NYT Article on App Economy Understates Jobs Impact

As most of you know, I spent years as chief economist and lead economics writer for BusinessWeek. And I have utmost respect for the difficult task that journalists face under deadline pressure.

Having said that, I feel that the NYT article As Boom Lures App Creators, Tough Part Is Making a Living understates the jobs impact of the App Economy in three ways.

First, the article notes that the App Economy “was responsible, directly and indirectly, for 466,000 jobs,” as of the end of 2011, based on a February 2012 study that I did for Technet. However, an October 2012 report entitled The Geography of the App Economy, done by myself and Judith Scherer, showed 519,000 jobs in the App Economy as of April 2012. It would have been much more accurate for the reporter to have cited the more recent–and larger–estimate of App Economy jobs.

Second, it’s certainly true that App Economy entrepreneurs are not all successful, just like entrepreneurs in other fields. However, “The Geography of the App Economy” paper makes it clear that large companies are hiring droves of app developers in-house to create and maintain apps, listing quite a few by name. That paper identified 10 different categories of App Economy jobs, only one of which consisted of the stand-alone app developers that the NYT article focuses on.

Entrepreneurs know that startup businesses typically take at least 3-5 years to make a profit. How long were the entrepreneurs they interviewed in business? And the skills and experience these people develop in their own ventures make them more appealing to be hired at large salaries by more established companies. Indeed, the article notes in passing that one of the entrepreneurs was then able to get a job as a app developer working for a larger company.

In our research, we have found that one of the biggest problems facing App Economy entrepreneurs is that they are competing with large companies for the same talent pool of skilled computer software engineers, user interface designers, and others with app economy skills. In this industry, talent is the most important input, wages are high and rising, and there’s more demand for these skilled individuals than there is supply.

Finally, the NYT article ignores the positive impact of the App Economy on state and local economic development. In an upcoming paper, South Mountain Economics will look at the ways that some leading states and cities are trying to attract app developers and other innovative companies as the foundation for growing their economies. These innovation-minded economic development efforts will turn out to be crucial for economic success going forward.

Misinterpreting Data: How the WSJ Got the Wireless Jobs Story Wrong

On July 17 the online edition of the WSJ published a widely-cited story entitled Wireless Jobs Evaporate Even As Industry Expands. The main point of the story  (my emphasis):

In May, on the heels of a record year for industry revenue, employment at U.S. wireless carriers hit a 12-year low of 166,600, according to U.S. Labor Department figures released earlier this month. That’s about 20,000 fewer jobs than when the recession ended in June 2009 and 2,000 fewer than a year ago. While the industry’s revenue has grown 28% since 2006, when wireless employment peaked at 207,000 workers, its mostly nonunion work force has shrunk about 20%.”

In addition, the Journal digs further into the official data and claims that:

The number of customer-service workers at wireless carriers dropped to 33,580 last year from 55,930 in 2007, according to the Labor Department

Seems like a pretty straightforward story, doesn’t it?  The Journal is quoting directly from authoritative BLS data to demonstrate that the  wireless industry has been losing jobs, despite the mobile boom. The big picture message: Innovation does not equal job growth.

Unfortunately, the reporters and editors at the WSJ  fell into the same trap that has ensnared many other journalists, policymakers, and even economists. They looked at the label on a piece of official economic data, and assumed that they understood it.  But as we saw during the financial crisis and subsequently,  government economic data can all too easily be misinterpreted.

In this case,  the article was based on the Journal’s analysis of jobs in the “wireless telecommunications carrier industry,”  as defined by the BLS. However,  despite the name of the data series, it turns out that:

  • The BLS definition of the “wireless” industry does not include company-owned  retail stores or stand-alone company-owned call-centers.
  • The customer service numbers cited do not include  company-owned retail stores or stand-alone company-owned call centers.
  • The 2007 occupational data in telecom cited in the story cannot be compared with later years, because the telecom industry classifications in the occupational data were substantially redone in 2008.

