Economic Measurement Issues Arising from Globalization

Those waiting to see if the crude crash would lead to any sizable adverse impact on the US trade deficit in November, as lower production led to higher imports if only on paper, the answer is yes, but in the opposite direction: instead of increasing or dropping just marginally from October's $43.4 billion (to the $42 billion consensus estimate), the November trade deficit tumbled by 7.7% to $39 billion the lowest print since December 2013, as a result of a 2.2% drop in imports coupled with a 1% decline in exports.

Guest blog post by Mark Doms, Under Secretary for Economic AffairsIn July, Secretary of Commerce Penny Pritzker announced that our department will be hiring our first ever Chief Data Officer (CDO), building on her commitment to Commerce’s role as “America’s Data Agency.” She also announced the formation of a data advisory council comprising private sector leaders who will help the CDO navigate new and dynamic data challenges. This is the latest chapter in Commerce’s long history of adapting to serve the needs of an ever-changing American economy. The United States Department of Commerce has been a trusted provider of data and statistics for centuries. The first decennial census took place in 1790 and the first patent was issued that same year.  Today, because of advances in technology, we are able to provide Americans with more data, faster and more accurately than ever before. This transformation can be seen in the evolution of the Census Bureau. Article 1 Section 3 of the US Constitution states that the U.S. government shall enumerate the population of the United States every 10 years. Beginning with the 1790 Decennial Census and once every decade since then, the federal government has provided this invaluable information, making the United States the first country to produce a regular count of its citizens.    By the early 1800s it became clear that in addition to the important demographic information flowing from the decennial census, there was also an imperative for regular collection of business information. In response to that need, in 1810, the U.S. Census Bureau established a census of businesses, also known as the economic census.  The initial focal points were manufacturing, lumber yards and butcher shops. In 1902, Congress authorized the establishment of the U.S. Census Bureau and directed that the census of manufacturers be taken every five years (a “quinquennial” census).  As the economy grew, the Census Bureau responded accordingly and by 1930 it had expanded the economic census to include services.  The breadth of the survey has since changed to keep pace with our nation’s growing economy.  The 2012 economic census data are currently being released.

In previous posts I have shown data for global manufacturing output by country. One of the things those posts have showed is that manufacturing output in China is growing tremendously, but it is also growing in the United States. The chart below shows manufacturing production by country as a percent of GDP.

Lately, when it comes to obtaining an accurate sense of the true state of the US economy, it is as difficult if not more than analyzing the openly-manipulated Chinese data. On one hand, the Fed-juiced market, which has lost its discounting powers, no longer reflects the current or future economic (or corporate) fundamentals, on the other, massive seasonal aberrations, whether purposeful or accidental, have made a mockery of any data series, be it jobs, manufacturing, retail sales, or housing.

3 Economic Misconceptions That Need to Die

Every day we consciously buy products whose performance depends on one or more measured quantities — the wattage and lumens of light bulbs, that 12-ounce cup of coffee, the fill up at the gas station. Many of us take for granted that we are getting our money’s worth, and in large part we are, because the accuracy of these measurements traces back to calibrations and standards from the Department of Commerce’s National Institute of Standards and Technology (NIST).  But measurement and other precise specifications also play a much broader, largely invisible economic role. All the sophisticated technologies we depend on daily require equally sophisticated measurement capabilities to ensure performance, quality, and safety. The diameters of optical fibers as thin human hair must match up perfectly to carry telecommunications data and video over thousands of miles. CAT scan machines must deliver the minimum X-ray dose for clear images while protecting patients from unnecessary radiation. The frequencies of cell phone systems must be finely tuned so that you receive clear reception of your calls, and only your calls, without crosstalk from stray signals. Moreover, virtually every product or service one buys today is a complex technology system (computers, automobiles, even clothes washers). The components of these “systems” can only work together if the physical and functional dimensions of the interfaces between them are precisely specified. NIST provides the precision measurement and interoperability tools industry needs now while pushing the boundaries of the underlying science to create the enabling infrastructure for the technologies of tomorrow.

Real gross domestic product increased at an annual rate of 2.0% in the third quarter, reaching a annual rate of $14,730 billion (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7%. The 3rd quarter real USA GDP was up 3.1% compared to the 3rd quarter of 2009. Just scanning the headlines gives a hint why investors are moving money into emerging markets: China up 9.6%, India 8.8%, Brazil 8.8%.

China’s recovery: Is it for real?