What’s in the water in the WSJ’s Op/Ed offices? I don’t want to make a habit of this, but yesterday’s page just begged for a response.
George Melloan had a commentary titled ‘I Read the News Today, Oh Boy’. Its main premise is that the news tends towards sensationalism, scaring people to sell papers and generate ratings. We should therefore all relax:
"Looking back into both the recent and distant past offers support for this thesis. Hurricane Katrina was of course a big disaster, flooding large numbers of Louisianans and Mississippians out of their homes and businesses, causing an estimated $35 billion in insured property losses, severe damage to the Gulf-centered oil and gas industry and nearly 1,000 deaths. Yet the U.S. economy only hiccupped, as was made plain by last Friday’s report of only a slight decline in employment in September." (emphasis added)
Let’s just look at two problems with that paragraph:
1) Drill down beneath the headline of the Employment report, and its clear how false Mr. Melloan’s statement is:
"In the payroll survey, employed persons are those who receive pay for any part of the pay period that includes the 12th day of the month. Therefore, people who were on payrolls in the aftermath of Hurricane Katrina were counted as employed even if they were absent from work."
Let me translate that for you: If your office, firm or business was wiped off the face of the earth, buy you still were paid on the September 12, you were not considered unemployed by BLS. And, we know that many of the big employers in the region did not want to simply cut their employees loose. Many made efforts to keep paying them for a few more weeks, and that period included the key BLS date of 9/12. And then they slipped off the payrolls.
In other words, we have yet to see a full accounting of all those who
lost their places of employment and jobs post-Katrina in either the
establishment of household surveys. These folks will end up in the October NFP data.
While many firms made heroic efforts to find and relocate displaced persons to work in other locations, this amounted to only a small percentage of the estimated 400,000 people who lost their jobs. While they have not fully shown up in NFP, they have impacted the new unemployment claims data (see chart below) — something notably omitted from Melloan’s comments.
New Jobless Claims
2) Its four weeks after the Katrina; Do you believe that we know,
and have actually felt, the full economic impact of the disaster? That
assesment is quite premature. For example, we saw natural gas prices
spike, and the home heating season (for most of the country) has yet to
begin. Isn’t it remotely possible that the price rises will be felt
acutely by middle income consumers, who then throttle back their
This isn’t an alarmist perspective, its a very realistic
expectation that significantly increased energy expenses will crimp
Bottom line: The great irony here is a column lamenting sensationalist news is filled with such weak analysis and bad data. Its almost funny, in a pathetic kinda a way.
I gotta revert back to my decades old practice of not reading these WSJ Op/Eds, and sticking to the otherwise fine journalism in the rest of the paper. These commentaries will end up costing unwary investors boatloads of money.
I’m going to make sure none of it is mine.
‘I Read the News Today, Oh Boy’
GEORGE MELLOAN, GLOBAL VIEW
WSJ, October 11, 2005; Page A17
My question Barry, is this: if everyone knew the jobs data was not going to include the full impact of Katrina, why did they have their jobs numbers so low/negative? Were they all just wrong about when the data from Katrina was going to be included? It’s just wild to me that all the economics at the major banks had the number at -200k…any thoughts would be greatly appreciated.
the op/ed of the WSJ is like the unfortunate chronic halitosis of an otherwise desirable kind and well informed friend. forgivable, in that it can be easily avoided.
One side effect I don’t see mentioned is insurance companies. Won’t they have to sell a lot of stocks and bonds to meet their huge obligations?
I saw the same article and felt the same way. WSJ is a superb paper so long as you avoid the last spread in the first section…
I’ve been telling friends for at least 15 years that the WSJ is a great paper…..if you avoid/ignore their op-ed page.
Glad to see someone with a much wider audience (Barry R.) writing much the same.