As a result:

  • The data cited in the WSJ article completely misses the growth of jobs at company-owned retail stores (see Metro PCS chart below)
  • The data cited in the WSJ article potentially misses call center job growth such as the expansion of Verizon’s Nashville call center (see example below)
  • The phrase “employment at U.S. wireless carriers hit a 12-year low”  simply cannot be supported by the available data.  Data from the industry trade association (CTIA), which shows wireless employment up 36% since 2000, is much more plausible (see chart below).
In my view,  the WSJ article is a classic case of misinterpreting official statistics.

Before getting into the details, why am I taking the time and trouble to disassemble this particular article?Historically innovation and job creation have been closely linked, as I have argued in multiple papers and articles. With Washington now fighting tooth and nail over the budget, it’s very important for policymakers to understand that successful innovation creates jobs, not the opposite.

Second,   journalists, policymakers, and economists need to understand how easily government statistics can be misinterpreted.  For example, the statisticians at the BLS have reported huge U.S. productivity gains over the past decade, including the years following the financial crisis–a fact that has been duly repeated by journalists and applauded by economists.  However, in a recent paper, Sue Houseman of the Upjohn Institute and I argued that these reported U.S. productivity gains could be interpreted, in part,  as  an increase in the efficiency of global supply chains.  It matters enormously for jobs and wages whether productivity increases are coming from more efficient domestic operations, or more efficient offshoring.

Or consider  consumer spending.  Journalists regularly report that  “consumer spending accounts for 70 percent of economic activity.”  (see, for example, this recent Associated Press story that ran on the New York Times website). However this number,  calculated by dividing consumer spending into GDP, is pernicious nonsense. Nonsense,  because consumer spending includes a big chunk of  imports, which does not correspond to economic activity in the U.S.  Pernicious,  because it perpetuates the fallacy that the U.S. cannot recover without gains in consumer spending (see my blog post on the subject here).

Details

Now let me turn to the details of the WSJ’s mistake, or if you’d like, misintepretation.  The WSJ analyzed BLS jobs data for the “wireless telecommunications carrier industry”, (with the NAICS  ID 5172). That data looks pretty bleak (if you want to download the data for yourself, instructions are at the end of this post).

However, the WSJ apparentlydid not realize  that the BLS collects industry employment by establishment, not by company. The BLS defines an establishment in this wa:y

An establishment is an economic unit, such as a farm, mine, factory, or store, that produces goods or provides services. It is typically at a single physical location and engaged in one, or predominantly one, type of economic activity for which a single industrial classification may be applied.

Whenever possible,  the BLS assigns each establishment to an industry, and counts all the employment at that establishment at part of that industry.

Viewed from this perspective, a single wireless carrier, such as Verizon Wireless or Metro PCS,  will typically include several different types of establishments, each of which will be assigned to a different industry.

  • Wireless operations are in NAICS 5172 (“Wireless telecommunications carriers”)
  • Company-owned call centers are in NAICS 56142 (“telephone call centers”)
  • Company-owned retail stores are in retail trade, probably NAICS 443112 (“Radio, TV and electronics stores”)
  • Mobile tower and base construction could be in NAICS 23713 (“Power and Communication Line and Related Structures Construction”)
There might even be more different types of establishments in the wireless industry…it’s hard to tell.

This has several implications. First, retail expansion by wireless providers is counted in the retail trade industry, not  the BLS “Wireless Industry” numbers that the WSJ used.  This is true even if the store is carrier-operated.

For example, the tremendous expansions of retail stores by Metro PCS  in recent years, with added jobs,  did not show up in the WSJ data (for a related example,  employees at Apple stores are counted in the retail industry, not the computer industry).

Second, to the degree that wireless carriers are expanding stand-alone call centers, those additional jobs are not being picked up by the WSJ data.  We don’t know exactly how many there are, but we do know that overall national employment at telephone call centers have been rising, surprisingly enough.  It’s likely that the expansion of the wireless industry is a factor in that rise in call center employment.

We also know that at least some wireless telecom companies have been hiring at their call centers. For example, it took the work of five minutes to find this example of Verizon hiring workers for a call center outside of Nashville. Here’s an excerpt from the July 1, 2011 story in the Nashville Post:

Verizon Wireless has announced via Facebook and Twitter that it will expand its Sanctuary Park Center of Excellence Loyalty Retention Center by opening an office in Franklin. The company plans to add some 300 jobs in the Franklin area over the next 18 months.

