Beware the data ... who is doing the counting?

The picture that the US government (and the wider public) get about the financial health of the country is distorted by the way in which data are gathered and analysed. This is the claim from last week's gathering of economists from academia and government determined to come up with a more accurate statistical picture.

The fundamental shortcoming is in the way imports are accounted for. A carburettor bought for $50 in China as a component of an American-made car, for example, often shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, used in national productivity calculations.

“We don’t have the data collection processes to capture what is happening in a real time way, or what is being traded and how it is affecting workers,” said Susan Houseman, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan., who has done pioneering research in the field. “We have no idea how to measure the occupations being offshored or what is being inshored.”

The statistical distortions can be significant. At worst, the gross domestic product would have risen at only a 3.3 percent annual rate in the third quarter instead of the 3.5 percent actually reported, according to some experts at the conference. The same gap applies to productivity. And the spread is growing as imports do.