Podcast

Today the Commerce Department reported excellent economic news for January; retail sales climbed another 0.5%, the third gain in four months, and were up a hefty 4.7%, compared to a year ago.

The NYT had an editorial this weekend that trotted out some dangerous mistruths about the deficit and framed the issue as a left vs. right political game.

I hardly know where to start, but I will note that we’ve had massive accumulations of new debts under every single administration since the early 1980s, and that it hasn’t seemed to matter which party has controlled which branches of government.  One could be forgiven for suspecting that, when it comes to deficit spending, there aren’t two parties, but only one.

The real truth is that we have a culture of reckless spending in DC that transcends either or both parties, and I always lose a bit of trust in those who attempt to paint it otherwise.  This is simply not a partisan issue.

In January, the rate of unemployment was said to have reduced from 10.0% to 9.7%.  I cannot resist wading into this story, although I tried.  Here goes.

One of the (many) quirks in the US methodology for measuring employment and unemployment is that two entirely different methods are used and reported.  One, called the ‘establishment survey,’ gives us the headline job gains or losses that are reported.  For January 2010, that number was -20,000, indicating that more people were out of work in January than December.

The other, the ‘household survey,’ delivers us the rate of unemployment, which fell from -10.0% to -9.7%, indicating that fewer people were out of work in January than December.

These are entirely separate surveys, and they are nearly impossible to directly compare.  Still, over time, they should at least be directionally aligned, and this departure between the two will resolve itself sooner or later.

I believe that the household number is overstating the gains, and here’s why.

One of the things that I constantly harp on is that we need to change the stories that we tell ourselves.  GDP is one of those stories.

We tell ourselves a simple tale, and it goes like this:  A rising GDP is a good thing.

But with a slight bit of inquiry, we could discover the many ways that this story is more myth than fact.  First, we might discover that we routinely pad the tale with so many statistical distortions (“Fuzzy Numbers”) that the narrative not only loses its way, but becomes hopelessly misleading.