“We’re excited about this expansion for several reasons. It allows us to continue to provide customers with the high quality of service they expect from Verizon Wireless,” said James Nelson, associate director of customer service. “It’s also great to be a source for new job opportunities – especially in this economy.”

Further, the company said, “Many of the thousands of calls handled by LRC representatives each month are from customers requesting to discontinue service. It is their responsibility to convert as many of those disconnect requests into satisfied customers.”

The company ran its first training sessions in May and plans to begin taking calls at the center starting July 5.

I didn’t research this example any further. But it looks like these new call center jobs are not counted in the BLS data that the WSJ was using.

Finally, those customer service figures that the Journal made such a big deal about. Let me repeat the quote from the Journal story.

The number of customer-service workers at wireless carriers dropped to 33,580 last year from 55,930 in 2007, according to the Labor Department

Actually, that sentence is not correct as it stands.  The WSJ is citing occupational data pertaining to the “wireless” industry as defined by the BLS (NAICS 5172).   By definition, the WSJ’s figure for customer-service workers excludes  company-owned stand-alone call centers (like the previous example for Verizon Wireless). As a result, the figures cited by the Journal are absolutely useless for determining whether  wireless carriers are hiring or firing customer-service workers.

Just to add insult to injury, there’s a subtle twist that no reporter could be expected to know.  Buried deep in the documentation, the BLS explains that:

In 2008, the OES survey switched to the 2007 NAICS classification system from the 2002 NAICS. The most significant revisions were in the Information Sector, particularly within the Telecommunications area.

The implication is that telecom occupational data from 2007 simply cannot be compared to later years (I believe that the BLS would agree with that, if asked).

What’s the bottom line here? Let me show you again the chart of the jobs in the  BLS “wireless industry” (the data the WSJ used), and compare it to the survey of wireless industry employment done by CTIA, the wireless industry association.

The industry association figures-rose by 46% from 2000 until 2008, before dipping by 7% from 2008 to 2010.  By contrast, the BLS “wireless” data, which does not include call centers, retail stores, and tower construction, rose by only 8% from 2000 to 2008. Now, honestly, in the middle of a wireless boom of historic proportions, which figure do you think is more likely to reflect “employment at wireless carriers”, the phrase used in the WSJ story?

Now, that brings me to my final ethical question: Does the Journal have an obligation to run a retraction or a corrective story?  The article did not slander or libel anyone, and the reporter used the government statistics in good faith.  However, because the statistics did not mean what the Journal thought they meant, the story is filled with statements which leave readers with the wrong impression.  The typical reader  would read the story and naturally conclude that the phrase ” employment at U.S. wireless carriers hit a 12-year low”  referred to the number of workers who receive paychecks from Verizon Wireless, Metro PCS, the wireless part of AT&T, and the like.  But as we have seen, that phrase is based on government figures that only reflect a portion of wireless carrier employment.

More importantly, the story’s big picture conclusion–that innovation does not equal job growth–is not supported by the statistics. In this era of distrust of the press, should publications make an effort to clarify the record if their original story is faulty?

 

 

Coda: How to Get the Government Data that the WSJ used

 

Go to  http://www.bls.gov/data/#employment

Click on “Employment, Hours, and Earnings – National, Multiscreen data search”

Check ‘Not seasonally adjusted’, and click on ‘next form’

Scroll to ‘information’, and  click on ‘next form’

Click on ‘all employees, and  click on ‘next form’

Scroll to “wireless telecommunications carriers (except satellite)”, and  click on ‘next form’

Click on ‘retrieve data’

The data for customer service representatives in the wireless industry in 2007 can be found at

http://www.bls.gov/oes/2007/may/naics4_517200.htm#b41-0000

Fox vs CNN

I don’t usually do media criticism. But flipping channels on the Japan earthquake meltdown coverage, I  have to say that Fox was just so much more watchable and informative than CNN.  The CNN anchors and reporters spent an awful lot of time congratulating each other, and they often sounded ill-informed. The Fox folks drilled right in on the information and the pictures, and I felt like they were focused on the event rather than themselves.  (I was watching the feeds at my Los Angeles hotel).

