Fox News Channels Heritage-Quality Research

The Heritage Foundation lists Tim Kane as its expert on labor economics. Fox News shows once again that “fair and balanced” reporting means Bush cheerleading:

Leave aside the fact that jobs are only one of the measures of economic performance. The rapid growth rate in GDP, stable inflation, a housing boom, and world-beating productivity growth are all just as important and are clearly successes for Bush. But even if jobs are the sole measure, Bush’s first term is still one of the best ever. First off, the Bush years ended with more Americans working than ever before. The answer is clouded, however, by a lingering controversy over which of the two Labor Department surveys mentioned above is the best measure of job creation. The payroll survey, which polls employers, indicates a razor-thin gain of 120,000 jobs between January 2001 and January 2005. The household survey, which contacts workers directly, indicates a net increase of roughly 2.5 million employed. Which is correct?

First of all, average annual real GDP growth of only 2.5% is weak especially if labor productivity growth has been strong. With high productivity growth but weak output growth, one would expect a weak labor market. Kane continues:

In 2002 and 2003, payrolls were stuck in a “jobless recovery” while the number of working Americans grew by 2 million, according to the household survey. Last summer, the disparity between surveys was so big that the Labor Department had to publicly defend its payroll survey. The household survey said employment was up by 629,000 in July 2004, while payrolls grew a meager 32,000 … Payrolls began their recovery in August 2003, and since then the two surveys seem generally in sync. This doesn’t mean the controversy is over. Something important happened to make the two surveys diverge before August 2003.

Kane wants us to believe that the payroll survey is a poor measure of employment growth, while the only problem with the household survey is short-term noise. Odd that he forgot to mention that the 629,000 jump in the household survey figure in July 2004 was simply amending for the low reported growth even as the payroll survey showed strong month-to-month growth. Both series showed 1.1 million new jobs from January 2004 to July 2004.

As far as “something important happened to make the two surveys diverge before August 2003″, consider the following. Reported employment appears to have jumped by more than 1 million from December 2002 to January 2003. However, the employment to population ratio barely increased from 62.4% to 62.5%. Reported population jumped by 1.156 million from December 2002 to January 2003. It seems that Kane has also ignored this footnote in the BLS table that reports the Household Survey:

Data affected by changes in population controls in January 2000, January 2003, January 2004, and January 2005.

Also note that the employment to population ratio was 64.4% in January 2001 and was only 62.4% in January 2005. Given the attention we have paid to this problem as far as using the Household Survey to gauge employment growth over the years, how can anyone who purports to an authority on labor economics ignore this point?

For more of his writings on this issue, see this paper, which includes this gem:

The big shock today was the drop in the unemployment rate to 5.2 percent, an excellent indicator of real strength in U.S. labor markets.

Does Kane not realize how much the labor force participation rate has declined? We could have turned to the nitwits from the National Review for a better discussion than this. But then an honest analysis would no more likely be aired on Fox News than it would be accepted for publication in the National Review.