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The Faith-Based Economy? John Mauldin May 18, 2009 12:15 pm |
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One of my regular reads is The Big Picture blog. They featured a short piece by Michael Panzner this week. He put together some rather interesting data and then asked a question, which gives me an opportunity for discussing government data. Let's see what he had to say, and then I’ll make my comments.
"Many market-watchers claim that US economic statistics are increasingly being revised downward in subsequent periods, suggesting that the figures initially being reported by Washington are ‘puffed up,’ so to speak, most likely for political purposes.
"Well, I went back and had a look at the differences between the reported and revised data for various series, including monthly retail sales, non-farm payrolls, industrial production, and durable goods orders, to try and figure out if the cynics are right.
"Using data from Bloomberg, I calculated whether the revised data for each month was lower than the first-cut estimate. Then I tabulated 12-month running totals for each series to see if there has been some sort of systematic bias (in other words, whether the pattern of monthly downward revisions was trending higher instead of undulating up and down).
"To make the comparisons easier, I subtracted the 12-month tally as of May 2002 (an arbitrarily chosen date) from the monthly totals for all 4 economic series so that the starting point for each would be the same - zero.
"Based on a quick read of a graph of the data (see below), it does seem as though the pattern of negative revisions has been trending higher lately, especially during the past year or so, suggesting that the cynics may be on to something.
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"That said, I am not a statistician, and the results may be nothing more than ‘noise.’ There is also the possibility that my methodology is lacking (because, for example, the margins-of-error for each month's data are relatively large, or because of certain quirks that crop up when an economy is in transition). Still, you gotta wonder..."
Actually, Mike (can I call you Mike?) your last thought is the correct one: "…or because of certain quirks that crop up when an economy is in transition."
Go back to 2003-04. Notice that the numbers of downward revisions in non-farm payrolls are negative in your graph? Remember all the talk back then about the "jobless recovery"? We can now look back and see there were a lot of jobs being created. They just didn’t show up in the early statistics. And look at the opposite reaction in industrial production: Here they revised strongly downward for the better part of 2 years, yet it turned out there was a production boom going on.
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