Misleading GDP overstates ECONOMIC GROWTH

[unlawflcombatnt]

Misleading GDP overstates ECONOMIC GROWTH

Again, it appears that the calculated GDP has overstated actual economic growth. Today's published GDP figure of 3.8%, the same as the last quarter of 2004. However, growth of the 2/3's of economic activity due to consumer spending is slowing. The "final sales" growth, which many consider a better indicator of "growth," has declined for the 2nd straight quarter. In addition, most "investment" parameters are also slowing.

The link to these numbers can be found at Briefing.com's GDP section at: http://www.briefing.com/Silver/Calendars/EconomicReleases/gdp.htm

The 1st quarter GDP has now been revised upward to 3.8%. Again, this is the same as the 4th quarter of 2004. However, of the multiple factors used to compute this number, only 2 have increased significantly. The 1st of these is INVENTORIES, which increased from $47.2 billion in the 4th quarter of 2004 to $66.8 billion in the 1st quarter in 2005. This is a 42% increase over the previous quarter. The 2nd major increase was in "residential investment." (Housing & Real Estate) Here there was a 338% growth in the 1st quarter of 2005, from 3.4% in Q4, 2004 to 11.5% for Q1, 2005.

Final sales growth declined for the 2nd straight quarter. Final sales growth decreased to 3.0% from the 4th quarter's 3.4%. This marks a 13% DECREASE. The 4th quarter's final sales also decreased from the 3rd quarter's 5.0%. Thus, GDP sales are not keeping up with the measured GDP. Ultimately, the GDP must be sold to create profits. The declining "final sales" growth, in relation to the the total GDP, suggests the GDP is overestimating economic growth.

All other measures of consumer spending declined as well. Total personal consumption spending (PCE) growth decreased to 3.6% from the 4th quarter's 4.2%. All 3 components of PCE declined as well. Durable goods sales growth decreased 54%, declining from 3.9% in the 4th quarter to 1.9% for Q1 of 2005. Nondurable goods and services also decreased.

Nonresidential investment growth also decreased 72%, from 14.5% in Q4, 2004 to 4.1% in the 1st quarter of 2005. Not only did growth in nonresidential investment not increase, it actually decreased in Q1, 2005. The growth rate was actually -2.4%. Growth in equipment and software investment decreased from 18.4% in Q4 to 6.1% in Q1, 2005.

Thus, GDP growth was maintained almost exclusively from increased real estate investment and increased unsold inventories. All indexes of consumer spending growth decreased. This comes as no surprise, considering inflation-adjusted wages also decreased during that time. Decreased consumer spending power usually decreases consumer spending.

It appears the calculated GDP has again overstated actual economic growth. Goods are being produced in excess of what consumers are purchasing. Excessive goods production drives down demand for labor to produce goods. This decreases the number of employed workers, as well as wages of those who are still employed. This results in a further decrease in the aggregate consumer income necessary to purchase goods.

Growth of inventories and real estate investment are all that have increased during the 1st quarter of 2005. Does this really represent economic "growth"? Doesn't declining growth in consumer spending imply an economic slowdown? Do isolated increases in unsold goods and real estate investment truly indicate economic growth? Can unsold goods and real estate investment really be substituted for consumer spending? Can profits lost from declining goods sales be replaced by production and investment increases? How does that increase profits? Doesn't someone have to buy products for profits to be made?


unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[Sanity Claws]

1. I knew the numbers I heard were wrong

When this alleged growth was announced on the radio, I thought it sounded wrong. I see no signs of growth anywhere. I see signs of people hunkering down.
Announcements from the * administration sound more and more like Tass under the Soviet Union.

[unlawflcombatnt]

13. The Numbers

You were right that the numbers overstated economic growth. The alleged "growth" is just a paper gain. Less goods were sold, and more goods were produced. We can't make up for lack of goods sale by increased production. That's simply ridiculous. But that's how they arrived at those numbers. I guess if we produced enough goods, we wouldn't have to sell ANY of them.

[Supersedeas]

43. but it's faith-based economics.

[unlawflcombatnt]

47. Faith-based Economics

That's a great expression. Mine is "will our faith-based economy become a fate-based economic Armageddon?"