BTW, I did not evaluate MSNBC or CNBC.

Coming Event: “Interpreting the Economic Statistics in the New Global Economy”

This morning the retail spending statistics for December came out, and once again a large number of journalists got it wrong.  By repeating the incorrect  statement “consumer spending is 70% of the economy”, they are implicitly supporting the notion that business investment plus exports plus government only account for 30% of the economy altogether.

So rather than call out journalists by name this time, I’ve decided to be constructive.  I’m going to give a free seminar in DC on “Interpreting the Economic Statistics in the New Global Economy.”  I’ll cover:

*Why consumer spending is *not* 70% of the economy

*What really will drive growth

*The real difference between consumption and investment

*How to interpret the trade statistics

*What indicators are  signs of real recovery.

*and more

If people are interested, drop me a note at mmandel@visibleeconomy.com.  It will probably be in early February. If there’s enough interest, I’ll give one in NYC as well.

VisibleDeficits: News and Education

A year ago I started a venture dedicated to one goal:  Producing news  that is also educationally sound.  Or, if you like, producing educational materials that also have real news value. 

News is typically fast-paced, timely, and engaging—but not always consistent or well-explained.  Education is systematic, consistent, and well-explained—but not always timely or engaging. We—myself and colleagues Damian Ghigliotty, James Fair, Charli James, and Judy Scherer—believe that combining the best features of news and education can create an innovative and compelling view on the world.

Most of our output up until now has been nonpublic–news/education videos for textbook companies and nonprofits (feel free to contact me at mmandel@visibleeconomy.com if you are interested and want to hear more).  

But in our spare moments,  as it were, we put together our first public site, VisibleDeficits (http://www.visibledeficits.com).  VisibleDeficits is a prototype site that shows, I hope, one way of combining the best features of news and education. We picked state and local budget deficits as our opening topic–the ‘seed’ –because of the broadness and relevance of the issue. We will regularly update and expand the material on the site. 

Going forward, we intend to roll out other ‘seeds,’  under the general rubric of News and Education TV.  Seeds can either be news topics, like innovation, unemployment or immigration; or educational topics, like political science, sociology or how to find a job.

We’re very interested in hearing comments, negative or positive, about VisibleDeficits.   And if anyone would like to contribute either news or educational pieces on state and local budget deficits, or suggest potential seeds, that would be great as well.

Finally, great thanks to Damian, James, Charli, and Judy, the people who have actually done the hard work of putting together VisibleDeficits, as well as reporting and producing many other news/educational videos over the past year. They have all done great innovative and original work, breaking new ground in journalism and education.

More evidence for a journalism job rebound

In my previous post, I argued that the journalism job market had plunged, and then rebounded sharply over the past year.  Here’s the relevant chart again:

The newly-released 2009 Annual Survey of Journalism & Mass Communication Graduates  from the University of Georgia completely supports this narrative. The survey discovered that the  labor market for June 2009 graduates was terrible–exactly what my chart shows.

But then, as we went into 2010, things got better,  according to the survey–a lot better. The survey reports that:

Of those graduates returning the survey in November, only 46.5% reported having a full-time job. In May, the rate was 62.8%.

In fact, the survey’s chart 6 looks almost exactly like my chart above.

I think it’s pretty clear that the journalism job market, at least up this point, is bouncing back faster than a lot of other occupations. My best guess is that journalism, broadly defined,  is quickly going to become one of the hot careers.

The Evolution of the Journalism Job Market

As I travel around the country talking about the economy and journalism, I usually make two points. First, the next jobs expansion is likely to be driven by a communications boom (see this paper I did for the Progressive Policy Institute).  Second, we may be headed into a Golden Age of Journalism, where the combination of the falling cost of communications and the high demand for news just opens up all sorts of possibilities for doing journalism in different ways.  (I’ve put my money where my mouth is, starting a new venture, Visible Economy LLC, which does a combination of news and education). 

