Thursday, June 16, 2011

Bloomberg Hit Piece on the Texas Jobs Machine

Bloomberg "reports":
The Massachusetts labor market deteriorated less than in Texas from 2008 to 2010, according to data compiled by Bloomberg.

Massachusetts was the fourth most-friendly state for employment in the period, the data show. Texas, where Republican Governor Rick Perry has touted his state’s title as Chief Executive magazine’s best for business, was sixth...

Perry, the longest-serving Texas governor, told a $1,000-a- plate dinner of the New York County Republican Party in Manhattan June 14 that the U.S. needs low taxes, reduced spending and less regulation to end its “economic misery.” Perry, 61, said May 27 he was “thinking about” running for president.
So, is there a Massachusetts miracle? Is the Texas jobs machine a myth?


If nothing else, Bloomberg's own analysis ranks Texas 6th in the nation on its "Employment Index" for the period 2008-2010. California is 43rd. So, taking the Bloomberg rankings at face value, Texas is doing pretty damn well in comparison to the rest of the country.

But, the Bloomberg rankings should not be taken at face value.

Clicking over to the rankings themselves lets us know that:
To identify the states with the best employment conditions from 2008 to 2010, we used data from the Bureau of Labor Statistics. Each state was ranked on a scale from 1 to 50 on the changes in the estimated total employment for all occupations, the unemployment rate, and the annual median salary for all occupations in the state. Scores were created by summing the individual ranks. The higher the score, the better the employment conditions in the state from 2008 to 2010.
A quick look at the included, however, shows that Texas outperforms Massachusetts on 2 out of three of the indicators it includes. Total employment has shrunk proportionally less in Texas than it has in Massachusetts in the observed period (-2.9% compared to -3.6%) and the median salary has increased more in the Lone Star State than in the Bay State (6.0% compared to 5.5%). Massachusetts does outperform Texas in the change in unemployment rates, increasing only 60.4% compared to 67.3%).

It gets worse, though.

First, the data on the rate of change in the rate of total employment and unemployment are essentially meaningless since they tell us nothing about the baselines from which they are derived. If Texas started out at 5% unemployment ended up at 10% unemployment, while Massachusetts started at 10% unemployment and ended up at 15%, both states would have added lost jobs at the same rate, but Massachusetts rate of change would only be 50% compared to 100% for Texas. Comparing the rates of change in the unemployment and employment rates without telling us the underlying figures is worthless.

Second, the Bloomberg index is based on summing rankings. Small differences in actual economic performance may yield big differences in rankings if states are performing relatively equally. In contrast, large differences in performance may yield small differences in rankings if variance among states is high. Rankings are simply not good input for this kind of index (or most indices, for that matter).

Lastly, the index totally ignores the fact that Texas's population grew a fairly astonishing 3.8% between 2008 and 2010 (second in the nation behind Utah's 3.9%) while Massachusetts population grew only 1.33% (28th overall). So, even though nearly a million new people showed up in Texas over this two year period, Texas has managed to beat Massachusetts in two out of three components on Bloomberg's index, and yet it is still ranked lower in Bloomberg's index than Texas?

The index is junk. Its rankings are junk. The conclusions the accompanying article's authors draw from it are transparently political. The whole enterprise is low-end hackery. Don't buy it.

For my money, if you want a model for job creation, Texas is still a much better place to look than Massachusetts.

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