NRO’s BuzzCharts: Clinton Years Were Highly Profitable

Jerry Bowyer has produced some incredibly bizarre spin with his BuzzCharts rants with the latest being an attack on something Paul Krugman recently wrote (surprise). These BuzzCharts might provide great examples of how to lie with statistics, but the latest chart seems to say something other than what Jerry wrote:

Although BuzzCharts does not believe that the entire Clinton economy was a bubble, the last year or two clearly were. The jobs explosion was not financed with new profit, as it was in the past. It was paid for with old savings. Dotcoms were spending down pension-plan money mediated through venture-capital firms, and they weren’t creating new profit through each employee hired. Corporate profits per payroll job in 1998 were $14,928.90. Corporate profits per payroll job in 2004 were $21,593.51.

When I first glanced at his chart, two thoughts struck me: (a) how would this look in inflation adjusted terms; and (b) how much of the late 1990’s decline in his ratio was due to surging employment and how much of the rise after 2001 was from falling employment. But then I looked at his numbers and thought that the 1998 after-tax profits per payroll job were quite high. BEA reports that after-tax corporate profits were $469.96 billion for 1998 and BLS reports payroll employment that averaged 125.924 million for 1998. So Jerry’s number is four times what it should be. Did he take the quarterly flows (annualized) and sum them – rather than average them?

Now back to my original query – just one comparison. Note how Jerry displays nominal profits per job being higher in 2003 than it was in 1997? If one adjusts for inflation, real profits per job were lower in 2003 than they were in 1997. Real profits did rise but only by 4.3%, while employment rose by 5.9%. Of course, the reason why employment rose by so little has more to do with the decline in employment after March 2001.

Update: Krugman’s “A Whiff of Stagflation” can be found here. It features a very good discussion of the continuing weakness in the labor markets. Maybe I should thank NRO for pointing Dr. Krugman’s op-ed out. I do need to catch-up with his writings as well as the excellent materials on health care that AB and Kash have been providing!