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Bad Prediction, Bad Graphics

Posted By Russ Roberts On May 17, 2009 @ 9:19 am In Data,Stimulus | Comments Disabled

A number of people have sent me versions of this graph [1] that Greg Mankiw has now noted [2]. I delayed posting on it because the graph, which criticizes the Obama administrations predictive abilities, is so bad:

Stimulus effects.jpg [3]

The graph is supposed to show that unemployment with the stimulus package is the same or maybe worse than what the Obama Adminsitration economists said would happen if the stimulus package didn't pass.

The basic point is right. The unemployment rate has continued to rise rather than peak and decline.

But the triangles that are supposed to represent the current levels of unemployment are incredibly large. Why aren't they points? Or smallish circles. Which part of the triangle represents the measure of unemployment? The midpoint? The top? The right vertex?

Worse, the underlying graph is very hard to read. It is taken from the Romer-Bernstein forecast of the effects of the stimulus plan. But the horizontal axis is bizarre. For 2009, for example, there are two tick marks, Q1 and Q3, first quarter and third quarter. Where are Q2 and Q4 measured for 2009 or any year. Presumably, Q2 is halfway between Q1 and Q3 and Q4 is in the no man's land halfway between 2009's Q3 and 2010's Q1.

But now look where the triangles are located. Because they are so big, they overlap multiple quarters. The base of the April 2009 triangle ranges from Q2 all the way over to Q3. But either way, they're not in the right place. They span Q1 and Q3. But we don't even have all the data for Q2 of 2009. So what is the April triangle doing over Q2 and Q3? Why is a month of unemployment put into a chart that has quarterly measures.

But the basic point is likely to be correct. The underlying Romer-Bernstein chart says that unemployment will be 8% for the second quarter of 2009 if there's a stimulus plan and about 8.5% if it doesn't pass. I don't think we're going to average 8% for April, May and June.

Finally, I don't even know what quarterly unemployment is. I assume it's the average during the quarter.
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[1] this graph: http://michaelscomments.wordpress.com/2009/05/08/the-april-numbers-are-in-its-official/

[2] Greg Mankiw has now noted: http://gregmankiw.blogspot.com/2009/05/accountability.html

[3] Image: http://cafehayek.com/images/old/6a00d834518ccc69e201156f98d445970c-800wi

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