The economy grew nicely in the last quarter, we are told, increasing at a rate of 2.7% annually. I waited until now to talk about this because I suspected that the initial report of 3% would be revised downward, and I was right. I’m learning how they play these games. They release a bogus number with great fanfare, and hope that fewer people will notice the downward revision which is released as part of a “news dump” on Friday.
Another point worth noticing before we get too excited about this number is that this was the first full quarter during which the new method for computing GDP has been used. The Bureau of Economic Analysis has a rather detailed article of what that means, but the short version is that even if the additions are valid (and I have some doubts about that) we need to be aware that the increase in GDP is not entirely due to growth in the economy, but is in part caused by the fact that we have changed the way we are measuring it.
Our government does things like this on a regular basis. Unemployment too high? Quit counting people who are not looking for work. Inflation too high? Exclude food and energy. The interesting part of the latter one is that now economists are complaining that inflation rate is too low. Add food and energy back in and economists will be happy, but the general population will not and many legislators might not get reelected.
So, how much of the improvement in economic growth numbers is due to real economic improvement, and how much is due to the new method of measurement? Well, I don’t think anyone will be able to provide a meaningful answer to that question, but what really bothers me is that no one is even asking it. No one, in fact, is even mentioning the subject at all.
These numbers, inflation, unemployment, and economic growth, are produced by various bureaus which are supposedly non-partisan, but don’t let that fool you. For one thing, the heads of these bureaus are appointed by the current administration, and don’t think for one minute that their biases don’t filter down into the functioning of the lower ranks within the bureaus.
More importantly, all government staffers are dedicated to the maintenance of the status quo, and that means publishing numbers that are not going to “upset the apple cart.” Partisan or non-partisan, they are not going to release any numbers that would tend to indicate that things need to change. If the numbers start making it look like change is needed, they are going to find a way for their reporting to make the status quo look better. It’s called “self preservation.”