Further, almost no one pays attention to the fine print in the data, which talks about margin of error. The statisticians clearly understand the limits of their data, even if the public doesn’t. Often, the margin of error is larger than the number being given, so that a positive number may actually turn out to be negative, and vice versa, when viewed from a few years out.

As Cassius said in Julius Caesar, "The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings."

Faith-Based Economics

Should we cast aspersions on the data creators? I think not. The various government statistics creators are doing their best to give us information that, over time, will be useful. Some is more useful than others in real time. Some has large time lags before it’s accurate. To expect the BLS or the Commerce Department to have accurate current data is expecting them to know the future. The very people who are the most critical would never presume to be accurate about the prices of stocks 6 months out (or even one month), on a consistent basis. Yet that’s the kind of prescience they want from government statisticians.

Do you really want data from government sources that makes assumptions about economic recoveries and recessions? That’s the job of independent economists, and they generally do it pretty badly. There’s no need for the government to compound the errors.
Again, repeating myself, anyone who trades on government statistics as being anywhere close to accurate in real time deserves any losses they get. They’re at best, a foggy window through which we peer into the future. Taken together, and with some seasoning of time, they can be rather useful; but to pin hopes of a recovery or a bull-market run on one week's data is hazardous to one's wealth.

Reading and watching all the analysts and economists who "see" recovery in one set of data or another makes me wonder what sort of faith-based economics they actually practice. Just as it requires faith to believe in God, it also requires a lot of faith to believe in forecasts made on a single month's set of data, or based on past performance.

Are you interested in finding a real green shoot? Let's look for a quarter when the economic data keeps getting revised upward, 2 and 3 months out. That will signal a real recovery. As long as the data is being revised downward, the economy is "having issues," as my kids would say.

Quick sidebar to those who keep asking: Yes, I think we’ve seen the worst of the economic data, as far as GDP goes. But that doesn’t mean we don't have further negative quarters in our future. I just don't think they’ll be a negative 6 like they’ve been the last 2 quarters. And we may even see a quarter this year with a positive number. But take it with a grain of salt when the usual suspects declare the end of the recession. Look into the data that produces the numbers. As Gary Shilling points out, 8 of the last 11 recessions have had a positive quarter, only to see more negative quarters follow. GDP numbers are quirky. But here's to hoping for a real recovery when we do see the next positive number.