The FT and NYT both have stories about the dollar’s poor start to the year, which sounds alarming. But then NYT shows this graph to back up the claim and you know what, it really doesn’t seem to be all that dramatic. In fact, the very beginning of the year has been quite average, as have the last two months. It is only the period from March until mid-April that saw two unusual slumps, but does that count as “dollar having its worst start to a year since 1973”, as the NYT put it? It might, depending on your definition of “worst” and “start”, but hardly a foregone conclusion. I know that newspapers need to prepare for the slow news week with the holiday coming up, but come on. “Worst start to a year in more than 50 years” is a bit too dramatic for what the chart shows us.
What kind of data would deserve some drama? Well, again the NYT provides the perfect example with their front page news on April 2020 US unemployment data. The headline, in much deserved all-caps, says “U.S. UNEMPLOYMENT IS WORST SINCE DEPRESSION” and has the unemployed bard dip so far below anything in the past 50 years that it falls all the way down to the bottom of the front page. A true extreme value.
As an aside, if you thought you could call either “an outlier”, think again. Here is a 12-minute explainer on the difference from Pasquale Cirillo’s Log of Risk podcast but in short: outliers are impossible values, extreme values are, well, extreme but still in the realm of the possible. The dollar’s decline this year is neither but you wouldn’t know it if you just read the headlines.