Heritage Foundation’s Misleading Chart
In my ongoing (and largely empty) search to find empirical evidence for the role “policy uncertainty” in slowing hiring, a reader challenged me by sending me this link to a Heritage Foundation report. It was fairly shocking at first how clearly it seemed to show that the passage of Obamacare coincided with the economic recovery “stalling.”
James Sherk writes,
Within two months of Obamacare’s passing, the recovery stalled. Figure 1 shows net private-sector job creation from January 2009 onward. The red line shows the trend in job creation before and after April 2010. Private-sector job creation improved by an average of 67,600 jobs per month before April 2010. That month, private-sector employers added 229,000 net jobs.
As Sherk admits, this is only a correlation not causation but, he writes, “the fact does lend strong weight to the voices of businesses who say that the law is preventing hiring.” It seemed to be at least suggestive evidence of the “policy uncertainty” theory. Yet, my skepticism led me to think about this graph a bit further.
Notice that before around January of 2010 the line graph dips below 0. Although the “trend in job creation” is upward, what that graph actually shows is the economy is losing private sector jobs just at a slower rate from earlier months. Former Bush advisor, Keith Hennessy, had previously criticized Austan Goolsbee for a similar tactic with arrows. (I discuss that video here) The Heritage Foundation even approvingly links that video so they understand what they’re doing.
If you instead look at this bar graph of private sector job creation you can see more clearly what’s going on.
I’ve added in an arrow for April – the month that supposedly shows the beginning of the lower trend for job creation due to Obamacare. But now we see that after Obamacare passed we were gaining jobs while before it we were losing jobs. I’m certainly not claiming causation. I’m merely pointing out the obvious fraud that James Sherk and The Heritage Foundation are trying to get away with here.
[update July 22]: A few other bloggers have noticed them same thing I did about Heritage’s deceitful report. Their pieces are worth reading too. Funny enough, I actually checked all these blogs when I was first sent the Heritage link. Glad they joined the party to expose the propaganda.
Modeled Behavior Kevin Drum Matt Yglesias
[update September 13]: I’m happy to see that this post has been cited frequently in numerous online forums. Unfortunately, I’ve noticed that some confusion continues around the change in “trend” in private sector employment before and after the passage of Obamacare. The trend cited by Heritage is purposefully misleading; we were not gaining an average 67,600 before April and then 6,400 afterwards. Repeat: Net change in jobs is not the same thing as job growth. I looked up the private sector job numbers for the dates in the graphs (Jan ’09 – Jun’11) and calculated the average monthly change in private sector employment before and after Obamacare, which is what everyone seems to think the Heritage graph shows.
Before Obamacare the monthly change in private sector employment was an average of about -326,000 jobs a month. That’s NEGATIVE 326 thousand.
After Obamacare the monthly change was an average of +114,000 jobs a month. That’s POSITIVE 114 thousand.
How’s that for a changing trend?
I’m reminded of how many times I’ve heard criticism of the “lame-stream” media. The truth of the matter is that neo-cons have had to create their own facts in order to insulate themselves from the truth. Reports like this one show that we are not dealing with a think tank. but a propaganda tank.
I am curious as to which sectors were affected. I wonder if it is medical services. If so, we might as well say they are jobs in the public sector since that is the road the medical industry is heading. I know a lot of insurance stock shot up with the introduction of Obamacare.
I don’t claim to know a lot about this issue, but good job with the bar graph. I think if anything these exercises show how graphs and numbers can be manipulated. I prefer to operate by principles, as do a lot of people, I think. Obamacare boils down to an entitlement benefit, people will decide one way or the other based on that and then find numbers that will support their point of view. So yeah, good job with the debunking.
The healthcare industry has been increasing hiring more than most (if not all) sectors. Everyone should always be skeptical of being mislead by stats and graphs. But I worry that people will take that to mean “don’t trust any stats and graphs.” Statistical nihilism is as big a danger as statistical credulity. The best way to combat being fooled is to learn about statistics and economics and to always read competing views.
That’s true. I, of course, am guilty of blowing off graphs if they don’t fit into my paradigm and quick to peddle ones that I agree with, but for the most part I try to take them all in to paint a bigger picture. I think that they are very instructive though, and should lead you to dig deeper. They are also some factors that can be graphed that are so clear cut that there can be little debate as to what is going on.
