Lies, Statistics, and Economic Statistics

[eridani]

http://www.huffingtonpost.com/michael-brenner/lies-statistics-and-econo_b_341149.html

Weathering a blizzard of statistics is the fate of the public minded. Numbers come at us from all points of the compass. Some are raw data, some massaged, some naked and some fitted out for the occasion by their sponsors. In this wintry economic season, they all come with a message and meaning. Making sense of the figures demands a large measure of skepticism and an eye for misrepresentation and forgery.

Here is a quick everyman's guide to economic statistics. First, the "recession." No term has been more abusive of statistics. There is a narrow technical meaning for economists. It is strictly a matter of GDP numbers having nothing to do with our feelings of being "in the money or out of the money." If the economy registers a quarter in which GDP rises - by however small an amount, we are no longer in recession. That's it. That happened in the third quarter of this year when it rose at a 3.4 annualized rate.

If GDP drops 4 percent in the fourth quarter and then rises just 0.4 percent in the first quarter of 2010, the business headlines could rightly proclaim that the "recession" is still over. The public understanding of the term "end of recession" is that we have hard data of a return to prosperity - or, at least, that a growth cycle is imminent. Nothing of the sort is in the numbers per se. The discrepancy between these two meanings are cynically played upon by all those who have a vested interest - political, intellectual, or financial - in creating the impression of an economic morning in America. That covers just about everyone marketing the news.