recognized?
2) Did it actually do the economy serious harm?
3) What could have been done?

These questions are loosely touched on by a worshipper�s ((Daniel Drezner) review of a critic�s (Peter Hartcher) book in the Post book review section. The worshipper comes up seriously short in his assessment.

Hidden Housing Price Declines

As I mentioned in a prior note, house prices may be dropping in ways that are not picked up by price indices because the indices all use the contracted sale price. Currently sellers are using a variety of kickbacks that reduce the effective price below the sale price.

Today's Washington Post has a good example. Centex, a major national builder, has a full-page ad (sorry ads don't appear in the web edition) offering mortgages at well below the market rate, plus closing cost assistance. (The difference on the 30-year is about 0.8 percentage points.) The ad also promises realtors a $5,000 bonus. So, on a $400,000 home, these incentives could easily come to 5 percent of the purchase price.

More "Entitlement" Nonsense at the Post

Yet again the Post reports on the threat posed by �entitlement� spending, referring to Social Security, Medicare, and Medicaid. To quickly repeat myself, this is dishonest. There are modest and manageable increases in projected Social Security spending due to the aging of the population. There are unmanageable projected increases in Medicare and Medicaid expenditures due to a projected explosion in health care costs. If the projected explosion in health care costs proves accurate, then it will devastate the economy, and cause serious budget problems.

Wrong Experts on Inflation and Unemployment

The Times had an article examining the prospects of the Fed being able to successfully bring down the inflation rate, without also inducing a recession. While it is a thoughtful piece, the two experts whose views dominate the article, Robert Gordon and Lawrence Meyer, have the distinction of having been proven completely wrong on this topic by the events of the nineties.

Trade Deficits and Living Standards

The modest drop reported in the trade deficit in June is good news, the current deficit is unsustainable. A declining trade deficit will also help to boost economic growth, as noted in a Times article this morning. However, the article missed an important part of the story.

What Do Plunging Mortgage Applications Mean?

It could mean less demand in the housing market. The Mortgage Bankers Association released the results of its weekly mortgage applications survey yesterday. While the weekly number for purchase mortgages was up slightly, the 4-week moving average was down and now stands more than 20 percent below its peaks last year. The refinance index is down by more than 50 percent. (The survey covers approximately 50 of mortgage originations.)

Remarkably, this important and timely data on the housing market appear to have been ignored in the NYT, WSJ, and Washington Post.

--Dean Baker

Mortgage Rates Will Stay Low, Why?

With the housing market clearly in a slump, the New York Times had a piece this morning asking how fast the housing market is heading down. In presenting the case for a gradual and limited decline the article asserts that �mortgage rates are still relatively low and look to stay well below rates common in the past.�

The Joe Lieberman Nobody Knows

Obviously Joe Lieberman was defeated because of the war. Three term incumbents don�t lose primaries because of their personal peccadilloes. But there is a side to Joe Lieberman that very few people are familiar with. Joe Lieberman played an important role in laying the basis for the accounting scandals of the stock bubble era.

The Problems of Public Pensions

Mary Williams Walsh has a nice piece on the unbooked libailities of public sector pension funds in today's NYT. Supporters of defined benefit pensions and public sector provision of public services are not helping the cause when they ignore bad accounting.

More Evidence of a Bursting Housing Bubble

New data from the Fed show that credit card debt rose at a 9.8 percent annual rate in June after increasing at an 11.0 percent rate in May. This extraordinary two-month rise is consistent with the story that homeowners are finding it increasingly difficult to borrow against their home � presumably because prices are no longer rising. If you need to borrow, and borrowing against the home is not an option, credit cards may be the next best alternative.

Economic Malpractice at the Financial Times

In case you thought that the United States had a monopoly on bad economic reporting, the Financial Times is out to prove you wrong. In a column this morning, Lex sought to show that an increase in the value of the Renminbi will not necessarily lead to a decline in the U.S. trade deficit with China. The evidence is a chart showing that the large rise in the euro against the dollar since 2001 has actually been associated with an increase in the U.S. trade deficit with Europe.

U.S. Health Care and Long-Term Deficit Scare Stories

My earlier comments about the how projections of rising health care costs are driving the horror stories about the long-term deficits prompted a number of comments. I will make a few quick points by way of response.

Job Numbers for Nerds (and Good Reporters)

As has been widely reported, the July job numbers came in somewhat weaker than expected, with job growth of just 113,000. This is the fourth consecutive month in which job growth has hovered near 100,000.

However, the actual picture may be somewhat worse than the official data show. The reason is that the Bureau of Labor Statistics (BLS) may be imputing too many jobs into the survey for new firms that are not included in their sample.