Things are still busy for me here on the coast and I haven’t much time to spend posting. That said there is one story from the business world I caught a while back from the New York Times via Yahoo I thought was good. Turns out the statistics our government uses to calculate levels of economic activity are unreliable. Then again we all knew that for example in the Summer of 2008 when gas prices were at $4 the Bushie economic team was telling us the economy was not in recession when most of the populace was clearly struggling. Now we know why:
A widening gap between data and reality is distorting the government’s picture of the country’s economic health, overstating growth and productivity in ways that could affect the political debate on issues like trade, wages and job creation.
The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture.
The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.
American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics. Continue reading “Holiday week open thread plus Monday Music.”