GDP and the Decline of National Statistics

by: Felix Salmon August 28, 2008    
Felix Salmon

Felix Salmon

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Zubin has a good roundup of reactions to the latest GDP numbers, which basically amount to a lot of economists caught wrong-footed and desperately trying to explain why a 3.3% growth rate isn't anything like as healthy as one might imagine.

The blogs, too, are sounding the same note: "it's a big flashy number, but it probably doesn't mean all that much," says the Economist, although others are more upbeat.

Barry Ritholtz has a good question, noting that all of the government expenditure figures were revised upwards:

If you are wondering why the government does not know what it is actually spending in near real time, welcome to the club.

The really big-picture lesson from this GDP report, however, is that government statistics in general, and GDP statistics in particular, are continuing their long and steady decline in terms of accuracy and usefulness.

There are a lot of factors behind this fact. Just some: the fragmentation of the economy, with a large rise in the number of small companies and self-employed individuals; the globalization of the economy, with its attendant blurring of the idea of what counts as "domestic production"; the fact that first-rank economists simply don't become statisticians any more; and a general fiscal neglect of the statisticians that the government does have.

I'm pessimistic about the prospects for this trend being turned around any time soon: it's hard to imagine a less sexy rallying cry than "we need to work on the accuracy of our national statistics". But if anybody can do it, maybe Jason Furman can: Vote Obama! You might not like his policies, but at least you'll be able to measure their effect!

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This article has 30 comments:

  •  
    Aug 28 03:37 PM
    I hope the government can do something with the data on jobs. Losing 50,000 jobs a month is very disheartening...
    Reply | Link to Comment
  •  
    Aug 28 03:38 PM
    The national statistics accounts are kept with great care by intelligent and sophisticated technocrats, and are at least as reliable as they have ever been. Hacks and ideologues peddling grand meta narratives just don't like what they are saying, so they play smash-mouth and lie about them. I'll take the BEA's objectivity over doom-mongering blogger spin every day of the week and twice on Sundays.
    Reply | Link to Comment
  •  
    Aug 28 03:54 PM
    Must say that 2 key ingrediants of 2 recent economic releases do look fishy. GNP price deflator, which translates nominal GNP to real GNP was 1.6%. With CPI up 5.5% year to year, how can this be possible? And, the monthly employment report has been distorted upward all year by the addition of hundreds of thousands of jobs not couted but assumed to be created by small businesses...the birth/death model. This also seems quite unrealistic given the economic environment.
    Reply | Link to Comment
  •  
    Aug 28 04:52 PM
    JasonC, Oh how naive you must be.

    While I believe some statistics the government spits out have no bearing on everyday life, running a business or investment decisions, they give the public a certain sense of comfort knowing the current economic situation. If you believe the government is above fudging the numbers to keep the masses happy, you're dead wrong.

    Just look at the CPI numbers. The Bureau of Labor Statistics uses the CPI to adjust government salaries, pension payments, welfare increases, etc. Its in their best interest to keep the numbers low. When independent companies say inflation is running around 10% and the BLS says its only 5.6% I have to believe the BLS is lying.

    As the saying goes "There are truths, lies and statistics."
    Reply | Link to Comment
  •  
    Aug 28 04:55 PM
    Also, coming up to an election, I wouldn't put it past anyone in the gov't to fudge the numbers a little to make the economy look like it isn't in a recession. If these guys want to be reelected they have to make it seem like they're doing a bang-up job.
    Reply | Link to Comment
  •  
    Aug 28 05:03 PM
    Well Jason, see if they'll charge you the government inflation rate at the food store and the gas pump. Most of us like to live in the real world.
    Reply | Link to Comment
  •  
    Aug 28 05:04 PM
    Perhaps a foolish question: but why do we need the government to publish these numbers? Maybe this trend is an opportunity for a private firm to begin collecting (and selling) these statistics?
    Reply | Link to Comment
  •  
    Aug 28 05:22 PM
    At this point is seems most intelligent people in this country (at least those who have managed to avoid being brainwashed by the corporate controlled financial media) know almost all numbers put out, by any branch of our government, are essentially lies.

    What is even more comical is that our government knows that the smarter ones in our country know they are lies, but continue to print bogus numbers anyway, for the majority of our country are in a robotic, 24/7 media induced state of complacency.

    Let me preface the following statement by saying I am not an evil person, nor do I think I am better than any of you who might read this. What I am about to say is the truth.

    As someone who is part of the 10% of this nation who controls 90% of its net worth, (for me, it was once the other way around) It amazes me to see the sheeple and they go about their lives, being told what to think, how to act, what to believe. To see these poor souls, weeping at political conventions, convincing themselves that wether you be democratic or republican, that their miserable lives are going to get better, though we as a nation have been promised the same things for decades and nothing gets any better. I guess if you count the internet, gadgets, plasma TV's and easy credit, I guess Americans are doing OK then. LOL.

    The reality is simple. A small elitist class now runs and owns most everything in this country, and have political connections that protect them, this as a result of career politicians who can buy every election.
    They are untouchable, for now.
    There is always a hope, that somehow, some way, even a mere 1% of our population will wake up and take back this country from those who forget that they are put in office to serve the people.
    Not to rape the people.
    Reply | Link to Comment
  •  
    Aug 28 05:46 PM
    Its a fishy number because they (administration) have now figured out how to tweek it - just add a little tax rebate. That measurement is now no good. I'm insulted they think we won't notice.

    Most of us out there have lost our a**es. whatever's left is going to fuel.
    Reply | Link to Comment
  •  
    Aug 28 05:59 PM
    The masses aren't duped by government economic numbers, because the masses don't know government economic releases from their anatomy. The only time they will ever encounter one is as a highly spun 20 second soundbite on the evening news. Which will say with 99% certainly everything is horrible if the newscaster's party isn't in the White House and everything is peachy if it is, but will have nothing to do with the actual content or meaning of the statistical release.

    Only geeks with pocket protectors actually delved into details of government statistics and what they mean. Sophists on the other hand just riff on them, telling us the same old tired partisan lies they have told for hundreds of years, without the slightest reference to empirical reality.

    As for the nonsense about the 500 families controlling everything, the Marxist left literally hasn't changed their script in the matter in over 150 years. Not only does their mantra have nothing to do with statistics or the economy, it has nothing to do with reality or history, either.

    As for the present state of the American people, it is simply the richest society in the history of the world, and the freest. Real economic hardship hasn't been an issue of any consequence in America for 70 years, and economic management even in detail for about 35, but political parties are simply too stupid to find new things to fight about.

    Idiots pretending everything government statistics say are lies belong out of the street corner in a washboard. They are comical moonbats, not financial market commentators.
    Reply | Link to Comment
  •  
    Aug 28 06:18 PM
    bds 231 - That's a great idea to have privte companies collect "accurate" data and sell it. Economists do that. In fact, Alan Greenspan's company Greenspan Kennedy has been doing it since Alan was a young man, which was a long time ago. Of course they often use government data, but they try to get to the "real" number for clients making business decisions.

    Jason C - I think you made your own case against yourself.
    "The masses aren't duped by government economic numbers, because the masses don't know government economic releases from their anatomy."

    They may or may not know their own anatomy, but they know inflation when they see it at the gas pump, grocery store and anywhere else, and they adjust their lives accordingly, which they are in fact doing. Nobody's smarter than Mama with five faces to feed and a tight budget.
    Reply | Link to Comment
  •  
    Aug 28 06:23 PM
    After having a good laugh at the BEA GDP numbers ( inflation at 1.6%!?), check the numbers at the Institute for Supply Managers:
    www.ism.ws/index.cfm

    A little closer to reality.
    Reply | Link to Comment
  •  
    Aug 28 07:14 PM
    It appears to me that the people who develop the Government economic data may have gone to the same schools as the folks who determined that sub-prime CDOs deserved AAA credit ratings.
    Reply | Link to Comment
  •  
    Aug 28 07:30 PM
    This article is an insult to intelligence, you cant make a claim if you cant back it up. Where is the proof? Where are the references? What are your credentials to be talking about government economist?
    Reply | Link to Comment
  •  
    Aug 28 08:24 PM
    <<As for the present state of the American people, it is simply the richest society in the history of the world, and the freest. Real economic hardship hasn't been an issue of any consequence in America for 70 years>>

    You are either:
    A) a civil servant or government worker who has never had to save a penny on your own because it is done for you, and never paid a cent in health insurance premiums because the taxpayers take care of you
    B) Mommy and Daddy provide you a monthly "gift" of cash (that of course no one knows about) to help you keep up with the Jones's
    C) You are part of the 90% that is controlled by the other 10%, you figure nothing in the future matters, you will never die, and all the money you owe on credit or otherwise, just will never have to be paid back.
    D) You confuse home equity extraction and credit card debt with real liquid net worth.
    E) All of the above.

