The Fed’s Most Harmful Statistics Error

Accurate statistics are critical for understanding the economy and making policy, as well as structural economic changes and economic performance.

As Rob Atkinson writes in American Compass, analysts and policymakers heavily rely on the U.S. Bureau of Economic Analysis data. At first glance, the data from the BEA looks good, adjusted manufacturing output has been growing. This leads most pundits and analysts to believe that all is well, and that even though there has been a massive decline in manufacturing jobs, it is all due to high productivity. But in reality, that data is misleading and manufacturing output is falling. When these methods are applied to information technology goods (IT), the rate of quality change is rapid, leading to misleading statistics. This data is also harmful for accurately analyzing business capital, with investments in particular.

It is crucial that the government uses appropriate, common sense measurement methods going forward to be able to accurately analyze this data.