This may be one very good reason people in the USA are excited about a successful businessman running the country. They’re ready to start making money again.
Mark Twain is credited with saying “figures don’t lie, but liars figure.” If he were around today Twain’s quote might go something like this: “Figures do lie, and liars figure out how to make people believe them.”
Granted, not as catchy.
But my quote goes a long way toward explaining something that is bothering many political pundits today. President Obama whined last week that he’s not getting enough credit for the economy.
Democrats are besides themselves wondering why Americans are so angry that they might be willing to elect Donald Trump president when the official unemployment rate is only 5%, oil prices are near their lowest level in a decade and the economy has been expanding for seven straight years.
Why aren’t Americans happier?
One of those pundits made me chuckle Tuesday night when he was talking about Trump’s primaries victories in another five states. He suggested that Americans were somehow being brainwashed by the media into thinking the economy was really bad when in fact it was good.
Then, on Thursday, the Commerce Department showed just how good the economy wasn’t. It announced that the Gross Domestic Product grew by an annual rate of just 0.5% in the first three months of 2016.
But that didn’t stop the media from trying to explain away the disappointment.
The New York Times, for example, suggested softly that “the recovery has two sides.” Toward the bottom of the piece, it included the startling facts that “factories shed nearly 50,000 jobs in February and March, wiping out all of the gains recorded last year. The proportion of Americans in the active labor force remains depressed by historical standards, and more than 6 million workers say they are in part-time positions because they cannot find full-time work.”
But hey, the paper continued, we found some anecdotes of companies that are hiring!
It’s not just political spin, however, that explains the rose-colored coverage. Another explanation is that the media is plain stupid — quick to accept guidance from economists on Wall Street, for example, who have a vested interest in making everything wonderful.
Economists understand what “statistical noise” is. If you don’t, here’s a definition from a website called WiseGeek: “Strictly defined, statistical noise is a term that refers to the unexplained variation or randomness that is found within a given data sample or formula. There are two primary forms of it: errors and residuals.”
In other words, economic statistics may not make sense in the short term because something is innocently interfering with the accuracy of the data or someone is intentionally fooling with the numbers.
I don’t think anyone today is intentionally fooling with the nation’s economic data, although I’ve proven that there were questionable data collections leading up to the presidential election in 2012. These days, I think the data is simply misleading.
Take the economic data that came out throughout the first quarter of 2016 as an example.
The Federal Reserve Bank of Atlanta keeps real-time track of the nation’s economy using something it calls GDPNow.
At the beginning of January, GDPNow was showing that US economy growth was around a 2.7% annualized rate. By last week, GDPNow had been ratcheted all the way down to 0.6% — which was slightly better than the actual number reported on Thursday by the Commerce Department.
How could the Atlanta Fed have been so wrong? Statistical noise made it tone-deaf to what was going on in the real world.