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    Economic Measurement Issues Arising from Globalization

    Tue, 11/10/2009 - 12:10 EDT - curiouscatblog
    • Comments
    • economic data
    • Economics
    • economy
    • Financial Literacy

    One challenge of understanding the state of the economy is we don’t have clear measures. We attempt to gather accurate data but there is quite a bit of inaccuracy in the data (both from preliminary estimates – before all the data is in, which can take months, or longer – and just plain items we have to estimate no matter how long we have).
    Related: Manufacturing Data – Accuracy Questions – Why China’s Economic Data is Questionable – What Do Unemployment Statistics Mean? – Manufacturing Jobs Data: USA and China – The Long-Term USA Federal Budget Outlook – Is China’s Recovery for Real?
    Economists Seek to Fix a Defect in Data That Overstates the Nation’s Vigor
    The federal agencies that compile the nation’s statistics increasingly acknowledge that they lack the detailed data needed to calculate the impact of imported goods and services as imports rise from an insignificant 5 percent of all economic activity 35 years ago to more than 12 percent today, not counting petroleum. As a result, many imports are valued as if they were made in the United States and therefore higher in price than their imported counterparts.
    The problem is particularly acute in manufacturing. Imported components constitute an ever greater share of the computers, autos, appliances and other finished merchandise that roll off assembly lines in the United States – and an ever greater share of all of the nation’s imports.
    …
    The stated goal, among those at the conference, is to repair the statistics, but that requires several years, lots of money (from Congress) to gather more information about what companies are doing, and whole new procedures for measuring imports. Much of the conference was devoted to an analysis of the gap between existing data and reality, and ways to close that gap.
    The Measurement Issues Arising from the Growth of Globalization conference has thankfully provided open access to papers from the conference including:
    Offshoring Bias: The Effect of Import Price Mismeasurement on Manufacturing Productivity by Susan Houseman (Upjohn Institute), Christopher Kurz (Federal Reserve Board), Paul Lengermann (Federal Reserve Board), and Benjamin Mandel (Federal Reserve Board)
    We find that the growth rate of imported intermediate input prices may have been biased upwards by between 16 to 35 percentage points, which in turn has led the average annual growth rate in manufacturing productivity to be overstated by 0.1 to 0.3 percentage point or by between 9 and 20 percent over the entire period from 1997 – 2007.
    Effects of Imported Intermediate Inputs on Productivity* by Lucy P. Eldridge and Michael J. Harper, U.S. Bureau of Labor Statistics
    By including imported intermediates in the MFP model, we find that private business sector multifactor productivity would grow 0.1-0.2 percent per year slower than the BLS published series. Also, we estimate that the growth in imported intermediate inputs contributed 14 percent to the average annual growth of labor productivity for the private business sector from 1997-2006.

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    Related

    • Why China’s Economic Data is Questionable

      There are several issues with economic data, as I have mentioned before. These issues have to be considered when analyzing economic data and being financially literate requires an understanding of the problems with economic data. The political pressures for manipulating the data to appear good exist is every country.

    • Portrait of US economy looks cloudier after poor jobs report

      WASHINGTON: An unexpectedly bleak May jobs report has suddenly muddied the outlook for the U.S. economy. Until this week, the Federal Reserve had seemed poised to raise interest rates perhaps as soon as June 15, a sign of confidence that the economy was strengthening after struggling just to grow early this year. Any such certainty vanished at 8:30 a.m. Eastern time Friday. That was when the government reported that employers added a scant 38,000 jobs in May _ the fewest since 2010 and far less than economists had expected.

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      The USA unemployment rate dropped slightly to 9.4%. The economy lost 247,000 jobs which is both a sign the economy is not strong and also that it is improving (job losses from November through April were 645,000/month and 331,000/month from May through July). The job losses for May and June were both revised to show 20,000 fewer job losses each in the press release from the Bureau of Labor Statistics.

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      Total nonfarm payroll employment increased by 171,000 in October, and the unemployment rate was unchanged at 7.9%, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, health care, and retail trade. The change in total nonfarm payroll employment for August was revised from +142,000 to +192,000, and the change for September was revised from +114,000 to +148,000.

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      Nonfarm payroll employment increased by 216,000 in March, and the unemployment rate stands at 8.8%, the U.S. Bureau of Labor Statistics reported today. Revisions for January and February were very small (adding 5,000 jobs to the January totals and 2,000 to February). Since a recent low in February 2010, total payroll employment has grown by 1.5 million.

    • Government Debt as Percentage of GDP 1990-2008 – USA, Japan, Germany…

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