Is The U.S. Economy Really Booming?ByRaymond D. Matkowsky
The United States government tries to make people believe that the U.S. economy is booming. They are succeeding at least in the media. Officials are quick to point out that the stock market is reaching new heights. The stock market is not the U.S. economy. I will point out that prior to the economic crash during the Depression of the 1930 the stock market was also reaching new heights.
My foreign readers should also be very concerned. The United States economy drives the economic health of the rest of the world. A poor U.S. economy spells poor trade for the rest of the world. The Depression of 1930 spread worldwide very quickly.
Deceptive Statistics
For a long time, we at Data Stats have felt that, although the data numbers they are based on are accurate, The Bureau of Labor Statistics and The Bureau of Economic Analysis present economic statistics in a deceptive manner. They do this to put a positive light on United States government activities. An example of this is the “Seasonable Adjustment.” I fail to see what this adjustment entails. It appears to me that this is a moving target that fall victim to the whims of various individuals. I would caution my readers to take this type of information with “a grain of salt.”
Both bureaus use previous quarter to present quarter seasonally adjusted data. Supposedly this gives you a moving picture of the economy. However, this can be a potentially poor representation. A bad previous quarter will make the present quarter look exceptionally good and it will be stated as such when in fact it is not or a previously good quarter would make the present quarter look bad when it really wasn’t. Either way seldom is it an accurate portrayal of the status of the economy. Take a look at the following data for the growth of U.S. Gross Domestic Product over the last few years:
| Year |
Actual (Year to Year) |
Seasonally Adjusted |
You can see that the U. S. government badly overestimated the state of the economy during the last four years. How bad? The closest estimate of the two was in 2014. The furthest estimate differential was in 2013 and 2015. In 2014 the Bureau of Economic Analysis overestimated the state of the economy by $645.5 billion. In 2013 they overestimated the state of the economy by $1676.81 billion or $1.68 trillion and more in 2015 out of a $17-18 trillion economy. At Data Stats we only use unadjusted yearly data. This information is available in government reports. However, you will have to look for it.
I would remind my readers that absolute numbers in many areas are just short of being meaningless. In order to know where you are going, you have to know where you have been and enough time has to elapse for you to recognize the trend. Quarter to quarter data will not meet this standard and certainly not one that is massaged to look better than it really is.
How About Inflation?
Over the past four years, the United States’ economy has been essentially stagnant ranging between 1.5% to 2.6% growths per year. Yet, the government will tell you that the economy is taking off to new heights. That is far from the truth. It is even further from the truth when you consider inflation. In 2013 the inflation rate was 1.5%. Therefore, real growth was only 0.7%. In 2014 inflation equaled 0.8% making real growth 1.8%. 2015 had an inflation rate of 0.7% making real growth only 1.3%. 2016 is the worst year that we have experienced. Inflation was 2.1% making the actual economy contract by -0.6%. We recently finished 2017 and the final data is not in, but it looks to us here at Data Stats that the economy will only expand 0.1%. We are not in a booming economy. We are muddling through, barely keeping are head just above water.
Maintaining Your Business’s Prosperity
Be cautious, delve deeply into government statistics, take appropriate actions, and make decisions based on your own trends and on your own situation. Do not accept the circumstance on face value. There are sections of the world’s economy that are dying. All that is being put forward though is “happy talk” and “wishful thinking.” A business cannot survive on “wishful thinking.”
As the data changes and new trends emerge, our opinion of course will change. It can change drastically. But, remember historically we are way beyond the typical periods between recessions. So, it is difficult to have a rosy outlook.
If you have any further suggestions, do not keep it to yourself. Help your fellow readers!
If you have any questions, comments or suggestions drop me a line at rdm@datastats.com.
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