The Associated Press's choice of a headline to accompany business writer Stan Choe's Saturday morning report on the state of the economy — "MAIN STREET HOLDS UP AS WALL STREET STRUGGLES, FOR A CHANGE" — has a couple of interesting implications.
Is AP celebrating the fact that Wall Street is struggling? Or does the idea that "Main Street" is holding up "for a change" mean that it hasn't been doing so for the past seven years? (Or both?) In any event, the AP's Choe used recently published data cooked with heavy doses of seasonal adjustments to support his "Main Street is okay" contentions, but without using the "seasonally adjusted" descriptor, thereby misleading readers and subscribing media outlets into believing that the situation out in the real world is far better than it really is.
Here are early excerpts from Stan's stinker (bolds are mine):
MAIN STREET HOLDS UP AS WALL STREET STRUGGLES, FOR A CHANGE
Wall Street is hurting, and Main Street doesn't care. It's got burgers and cars to buy.
Big losses in stock markets around the world this year have the wingtip-set fretting, but regular consumers across the United States are confident enough to open their wallets and spend more. It's an about-face from the early years of the economic recovery, which began in 2009, when stocks and big banks were soaring but many on Main Street felt like they were getting left behind.
Trust us, Stan; it's not just a "feeling."
Continuing (numbered tags are mine):
For now, though, Main Street continues to trend upward. Only 13 percent of the U.S. economy depends on exports, and the rest of it - which is mostly consumer spending - is still growing, albeit slowly. [1]
... Retailers around the country are seeing something similar. Shoppers bought more autos, clothes and other items last month, [2] even though the S&P 500 in that span had its worst week in more than four years. U.S. retail sales rose 0.2 percent during the month, [3] beating analyst expectations.
... Employers continue to add jobs, particularly in the retail and health care industries, and the unemployment rate is at an eight-year low. Job growth did slow last month, but economists say that just balances out the big surge in hiring at the end of last year, and they're still forecasting more gains. [4]
Even more importantly, wages are trending higher. [5]
... "The first half of an economic cycle is when markets tend to best, and that's when Wall Street gains on Main Street," (chief equity strategist at Nuveen Asset Management Bob) Doll says. "The second half is when labor gets an increasing share of GDP, and that's just starting." [6]
Notes:
[1] — Well, if only 13 percent of the economy depends on exports, why has the go-to excuse in the business press for the year-long string of consistently weak reports on durable goods orders and shipments, wholesale sales, and manufacturing and trade sales almost always been the "weakening world economy" and the "strong dollar"? The answer is that the press has been engaging in misdirection. The domestic economy, independent of the worldwide economic situation, has not been and continues not to be particularly strong at all.
[2] — Without employing the term "seasonally adjusted" — a term that is nowhere in Choe's report — his claim about increased purchases of autos, clothes and other items in January compared to December is a fantasy, as seen below:
The red box shows that January' overall sales were almost $112 billion (22 percent) below December's. That would be expected, as December is the height of Christmas shopping season.
But Stan Choe apparently wants readers who have no idea that data is adjusted at all to believe that January's actual sales were greater than December's. That's what we must assume, because in a roughly 950-word report, he failed to use the two words — "seasonally adjusted" — which would have made matters crystal clear.
Choe's failure makes the following statement from his report, broken down, utterly ridiculous (the framework he used is obviously a January to December comparison, because he cited the 0.2 percent January vs. December seasonally adjusted — again, not labeled — retail sales increase):
- "Shoppers bought more autos" — As seen above, shoppers spent $11.7 billion less at auto dealers , obviously meaning that they bought fewer autos.
- "(Shoppers bought more) clothing" — They bought 47 percent as much clothing at clothing stores, while department store sales dove by 46, percent. This is doubly ironic because the big complaint about the weak Christmas shopping season was that the weather was too warm, and that consumers refrained from buying cold-weather clothing as a result. Then January's related figures dropped off by larger percentages than seen in previous December-January time periods.
- "(Shoppers bought more) other items" — no category listed shows an increase.
[3] — Now let's look at that supposedly good-news item about January's (seasonally adjusted) sales increase. It's hokum, as this table showing the past four years actual December-to-January sales declines and their seasonal conversions will demonstrate (more underlying detail is here):
Regardless of whether the seasonal calculations were technically done correctly, the idea that the worst sales decrease on the list led to a positive result — a result almost as strong as the one involving a 3.3-point smaller decline — is absurd. January's decline, especially following a December which everyone acknowledges was not strong, even after revisions, would have been expected to lead to a seasonally adjusted decline of about 1.9 percent.
[4] — Demonstrating how journalistic failures compound on themselves. In a Tuesday NewsBusters post, I noted that the 2.989 million in raw (i.e., not seasonally adjusted) jobs lost in January was the third-worst figure in 77 years of monthly government recordkeeping, exceeded only by January 2008 and 2009. Instead of seasonally adjusting to the reported +151,000, one could reasonably have expected a reported seasonally adjusted loss. Now Choe is using misleadingly adjusted data to make yet another bogus claim, i.e., that there will be even "more gains." You can't have "more gains" when you're building on a loss.
As to the "balancing out" Choe claims, that's bogus too:
Balance, schmalance. Actual net jobs lost from November 2015 through January 2016 were 211,000 higher than last year. That's not a small difference. The most recent net loss is just barely escaped being the worst in the entire five-year list.
[5] — As I also noted on Tuesday, January's 12 cents per hour increase in seasonally adjusted hourly wages followed a flat December. 12 cents in two months is not impressive. Additionally, January's number was likely influenced by the dreadfully large 3 million in raw job losses. Those let go were most probably lower earners, meaning that higher earners were still on the job. That doesn't mean that those who were still working got much, or even anything, in the way of pay increases. So we really have no proof that "wages are trending higher."
[6] — The only way labor's share of GDP will increase is if GDP itself significantly increases. That certainly didn't happen in the fourth quarter, and there are serious doubts about whether it will happen this year.
The government's first estimate for the fourth quarter came in at only an annualized 0.7 increase. Generally overoptimistic Mark Zandi at Moody's believe it will be adjusted down to between 0.0 percent and 0.5 percent in the February or March revisions.
This year, if you believe the consensus, full-year growth might be 2.5 percent. The track record of these forecasts in previous years during the Obama years has been that actual results have generally come in lower. Despite what Mr. Doll says above, evidence that significant wage increases are "just starting" is sparse.
Thus, several core claims Choe has made is in pieces. Retail sales are not growing. Hiring has from all appearances significantly slowed, and there's no strong evidence that strong wage increases are taking hold. As a result, the other positive points he's trying to make — that people have more money to pay their bills, and that home values are rising — are at best peripherally positive, and more likely virtually irrelevant.
But he did a great job of pretending, didn't he? It's a perfect report for a "reporter" at the Associated Press, aka the Administration's Press.
Cross-posted at BizzyBlog.com.