In this post, I want to look at the evolution of the journalism job market over the past three years.  Back in September 2009, in a previous incarnation, I did two extended blog posts on the journalism job market (here and here). I used data from the Current Population Survey to conclude back then that “there is no convincing evidence yet of a long-term secular decline in the journalistic occupations” (September 2009). 

Now we have nine more months of data, and my conclusion is surprisingly positive.

In terms of jobs, journalistic occupations are outperforming the overall economy.  However, many of the journalistic jobs  are not being created in conventional journalism industries.

Let’s start by looking at a chart (why not? I love charts, and you should too).

Now that’s a recovery!  This chart reports the average number of employed “news analysts, reporters and correspondents” for the prior 12  months  (so the number for June 2010 includes July 2009-June 2010).  These numbers are based on the  Current Population Survey, a monthly survey of roughly 60,000 households conducted by the  Bureau of Labor Statistics and the Census Bureau.  As part of the survey, respondents are assigned occupations on the basis of the “the kind of work the specified person usually does and on a description of his/her most important activities or duties.” (A direct quote from the CPS interviewing manual)

The occupational category of  “news analysts, reporters, and correspondents” includes people who:

—Collect and analyze facts about newsworthy events by interview, investigation, or observation. Report and write stories for newspaper, news magazine, radio, or television.

—Analyze, interpret, and broadcast news received from various sources

So in theory this survey is picking up, with a wide range of statistical sampling error, the number of people who work as reporters and correspondents, whether or not that is their actual title.

What we see here is that after taking a sharp dip, the number of news analysts, reporters and correspondents–let’s call them ‘journalists’ for brevity’s sake, has rebounded sharply.

It’s worth comparing the job performance of this occupational group against the overall population, and against the population of college graduates.

Overall the number of employed journalists, based on the CPS, has increased by 19% over the past three year. Meanwhile, the number of employed college graduates has risen by only 3%, and overall employment, as measured by the CPS, has dropped by almost 5%.

How can the number of employed journalists rise, given that employment in the publishing and broadcasting industries has fallen? Over a comparable time period, employment in newspaper publishing has fallen 26%; periodical employment is down 16%; and radio and television broadcasting is down 11%.

Explanation #1: Journalists are being hired in nontraditional industries. Yahoo, for example, hired Jane Sasseen, BW’s very good Washington Bureau chief, to help beef up politics coverage.  That job likely shows up in the industry “internet publishing and broadcasting and web search portals”, which has grown by 22% over the past three years.  Or take my business, Visible Economy LLC.  We’ve hired three young journalists, but it’s tough to say whether these jobs would show up in educational services or in journalism.

Explanation #2:  Some of the gain in journalist jobs simply represents an increase in self-employment. True, but as it turns out, the number of  the number of “news analysts, reporters, and correspondents”  employed by others has risen by 15% over the past three years. That’s not as big as 19%, but it isn’t bad.

Explanation #3:   Reporters have done better, jobwise,  than editors and production support personnel.  Generally speaking, the new technologies allow a delayering of  journalistic organizations–fewer editors and production support personnel needed to get out the same amount of content.

Take a look at this chart, which shows the number of people employed in the broad category of ‘editors’.

Unlike reporters, the number of editors is down over the past three years, by about 2%.  However, if we add together the two categories (“news analysts, reporters and correspondents” plus “editors”)  the total employment gain over three years for “journalistic occupations” is a decent 5%, beating out the overall gain for college grads.

Explanation #4:  Maybe the jobs are there, but it’s possible they could be worse-paying, fewer hours etc.  There is certainly some truth to this. The median weekly wage for full-time reporters et al fell by 1.5% between 2008 and 2009, according to BLS calculations.  Meanwhile, the median weekly earnings for all managers and professionals rose by 1.9%.  I don’t yet feel confident to extend the wage analysis  to 2010.

All four explanations are true simultaneously, I think: A shift in journalistic employment to nontraditional industries, an increased in the self-employed, a delayering of journalism, and perhaps lower pay.

So…a Golden Age of Journalism…it may not pay as much, but it’s going to be a heck of a lot of fun!

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