[PsycheCC]

48. You're Kidding, Right Supersedeas?

"I was sitting outside the classroom, waiting to go in, and I saw an airplane hit the tower -- the TV was obviously on. And I used to fly myself, and I said, 'Well, there's one terrible pilot.' " George W. Bush

W didn't really say this did he? Is this a joke? Or is it W making a joke of tragedy???

[unlawflcombatnt]

49. Bush's Statement

Supersedeas,

Did Bush really say that?

[unlawflcombatnt]

16. No signs of "growth"

I think signs of growth are like the weapons of mass destruction. No one could find them. And no one can find any signs of economic growth either. It's just a figment of Bush's imagination. Just like the WMDs.

[indepat]

2. Say it isn't so, Joe, tell me my government wouldn't fudge the numbers

to paint a rosier picture of their stewardship. Say it ain't so.

[unlawflcombatnt]

25. Media Distortion

I think that one of the biggest threats to our economy is the misreporting of economic events. The general public never hears the actual statistics. They hear a very carefully edited few of the real statistics. When the Bushites make their falsely optimistic assessments, someone needs to challenge the assessment, and question what the basis is for the assessment. Using the poorly representative "household survey" to discredit the far more representative "payroll survey," is one such example. The household survey is the one quoted by Cheney when he commented on all the new jobs created on Ebay. The overwhelming bulk of economic statistics do NOT support the contention that we are in a recovery. In fact, most statistics imply the opposite. That's why I keep posting them here. Evidence supporting economic improvement is scant. Evidence to the contrary is abundant, though it's being minimized by the press.

[PsycheCC]

31. CHENEY=DISTORTION KING (Well, Prince maybe)

Unlawful said "Using the poorly representative "household survey" to discredit the far more representative "payroll survey," is one such example. The household survey is the one quoted by Cheney when he commented on all the new jobs created on Ebay."

Even the economically uneducated like me know the household survey is next door to a bad fiction novel, NOT factual and NOT interesting. It's a waste of time to even check it, and it's only ever used by people who don't want to admit the real job picture.

[WCGreen]

51. Kudlow loves that household survey as well......

I have always thought that the financial press has a bias toward growth. Afer all if people aren't juices to invest, what's the purpose of having a financial press....


(BEar with me now, I have pulled an all nighter here)

The departments report the info and then let the press pick and choose what they want to say to the public.....

Watch CNBC to see what I mean.... They have this little Bulls vs BEars thing periodically during the day.....

Watch how the people runing the show favor the bulls and always shift the bears aside....

It's like watching an intelectual version of the Hannity and Colmes show......

Subtle but it's there....

I think this administration has capitalized on this in order to keep the spirits up on Wall Street....

The housing bubble can't last....

Mortage lenders are morphing into used care sales men....

Pension funds are leaking like that famous dyke over in Holland....

And today, yesterday really, it was reported that in the month od June, less about 145k new people were hired into the economy. And they need 156k to just keep even....

Not ten minutes before the announcement, Krudlow was saying he was expecting slighgtly less than 200k. As soon as the numbers were released, he was bubbling at how great the numbers were....

I'm rambling but giving you examples. I watch that crap every day.

So, the question becomes how can the economy not generate enough new jobs to keep up with the population growth and yet have the unemplyment rate drop by .1%. The answer, more people have dropped out of the workforce beacuse they are no longer looking for jobs. They've given up....

So that's a healthy economy....

Have I got a bridge for you....

[PsycheCC]

53. Great Post!

Krudlow... very funny. :rofl:

Unfortunately, it seems almost everybody wants to buy your bridge!

[unlawflcombatnt]

56. Unemployment & Job Growth

You're absolutely right to question how unemployment declines when job growth hasn't kept up with labor force growth. The unemployment rate, which comes from the extremely variable "household survey," is very close to being a work of science fiction.

If the unemployment rate can't be brought down any other way, the Bushites simply claim the labor force participation rate has dropped. That way they don't have to count some of truly unemployed workers as unemployed. They simply claim they weren't looking for work, so they aren't unemployed. How do they make this brilliant determination? They simply ASK the potential workers in their survey if they were looking or not. Real scientific, isn't it. Also real easy to fudge on.

[BurgherHoldtheLies]

3. Recommended. Reality based numbers are important. nt

[Evergreen Emerald]

4. I don't believe one report, survey result, estimate, fact, figure....

...WORD out of the government these days.

