USA Today Email Understates Durable Goods Disaster; Linked AP Report Makes Excuses For Day's Awful Econ News
Apart from bias, which is obviously the bigger problem, the establishment press's tendency towards unforced errors in business news reporting has grown over the past several years.
So when I received the following email from USA Today this morning (available here without subject line), I thought it surely must be mistaken. Well, the item I thought was a mistake wasn't one, while the one I thought was probably okay understated the underlying catastrophic news. Clarity follows the jump:
The email concerns today's disastrous durable goods report from the Census Bureau:
Surely nondefense aircraft orders didn't disappear and then some, right?
Oh yes they did:
Yes, that is a decline of 101.8% for new aircraft orders from $19.199 billion to -$0.346 billion, representing net cancellations on a seasonally adjusted basis. The raw (not seasonally adjusted) numbers indicate that net new aircraft orders were a "whopping" $33 million. Either way, net new order activity in the sector ground to a virtual halt in August.
Concerning the bigger picture, the email's claim that today's report had "the biggest monthly drop since January 2009," while correct, is not the big news. As seen in a graph at Zero Hedge, the absolute level of durable goods orders is the lowest seen since December 2009 or possibly January 2010, making the report a sort of economic Groundhog Day, almost three years after the original.
As to the economy as a whole, two of Friday's three major economic reports, the just-noted durable goods and second-quarter economic growth, which was revised down sharply from an annualized 1.7% to 1.3% (when no change was expected) were disasters, while the third and arguably least important showed that initial unemployment claims dropped from an upwardly revised (of course) 385,000 during the previous week to 359,000 (pending yet another virtually inevitable upward revision next week).
USA Today's email currently links to an unbylined Associated Press report at McPaper's web site which contains a koolaid drinker's headline, a heavy dose of economic excuse-making, a round-down of the disastrous percentage drop in aircraft orders, and an obvious factual error:
Slew of economic reports paint mixed view of economy
The economy grew at an even more sluggish pace last quarter than previously believed as a severe drought slashed farm production in the Midwest. The economy's GDP, the broadest measure of its health, grew at an annual rate of 1.3%, revised down from an earlier estimate of a 1.7% annual pace, the Commerce Department said Thursday.
An even bigger surprise on the economic front Thursday was a report showing that orders for long-lasting durable goods plunged to its lowest level since January 2009, when the economy was in recession. (This statement, which I originally thought was correct, is not; it's the worst one-month drop since January 2009, but, as seen here, it's the lowest level since December 2009 or possibly January 2010. -- Ed.)
Durable goods orders dropped 13.2% in August, Commerce said, after rising 3.3% in July. Most of the huge decline was due to a 101% drop in aircraft orders, which can cause the economic indicator to swing wildly from month to month.
Economists tend to pay more attention to core capital goods, which signal investment plans. Those orders rose 1.1%, the first increase since May, although it follows steep declines in the previous two months.
One hopeful sign: The number of Americans seeking unemployment benefits plunged 26,000 last week to a seasonally adjusted 359,000, a hopeful sign for the job market. It's the lowest level of weekly applications in nine weeks.
A more reliable measure of the job market's health, the four-week moving average of jobless benefits claims, dropped 16,000 to 374,000, the Labor Department said Thursday. It was the first drop in six weeks.
The word "drought" does not appear in the government's official GDP announcement or in the full report with tables. It's reasonable to believe that administration apparatchiks fed this excuse to reporters, who as dutiful stenographers took the claim at face value without questioning its legitimacy. The latest available data from 2010 shows that "Farms" comprise 0.9% of GDP ($132.6 billion divided by $14.5265 trillion at link). As truly bad as things are in that sector, the idea that it's the dominant reason why GDP growth fell so steeply in its final revision seriously strains credulity.
As to the supposed drop in the 4-week moving claims average,
the Labor Department's announcement clearly states that "The 4-week moving average was 374,000, a decrease of 4,500 from the previous week's revised average of 378,500." I have no idea how the AP reporter involved could have committed such an error, but I do know why the deceptive headline and excuse-making are in there.
Maybe it's me, but it seems that blatant reporting busts such as these go overwhelmingly in the direction of making things seem not quite as bad as they really are.
Cross-posted at BizzyBlog.com.