    We may be the freest society (or at least it might appear so) however we are not the richest. Our own govt is now the biggest debtors in the entire world. We owe the poorest nations in the world more money than we currently have (quick Bernanke, man the printing presses).

    If we are so wealthy, tell me, why is it Americans families owe just under one trillion dollars in revolving credit card debt, and happily pay 20% interest on that debt, while the stock market does not even return that. Why dont Americans just pay it back. After all, according to you JasonC we are the "richest society in the history of the world".

    It is a well known fact, spoken about by EVERY SINGLE financial planner, that paying off credit card debt is like getting a 20% return on an investment, especially when the market has returned NOTHING over the past 10 years. So again, why isnt credit card debt being paid off?
    Why? Because it can't be paid off. That 90% of Americans, the ones who, as per the biggest mutual fund families in data released early in the year, have less than $35,000 in mutual funds on average. American families unlike the previous generations, have the smallest amount of equity in their homes now, and are living paycheck to paycheck.
    The reality is, the majority of Americans "just get by". Some are better than average, some are worse. Our country has given the illusion of wealth, though it it mostly held by that top 10%.

    JasonC, enough glue sniffing for you.
    Reply | Link to Comment
  •  
    Aug 28 08:39 PM
    Ron Paul... paging Dr. Ron Paul... shadowstats.com has a good "unfudged" set of economic statistics for the number lovers.
    Reply | Link to Comment
  •  
    Aug 28 08:45 PM
    The first lesson in US History is the following: "governments lie".

    All else is details.
    Reply | Link to Comment
  •  
    Aug 28 09:38 PM
    "As for the nonsense about the 500 families controlling everything, the Marxist left literally hasn't changed their script in the matter in over 150 years...

    As for the present state of the American people, it is simply the richest society in the history of the world, and the freest...

    Idiots pretending everything government statistics say are lies belong out of the street corner in a washboard. They are comical moonbats, not financial market commentators."

    Give 'em HELL, JasonC!

    I don't trust all those comical moonbat, elitist Commie academics telling me things are getting more unequal here in God's country. I get sleepy when I hear about Gini Coefficients, regressive taxation, debt-to-GDP ratios, blah-blah-blah... Heck, my head hurts already.

    Personally, I rely on my gut to tell me when things are going great --and I feel awsome!! My gut tells me we're winning the War on Terror, the War on Privacy, the War on the Environment, the War on Houing Affordability, the War on Civil Liberties, and the War on the Geneva Conventions (I think we're also at war with Eurasia, but I'll have to check with Fox News and get back to you).

    Whenever those L-I-B-E-R-A-L pukes aren't working themselves into a lather (or is it a 'froth'? --sounds more like Starbucks, where Lefties like to hang out) over Bush & Cheney (blessed be their names!), they're trying to scare us into believing the planet's in danger. And they keep switching the so-called threats. Today it's "peak oil", yesterday it was alleged "global warming", tomorrow it's... who knows? Cat juggling, maybe? What a bunch of hand-wringing, Chicken Little cry-babies!

    Anyhoo, I'm getting FILTHY STINKIN' RICH going long FNM, FRE & USD, baby! Gotta get back to my sensual massage from 3 lovely masseuses in my palatial 40,000sft estate.

    JasonC rocks!! Only listen to Rush, Larry Kudlow, Anne Coulter & Fox --the rest are crap.

    Ciao...
    Reply | Link to Comment
  •  
    Aug 28 10:18 PM
    Felix ---Your post is nothing but leftest garbage.
    Reply | Link to Comment
  •  
    Aug 28 10:52 PM
    @JasonC & CLH,

    Umm... you two are aware that CPI and GDP index manipulation goes back to the Clinton era (if not before), right? So, unless you consider the CPI & GDP metrics to somehow be the personal creation of Shrub & Cheneyburton, questioning their accuracy would technically be a nonpartisan issue.

    But I guess 'nonpartisan' is a concept lost on the two of you.
    Reply | Link to Comment
  •  
    Aug 28 11:12 PM
    A system built on fractional-reserve banking requires confidence. You get it? CON-fidence. Now you understand.
    Reply | Link to Comment
  •  
    Aug 28 11:15 PM
    1. US net external liabilities is 8% of GDP. That does not make the US a poor country. In fact this is a quite moderate and very sustainable. Don't pay attention to fear mongers whining that the US is the largest debtor nation without putting the numbers in context - the US is also the world's largest economy. It is a VERY rich nation.

    2. Why do people thing the GNP deflator of 1.6% is so unreasonable? It is quite clear that producers are having a hard time passing on increased energy costs which is the primary driver of CPI these days. That would easily explain the difference.
    Reply | Link to Comment
  •  
    Aug 28 11:23 PM
    "My gut tells me we're winning the War on Terror, the War on Privacy, the War on the Environment, the War on Houing Affordability, the War on Civil Liberties, and the War on the Geneva Conventions (I think we're also at war with Eurasia, but I'll have to check with Fox News and get back to you). " HARM

    You rock! Yep, we are at war with everything. How about some peace for a change, ya morons?
    Reply | Link to Comment
  •  
    Aug 28 11:26 PM
    Sorry, living under Bush is nerve wracking. The Repubs and Demos have a lot to answer for for making me choose between Bush and Gore.
    Reply | Link to Comment
  •  
    Aug 28 11:28 PM
    Complaints about fractional party banking are one of the best ways to catalog moonbats.
    Reply | Link to Comment
  •  
    Aug 28 11:41 PM
    "Complaints about fractional party banking are one of the best ways to catalog moonbats." otbricky

    Oh well, when the brilliant folks like Alan Greenspan screw up the economy, the lesser minds get upset. Just when are you guys going to cure the business cycle? We've been waiting since 1913. Read some Austrian economists who BTW PREDICTED the Great Depression.
    Reply | Link to Comment
  •  
    Aug 29 12:48 AM
    this 3.3% is not the growth over the past year but a projection if the same trend of growth between the last two quarters. and since there were tax rebates equaling 1% of GDP and they were erroneously extrapolated using the present model over the next 3 quarters, there are 3 phantom percent of GDP growth in the number.

    and you wonder why the GDP deflator is bogus? if producers can't pass on increased costs then their profit margins should be shrinking. Yet profits are growing at 7% (s/p500 cos less financials/energy) while a year back they were at 11%. if you assume high 30% avg profit margin, that would have meant they absorbed 1.5% of additional PPI. well, most resources have gone up in the quarter at good double digits, most resources are imported and the dollar was down again for most of the quarter, and this assumes there is no contraction in production activity contrary to the rising unemployment trend. think again.
    Reply | Link to Comment
  •  
    Aug 29 01:33 AM
    "Complaints about fractional party banking are one of the best ways to catalog moonbats."

    I don't know what "fractional party banking" is, but I know a little about "fractional reserve lending" and how a reckless, incompetent Fed used it to blow speculative bubbles and help drive the U.S. economy, banking system, and currency into a ditch. Oh, and for the record (before the usual idiotic partisan comments), "Sir" Alan Greedspan served under 4 Administrations: Reagan, Bush Sr., Clinton & Shrub.
    Reply | Link to Comment
  •  
    Aug 29 01:43 AM
    I, for one consider this time wasted reading the rants.

    Republican or Democrat it should be clear our government is in a phase that is not logical. Trillion and a half dollars , and 5,000 lives go for what in Iraq?

    Did Osama Bin Ladin win? I believe he gave us Vietnam in the desert.

    Oil has been and will be our achilles heel until someone has the guts to give us in the US a plan -(akaT.Boone Pickens) and implements it. That is going to mean Washington DC brats need to stop bickering.
    Reply | Link to Comment
  •  
    Aug 29 03:49 AM
    There are a few good comments in here but do the rest of these people live on the same planet I do?

    For the people of the left coast: Oil is expensive now. It will stay that way until all the SUV driving idiots talking on cellphones get off the freeway. There is no democrat you can elect which which will change this fact. The democrats want to starve us of oil and the republicans want to put us deeper in debt. Who do you propose to elect? The rest of the country will give you one more chance, but your track record is looking pretty dismal.
    Reply | Link to Comment
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