[BurgherHoldtheLies]

5. Can you post this in the STOCK MARKET WATCH within LBN....

A lot of people only look there for economic stories?

[unlawflcombatnt]

6. Posting at LBN

I'd like to post this everywhere I can. How would I find the Stock Market Report at LBN?

unlawflcombatnt

[BurgherHoldtheLies]

7. It's currently on page 2 of LBN with a last post of 4:16pm

It's always in ALL CAPS and is a daily thread.

Thanks for posting.

[unlawflcombatnt]

8. GDP Link Correction

My apologies for posting a bad link for the GDP. The correct link should be http://www.briefing.com/Silver/Calendars/EconomicReleases/gdp.htm

If the link still doesn't work, add "es/gdp.htm" to the end. For some reason there's a problem getting the whole link to post in my message.

[Ugnmoose]

9. More government propaganda

There are lies, damn lies and statistics. This is just more spin to make people believe things are going well. As far as I am concerned this whole economy is being artifically propped up right now.

[ProfessorGAC]

10. Here's A Quick Synopsis Of An Analysis I Did

From a different thread in LBN.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=1591013&mesg_id=1592652

The Professor

[unlawflcombatnt]

14. Thanks for the link

I checked your link out, as well as the thread you posted it in. It's great to see people aren't buying the Bush propaganda about a growing economy. The Bushite's are just making up the numbers as they go. In addition, they are using only a few isolated statistics to bolster their "growing" economy claims. This is definitely a faith-based economy. It must be, because it certainly doesn't have facts or logic to support it. This "faith-based" economy may well become a "fate-based" Economic Armageddon.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com /

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."
Original Message

[PsycheCC]

50. Thanks for the Link Professor

I do appreciate those of you who help the rest of us look beyond that first layer of numbers. Your was a very interesting thread.

[snot]

11. This is very helpful; I'd like to see more analyses of $ topics. nt

[unlawflcombatnt]

12. More $ related topics

I'll try to post more. I think a lot of the Bush administration's economic pronouncements are discredited when actual numbers are used. They're as bad at calculating numbers as they are at stating facts. They seem to just make them up as they go.

[snot]

19. Thanks--

I'm stunted w.r.t. numbers, so I really appreciate when someone with more talent can analyze and put in lay terms.

[unlawflcombatnt]

22. Thanks for the support

I'm glad you found that analysis helpful. The Bush administration always reports the few statistics that are favorable, as well as simply making some of them up. I'll keep posting the abundance of statistics that show how poorly our economy is doing. I think it's important to realize how few positive statistics there are regarding our economy.

[nadinbrzezinski]

15. And on a historical note

why am I thinking HOOVER?

You don't say, he ALSO lied

[PsycheCC]

58. It does seem that we've been lied to forever, but I really wish I

had the perspective to tell if I'm right that the Bush Administration has turned lying into an art form never before seen on the political stage. They really are the most prolific, egregious liars ever, aren't they? Of does anyone know of a time that was actually worse?

On a related note, I hope Rove gets worse than axed. Anyone see prosecution in his future?

[OneTwentyoNine]

17. The've been doing that since 01,even with massive layoffs taking place

They know their base isn't really interested in facts,links or even the truth. They just want to be led around by RW cable news stations and Pillboy.

[PsycheCC]

52. Isn't There Some "Check" to keep them from getting away with it?

I thought the Government Accountability Office was supposed to track accusations about things like making up the numbers as they go. Am I wrong on this? Or do the Bushies have guys breaking knee caps over at the GAO?

Pillboy. Hadn't heard that one. Very funny. :applause:

He needs a stash of pills to help him relax before he blows a gasket. :woohoo: :grr:

(Sorry...love those emoticons).

[unlawflcombatnt]

54. GAO and "accounting"

PsyceCC,

I think they get away with making a lot overly optimistic "projections" as to what they "estimate" the numbers will be in the future. I've read many of their previous "estimates" and they've often been far off. Last year I was reading their estimates of tax revenue and outflows/expenses, and they were far off, and had been far off in previous estimates as well. They don't tend to publish many false "final" statistics, but they do publish a lot of falsely "optimistic" future projections. Some would consider them honest mistakes. I don't. I consider them unrealistically optimistic. Their projections seem more affected by wishful thinking than by honest critical analysis.

[unlawflcombatnt]

55. I meant the CBO, not the GAO

PsycheCC,
Sorry, but I mispoke on my last answer about the GAO. Even though you clearly asked me about the "GAO," I answered your question as if you had said "CBO."
:dunce: :spank:


Therefore, I'd like to retract what I said regarding the GAO.
But if you want to ask about the CBO, then I've already got an answer for that one.
:)

[PsycheCC]

57. Hilarious Unlawful! Thanks for Both Replies

But really, no spankings are necessary! :rofl:

[unlawflcombatnt]

18. WAGES

Inflation-adjusted hourly wages have decreased 1.8% since the end of January. When "seasonally-adjusted," the wage decline is reduced to 0.6% since the end of January. Since December of 2003, hourly inflation-adjusted wages have decreased 1.2%.

These numbers come from the Bureau of Labor Statistics at http://www.bls.gov. You might have to search around some to find these. This comes from the series CES0500000049 and CEU0500000049. You can also try the following link http://dat.bls.gov/PDQ/servlet/SurveyOutputServlet. This latter link may only work after you've gone to the 1st link.

The Bureau of Economic Analysis, which is a branch of the Dept. of Commercials, uses a different inflation adjustment. And, of course, it understates inflation. Even their calculations show a decrease in inflation-adjusted wages of 0.35% since the end of January. They do not state this clearly, however. They simply show the non-inflation adjusted wages. They do, however, give an AGGREGATE total of the wages. Non-inflation adjusted "wage and salary disbursements were $5.610 trillion in January and $5.699 trillion in May. This is a 1.5 % nominal increase in wages. However, using the Bureau of Labor Statistics Consumer Price Index numbers, there has been a 1.94% increase in CPI since January (Jan.:190.7 to May's 194.4) So the BEA's wage decrease is 0.34% when adjusted for inflation. Again, these are aggregate, or total American wages. So American consumers' spending power has declined 0.34% since the end of January.

So no matter whose statistics are used, American wages are declining, both individually and the aggregate total income. Is this a sign of a "strong economy," and one that's "getting stronger all the time"?

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[unlawflcombatnt]

20. Consumer Spending & Recessions

The following is a quote from Yahoo's Economic Calendar for Personal Income:
"Personal income is a decent indicator of future consumer demand, but it is not perfect. Recessions usually occur when consumers stop spending, which then drives down income growth." The reference for this can be found at: http://biz.yahoo.com/c/terms/income.html

Again, recessions usually occur when consumers stop spending. The best single indicator of consumer spending is retail sales. Retail sales decreased 0.5% in May. Personal spending increased 0.0% in May. Leading indicators have declined over 1% in the last 6 months. Sounds awfully close to a recession to me. The following is the link to Briefing.com's Economic Calendar showing these statistics.

http://www.briefing.com/Silver/Calendars/EconomicCalendar.htm

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[PsycheCC]

21. Another Great Catch, Unlawful!

Thanks for keeping your eye on the numbers. I love that title, "Dept. of Commercials." Humor helps, especially when the topic is, shall we say, a little, teeny bit dry? :party:

[rman]

35. While the top 1% income has increased up to 500%

over the past few decades.

(source: Paul Krugman)

[unlawflcombatnt]

36. Thanks for the addition

I think I've read that from Krugman before. Do you happen to have a reference article on that? (I haven't checked today's New York Times articles yet.)

[unlawflcombatnt]

37. Krugman Article

I found a recent article by Paul Krugman where he has given some information on the differences between income increase in the top 1%, the top 0.1%, and the rest of us.


It's from his article, "Losing Our Country," posted in the New York Times on June 10, 2005. Krugman states that working families have seen little progress over the last 30 years.

Between 1973 and 2003, when adjusted for inflation, working familiy income has increased only 22%. Krugman states that much of that gain is the result of wives entering the labor force, or working longer hours. The increase has not been the result of increased wages.

In contrast, the average income of the top 1% has increased 100% since 1973. The income of the top 0.1% has increase 200%.

unlawflcombatnt
EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[rman]

41. "What went wrong" - Paul Krugman

"What went wrong"
Paul Krugman
rtsp://real.dialnsa.edu/REAL_BEARD/spring2003_events/schwartz.rm (realplayer)

...
(Economic) policies are being sold with a sales campaign that bares no resemblance to the actual content of the policies. I believe this is completely new.

Elimination of taxes on dividend income benefits people high up on the income ladder. 40% of wealth is in the hands of 1 percent of the population. The direct benefits of this policy flows to very well-off people.

You couldn't sell this policy on the basis that it is a populous policy .. that it is about cutting taxes for the regular people.

Yet that is exactly how it is being sold.

It is being sold trough... "lies" is not quite the right word, because they are careful to phrase things so that they are literally true, just misleading.
The scams are transparent, they are almost childish, it is hard to believe that anyone would dare to do such a thing.

One of the scams that is used is a variant of the old "When Bill Gates walks into a bar that makes everybody in the bar a billionaire, because once he's in the bar the average income of the people in the bar is a billion dollars".

That is exactly the logic that is used in the speeches, over and over again it says "93 million taxpayers will get an average tax break of 1083 dollars next year". Which is true.
The problem is that the great bulk of that, is huge tax breaks for a few people at the top, and about 250 dollars for the person in the middle.

You have this image of 93 million people getting 1000 dollar checks, which is completely misleading.
They didn't exactly say that because they don't want you to think that, and it is amazing that they can get away with it.

Another argument is that it's "for helping the elderly; most of the benefits of dividend tax exemption will go to older people". Which is true.
That is if you look at multi-millionaires, you find they tend on average to be elderly. If you do the arithmetic, you find that 75% of elderly get zero.
More broadly, for elderly Americans with an income of less then $50.000, a grand total of 4% of this tax break will go to them.

This is amazing, it is so transparent it's ridiculous. It is typical of the way that policies have been sold these last two years. Not just in economics but i'm going to stick to economics.

.. If we are polarized country politically it might well be at least in part is because we are polarized country economically. What has been happening is a extraordinary pulling apart of the income distribution. Traditionally people look at income distribution by "quintiles", by blocks of 20%. But that is not where the action is. It is not in the top 10%, it is not even in the top 5%.

To really see what is going on you need to look at the top 1%, the top 0.1% and the top 0.01%. Then you discover that there has been an explosion of income on the very top of the scale:

top 1%
1970 9%
2000 22%

top 0.1%
1970 2.8%
2000 11%

top 0.01%
1970 1%
2000 5%

We are by these numbers fully back to and by some measures above the level of concentration of income that we had in the 1920's.

[unlawflcombatnt]

44. MALDISTRIBUTION OF WEALTH IS WORSENING

Rman,

Thanks for that information. I used to mistakenly believe that the extremely wealthy owned only a small percentage of the total wealth. Now I don't know if that was ever true in the past. It certainly is NOT true at present. If the top 1% owned 40% of the wealth in 2003, I supect it's closer to 50% now.

No wonder the tax cuts did so little to stimulate the economy. Most of the top 40%'s wealth is not going toward consumer spending. There's simply little they'd buy with the extra money. Their money goes into investment (or "overinvestment.") And they certainly can help overinvest the stock market and real estate. Giving them tax cuts worsens this overinvestment. Giving them tax cuts also increases inflation, further reducing consumer buying power and the demand it creates. The tax cuts further increased the maldistribution of wealth, and further worsened the balance between investment and consumption. And the Republicans can still add this overinvestment into the GDP equation, further widening the gap between measured GDP and real economic growth.

unlawflcombatnt

EconomicPopulistCommentary
___________
The economy needs balance between the "means of production" & "means of consumption."

[unlawflcombatnt]

23. More Statistical Manipulation

MORE STATISTICAL MANIPULATION

Todays economic reports showed the 3rd straight month of decline in construction spending. This month's spending growth of -0.9% follows a downwardly revised -1.1% for April. April's construction spending growth had initially been reported at +0.5. Now it has been revised downward 1.6% to -1.1%. (Just an honest mistake, of course.)



Coupled with April's decrease, this marks a 2% total decrease in the last 2 months in construction spending. Construction spending also decreased 0.2% in March. This is the 1st time since mid-2002 that construction spending has decreased 3 months in a row.

Residential construction spending has declined almost 5% over the last 3 months. May's residential construction spending growth was
-1.7%, following April's -2.2% and March's -1.0%.

These statistics come from Briefing.com at: http://www.briefing.com/Silver/Calendars/EconomicReleases/const.htm

Briefing.com had a uniquely optimistic way of "interpreting" non-residential construction statistics. "Business structural investment recovered depsite the large commercial vacancy rate."

Let's review this statement. An increased commercial vacancy rate implies a decrease in demand for commercial structures. So "structural investment recovery", in the face of decreasing demand sounds ridiculous. Is it really a "recovery" to produce even more with decreasing demand? Is it really good for construction to increase when the occupancy rate is decreasing? This sounds like a Bush pseudo-recovery pronouncement. So they're increasing their production, despite a decrease in demand for that production. I guess the commercial structure owners don't need to rent out those spaces to make profits. They must somehow make profits when they're vacant.:sarcasm:



Index of Supply Side Managers:



The Index of Supply Side Managers (ISM) has declined fairly consistently since January of 2004. In fact, it declined every month from July of 2004 through May of 2005. June's increase was the first increase since last July. Overall, the index has dropped almost 9 points from May of 2004, from over 62 to this month's 53.8. The ISM index is used as a measure of manufacturing growth. Any number over 50 supposedly indicates expansion. So the rate of that expansion has declined considerably. Of course, Briefing.com describes today's release as "very encouraging." These numbers can be found at

http://www.briefing.com/Silver/Calendars/EconomicReleases/napm.htm


unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[PsycheCC]

24. Great Graphs!

Thanks for the graphs. They sure clarify the point, and it's nice to have them right in the text.

[Muddy Waters Guitar]

26. Yeah, I've long suspected something like this

Just like Enron and Tyco during their heyday, it's easy to make the situation look better than it actually is by selectively messing with the figures. Number cooking is older than the discovery of fire, and the US government seems to be among the most egregious offenders.

For example, when idiots like Thomas Friedman and Andrew Sullivan bloviate about the superiority of the US economy to Europe, they often cite the unemployment figures that supposedly indicate a massive difference in employment. But there's one crucial detail they fail to consider: The US counts only those people *actively seeking work and failing entirely to find it* in our employment statistics. People who've just given up searching out of frustration-- temporarily or not-- or trapped in a state of semi-permanent temping are not counted as unemployed, whereas Europe, in contrast, *does* count these people are unemployed. So by European (and probably more sensible) standards, our unemployment rate is probably twice as high as official stats suggest.

[unlawflcombatnt]

27. Right On!

I've been saying the same thing on my blog. The key manipulation in the unemployment rate is the labor force participation rate. During Clinton's presidency, the rate used was usually around 67.2%. That means unemployment was calculated off the 67.2% of the labor force deemed to be actively seeking work.

In contrast, the Bush Administration has been using a 65.8% participation rate. In other words, unemployment is only being calculated off 65.8% of the actual work force. Using 65.8%, instead of 67.2%, makes a big difference. Determining the participation rate is about as scientific as a palm-reading.

Using a labor force participation rate of 67.2% would make current unemployment 7.1%, instead of 5.1%. As far as I'm concerned, today's unemployment rate is 7.1% The 5.1% figure was arrived at by conveniently eliminating nearly 2 million workers from the "participating" work force.

unlawflcombatnt

EconomicPopulistCommentary

http://www.unlawflcombatnt.blogspot.com/

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[PsycheCC]

28. What Nerve These Bushies Have!

Lying, cheating, killing, torturing...all in the name of furthering some bazaar "I'm leading this country through the power vested in me by GOD" agenda. When is it enough? I really think they believe they can do ANYTHING to advance their cause, because after all their cause MUST be God's cause. It's perverse. THE ENDS DO NOT JUSTIFY THE MEANS!!!

On an unrelated note, Muddy Waters, I haven't heard anyone but O'Reilly use the word "bloviate." You wouldn't be listening in on the enemy would you? ;-) Nice to see you weighing in on Unlawful's threads. A lot of us think he makes pretty good sense. :hi:

[unlawflcombatnt]

30. The Unholy Alliance

Bush has done everything possible to meld the interests of the corporatocracy with the pseudo-Christian hate groups. These religious hate groups have become the foot soldiers of the Bush corporatocracy. Religious groups are unwittingly supporting the cause of corporate greed. Is this what Christ would have wanted?

[idlisambar]

32. more stuff for you

In case you weren't aware, you might also want to look into the effect of "quality adjustment" on the measure of inflation. Also look up "Boskin commission" -- the program to reduce the inflation measure began in earnest in the mid-90's on this group's recommendation. Keep up the reporting and analysis.

