The problems with statistics

Following up on my earlier posting on the need for more labor market (and statistical) research, would like to point out some other issues. Over the last month or so, there have been a number of interesting piece on the problems with economic statistics. Floyd Norris asked the question Did Unemployment Really Rise?:

In reality, the government report says unemployment rates remained steady at 9.5 percent. And the number of jobs actually rose, by 80,000. And the number of jobs for college-educated Americans rose more than in any month in the last six years.

That is true — for the non-seasonally adjusted numbers. But the seasonally adjusted data showed just the opposite. Economic data, especially employment, has long been adjusted for what are seen as purely seasonal fluctuations — more retail help during the holidays, more construction in the summer, etc. But, as Norris points out, these seasonal adjustments may be less relevant in today’s economy. Good question.

Then there was Louis Uchitelle’s column – “Economists Seek to Fix a Defect in Data That Overstates the Nation’s Vigor”. This piece highlights the problem with how we count imports

But the statistical system is not yet up to the task of sorting out which components are made here, which are made overseas and the resulting impact on employment.

As a result, productivity and GDP may be mismeasured.

Finally, Michael Mandel wrote this piece in Business Week The GDP Mirage:

The trouble is that those GDP and productivity growth figures could be significantly overestimated–perhaps by one percentage point or even more.
That’s because the official statistics are not designed to pick up cutbacks in “intangible investments” such as business spending on research and development, product design, and worker training. There’s ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation. Without investment in intangibles, the U.S. can’t compete in a knowledge-based global economy. Yet you won’t see that plunge reflected in the GDP and productivity statistics, which are still too focused on more traditional sectors, such as motor vehicles and construction.

Now, don’t get me wrong. The US economic statistical system is one of the best in the world. And there are dedicated professionals working hoard to make the system even better — including tackling the problem of intangibles. But every statistic should always be looked at carefully. So the above is just some things to think about the next time you are reading economic data.

Underemployment – and underutilized

As regular readers of this blog know, every month when the employment data is released I highlight the involuntary underemployed as a key indicator. Now, the Wall Street Journal has discovered the underemployment issue in a piece tells the story of a number of underemployed — Working Two Jobs and Still Underemployed. The story doesn’t get into any policy discussions. But it does raise, in passing, a related and hidden problem – underutilized. As the story notes:

State labor officials and economists generally label the underemployed as those who are working part-time when they would prefer full-time work, as well as people who are working beneath their skill level.
Federal figures on the underemployed, however, don’t count that second group — those who are overqualified for their jobs.

Getting a handle on the underutilized (overqualified) will take a lot more research — including a better conceptualization of “overqualified” and appropriate skills and skill levels. That is a set of labor policy questions which will bedevil the I-Cubed Economy.