Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

GDP, Inflation, Employment Economic Statistics: It’s All a Lie

Economics / Economic Statistics May 26, 2015 - 03:20 PM GMT

By: Harry_Dent

Economics

Rodney Johnson writes: I’m not much for glossing over the true state of affairs just to make things look better, which is why I take issue with many government reports.

When it comes to providing clear information on the economy, the U.S. government is more late-night pitchman than serious news anchor. And to make matters worse, many of the numbers they peddle have been “adjusted” so that reports show better results.


Statistics in this category run the gamut from gross domestic product (GDP), to inflation, even to employment. We don’t have to look far into the numbers to find questionable changes.

When it comes to measuring the growth of the economy, no report is bigger than GDP. It sounds straightforward — add up the value of production in the U.S. over a calendar quarter, and adjust it for inflation to determine the real rate of growth.

But apparently that’s not good enough.

In the mid-1980s the Bureau of Economic Analysis started adjusting the cost of computer equipment to reflect increasing capacity in later versions of the same equipment.

Even though consumers might have been paying roughly the same amount for a new computer as they would have before, the bureau adjusted the price higher when calculating GDP.

The idea was to show how much more buyers were getting with increased capacity, even though they didn’t pay any extra.

Got that?

This type of adjustment is called "hedonic." It now adds over 20% to the value of GDP and affects items as far flung as clothing — or back when this was established, videocassette recorders.

This chunk of money that is added to GDP never changes hands. It’s simply estimated as extra value received by the purchaser. Anything to make GDP seem better.

The same sort of thing is done with inflation… but opposite. They want GDP higher, and inflation lower, so they fudge the numbers accordingly.

For example, a television with improved components in later models will have its price adjusted lower in inflation reports, whether the actual price stayed the same or even increased. What you paid $1,000 for, they may write down as $800.

Effectively, consumers are told: “TV’s cost less, you just can’t buy one for the lower price.” If it’s not available to me, then how can it count as something I would purchase? What if I don’t want the extra features? Too bad.

The inflation rate includes another curious adjustment — Owner’s Equivalent Rent.

This piece of mathematical fantasy represents what a homeowner could rent his home for if he chose to. The number is included as the cost of shelter in the calculation of inflation.

Instead of performing all these mental gymnastics to arrive at an estimate of housing costs, the government could simply survey home prices. That’s what they used to do.

But here’s the thing. Rents don’t climb as fast as home prices. So if you’re battling inflation, you magically adjust the cost of shelter to reflect rent instead of what it takes to actually buy a house.

It’s no coincidence the adjustment showed up right after a period of strong inflation in the U.S. that was very evident in home prices in the late 1970s. Guess it was too much for the BEA to take.

Then there’s one of my favorite economic adjustments: employment.

Each month the Bureau of Labor Statistics (BLS) estimates the number of people with jobs and those who are unemployed. They conduct a phone survey of roughly 60,000 people to ask about their work. Again, this too sounded straightforward… Do you have a job? If not, do you want a job? But as with GDP and housing costs, this proved to be too simple.

If you don’t have a job, but want to work, there are a few more questions they have to ask. How long have you been out of work? If more than four weeks, then what have you done in the last four weeks to find a job? If your answer doesn’t include filling out an application somewhere, then magically you are no longer counted as unemployed. You still don’t have a job, of course, but for the purposes of the Labor Bureau, you no longer count toward the unemployment number. Brilliant!

GDP, inflation, unemployment… these are just some of the big economic releases that move markets and sway people’s opinions about the health of the economy.

And yet, the numbers reported by the government include all sorts of fudges and fixes to make the statistics more attractive than the raw numbers would be.

This is why we have to do our own homework. It is why we have to break down each report to the raw data, and then decide for ourselves where things stand.

It takes a lot of research, but the payoff is worth it. With it, we can make more informed decisions for our businesses, our investments, and our families. I’d say that’s worth the extra effort.

By Rodney Johnson, Senior Editor of Economy & Markets

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2015 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules