Is U.S. government-data being “massaged”?
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Many market-watchers claim that U.S. 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, nonfarm 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 arbitarily chosen date) from the monthly totals for all four 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.
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…
May 14th, 2009 at 10:18 am
Massaged? Ya think?
May 14th, 2009 at 11:15 am
It could be that the data collection process is flawed. In the current environment getting accurate data may be harder as respondants are either a) opt’ing out or b) not able to respond accurately, c) don’t care for various reasons, d) overworked since they are doing the job of their former co-worker who recently let go and this is the bottom of the priority/accuracy list. Or e) the data is massaged, or f) just coincidence since 3 of the 4 are within their historical ranges, or g) all of the above. I pick g.
May 14th, 2009 at 11:27 am
There’s always the possibility that when they constructed their models, they looked at historical data and decided the Great Depression was an aberration, and threw out that data. So their model works well most of the time, but fails when we’re in a situation like the Great Depression. I know the payroll data includes a business birth/death correction based on a model. I bet they used post WWII data to develop that model.
Just another version of Hoocoodanode.
May 14th, 2009 at 11:40 am
“Well, I went back and had a look at the differences between the reported and revised data for various series, including monthly retail sales, nonfarm payrolls, industrial production, and durable goods orders, to try and figure out if the cynics are right.”
Cynics?
For Christ’s sake – Just look at GDP. You own your house. The government calculates what you’d pay in rent if you rent, which you don’t and then they add that amount to GDP.
I could go on for days.
F&*king Enron accountants would be proud of sh&t like this.
Cynics? ” “You gotta wonder?”
NFW
May 14th, 2009 at 1:14 pm
You must be mistaken. What on Earth would the government have to gain by appearing to beat expectations? If you can’t trust your own government, then who can you trust. Shame on you.
Bizarro Dead Hobo
May 14th, 2009 at 11:38 pm
I don’t think there’s ANY DOUBT that government data is being “massaged”. And there’s nothing “special” about it.
May 15th, 2009 at 11:40 am
So Obama is in collusion with Bush? Makes sense to me. Or, is it possible that it is more difficult to measure statistics is periods of change? As BR even mentioned, the margins of error are large for an economy of this size.
If the revision falls within the margin of error is that manipulating or just within the margin of error?
May 16th, 2009 at 11:44 am
Maybe Obama can fix this!