But I digress. As far as the issue at hand, that bump s pretty definitive. I would like to see someone come up with some other reason that it did that.
Just watched the graph comparison video and your deconstruction. Good stuff. I think the most convincing argument Hennessy brings up is that there were a lot of factors. The one that struck me the most was time. In his revised graph as well as your bar graph it looks like overall the economy has been following a long trend that looks suspiciously like the normal business cycles. It is something that will happen over and over. Whether Keynesian economics is making the valleys shallower and the peaks higher is an almost century old debate. Meanwhile, no matter what, politicians will cast blame for the bad times and claim responsibility for the good times. It’s the same with these trends, generally unprovable.
As such, I think spikes, like the one we see on your graph are generally more informative, but even there it seems obvious (to me at least) that it had little effect on the general trend.
As an aside, job growth has begun to grow less fast. I don’t discount the fact that it is growing, but I do find it disconcerting that it has leveled off so quickly and looks like it is headed toward losing jobs again. I hope that on a longer time line ends up looking like an outlier.
It’s very worrying. And politicians in both parties seemed to have stopped trying. The reality is that employment situation has hardly improved at all – we’re treading water basically: http://research.stlouisfed.org/fredgraph.png?g=1dA
I think we should do something about the long-term debt as much as the next guy, but not at the expense of ignoring our current economic problems. The biggest disappointment in all of this is the Fed, which doesn’t have the same hurdles to action that our political institutions have. A better monetary policy could do a lot to speed our recovery.
I totally agree. Fiscal policy is a sledge hammer that takes at least six months to wind up and strike down whereas the effects of monetary policy can be felt the same day.
That being said, I am all for a deal that will cut debt, and cut spending any day of the week. Call me old fashioned, but I start feeling sick to my stomach when I think about how much money gets thrown away on interest payments. I expect the same fiscal responsibility from my gov’t as I practice in my home.
Argh, I must diverge. The government and a home are too different to analogize between. I don’t want to get too off topic from my original blog post so I’ll leave it there. Maybe I’ll cover that in another post.
I am just saying that there are general principles that should be used to practice fiscal responsibility. If you need to leverage some debt for awhile to improve conditions, that’s fine, but the who idea of gov’t spending (to me at least) is that you spend when you have to, but tighten the belt during times of plenty to replenish the stores. The problem i have with most gov’t spending programs is that they are so often entitlement programs that don’t go away and so when the next downturn happens, we are caught with our pants down.
So I looked that graph (http://research.stlouisfed.org/fredgraph.png?g=1dA) and if you don’t mind me throwing a correlation out there, I find it interesting that the drop-off coincided with unemployment extensions. Funny how when less people are working the economy tends to dive. But I don’t really want to get into a chicken or the egg debate. Obviously there are bigger players then some benefits, but I can’t see how that would help.
My actual theory is that there are too many people play WoW and living in their parents’ house.
What is clear is that wages have been stagnant since the mid 1970′s and that income inequality is increasing. I attribute this to the weakening of the new deal policies that have been occurring since the 1970′s. We need to return to policies that promote the middle class and not some top down coalition that we been pursuing for the last 30 years.
How can one legitimately compare net change in jobs with private sector employment?
Are these not actually two distinctly different cohorts?
And what is the latter? Since April 10 4 of the 16 months have seen “private employment” exceed 200,000. Really?
The 2nd graph is also showing the change in private sector jobs. It shows “monthly change in thousands.” I can compare them because they are showing the same thing – one is a line graph, the other is a bar graph.
Respectfully, I think not. The bar graph plots change, not the net change depicted in the line graph.
Feel free to look at the numbers in each graph by month: they’re the same numbers. Each graph is illustrating the change in private sector jobs each month.
You’re welcome to play around with the raw numbers and graphing tools at the St. Louis Fed if you don’t believe me. Plug in the dates, alter the “units,” and then switch back and forth between bar and line graph and you’ll see the same trends (with more up-to-date numbers) we see in the two graphs in my post.
Thanks for reading.
You are, of course, correct- the data are the same. However, the line graph’s rate of change add a flavor that the other doesn’t.
But enough. Thanks for tolerating my amateurish thoughts.
No worries, just glad I could clear everything up. Hope you keep reading whether you disagree or not.