How the government manufactures low inflation

Some government data suggest computer and car prices, among many other things, are falling. But when was the last time you paid less for a car? Here’s why you should be concerned.

By Bill Fleckenstein

Please join me this week in a trip to the government department responsible for fun with numbers. Those D.C. statisticians may churn out their work with a straight face, but that doesn't mean we have to fall for it. Among the skeptics are Steve Milunovich of Merrill Lynch, Jim Grant of Grant's Interest Rate Observer, and, of course, yours truly.

In a recent report, Milunovich noted that the Bureau of Economic Analysis (BEA), whose job it is to compute the Gross Domestic Product each quarter, has "stopped reporting the real computer hardware shipment figure used to calculate real GDP growth, though it is still used in GDP calculations." The BEA, which is part of the Commerce Department, made this readjustment because it is "concerned the rapid price declines for computers made the figures misleading."

http://moneycentral.msn.com/content/P72746.asp

more here...

http://seattlepi.nwsource.com/business/207970_cpi17xx.html
http://www.gillespieresearch.com/cgi-bin/bgn/article/id=343
http://www.gillespieresearch.com/cgi-bin/bgn/article/id=344

There is no question that the GDP reported is equivalent to a much lower number than say 20-25 years ago or even 10 years ago. There is considerable uncertainty over the size of the increase -- estimates vary from .5 points (BEA analysts) to over 2 points (certain outside observers).

[unlawflcombatnt]

33. Thanks for the Links

Idlisambar,

Thanks for the great links. I just recently had an online debate with a blogger about inflation. He claimed the Bureau of Labor Statistics was "overestimating" inflation. This discussion was the result of my showing him that average, inflation-adjusted wages were higher in the 70's than they are now. Average weekly wages (when adjusted for inflation) were actually over $300/week during much of the 1970's. Of course, the argument I got was that the BLS overestimated current inflation. This seems somewhat unbelievable, since all of the 70's figures I saw came from the BLS. You'd think that the BLS would simply revise the numbers, if they acknowledged overestimating inflation. Since they constantly "revise" numbers anyway, it seems they would have simply upwardly revised current numbers if necessary. I think I was hearing some of that old "revisionist" history.

unlawflcombatnt
EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[unlawflcombatnt]

34. Fantastic Links

Thanks again for the links. I've read 3 of them. I think this is going to require a separate post. I've already been ranting about how the Dept. of Commerce uses a different inflation measure than the Dept. of Labor, Bureau of Labor Statistics. This has huge implications. It's also affecting the GDP measure a lot.

The "hedonics" concept is just insanity. Also completely dishonest and corrupt. Thanks again. I'll be posting on this later when I figure out how to explain it.

unlawflcombatnt
EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[unlawflcombatnt]

29. GDP Final Sales Growth

A better measure of economic growth is the GDP final sales. It appears that the Dept. of Commerce also overestimates everything related to the yearly GDP. This is due to their deliberate miscalculation of inflation. Though the Bureau of Labor statistics uses the widely accepted Consumer Price Index (for all items) to determine inflation, the Dept. of "Commercials" uses a lower measure of inflation, which excludes the increases in food and energy costs. The inflation rate for all items, calculated from the consumer price index change from January 2004 to January 2005, is 3.0%. The calculation is as follows:
(190.7-185.2} divided by 185.2 = 0.03 or 3%
{Note: 190.7 is January 2005's CPI, 185.2 is January 2004's CPI}

The published GDP Final Sales for January 2004 is $11.436 trillion.
The published GDP Final Sales for January 2005 is $12.124 trillion.
Adjusted for inflation, Jan 2005 GDP fin. sales is $11.760 trillion.

The difference between $11.760 trillion and 11.436 trillion
is $0.324 trillion, or 2.8% GDP final sales growth for 2004. (Using the Commerce Departments 2.3% inflation rate gives a GDP growth of 3.57%.)

Again the Dept. of Commerce excludes the cost of fuel and food, making the inflation rate 2.3%, instead of 3.0%.

Again, by using an artificially low rate of inflation, they overstate our actual GDP sales growth. Surely they wouldn't try to deliberately deceive us, would they?

The CPI information can be found at http://data.bls.gov/cgi-bin/surveymost. (Look under the Consumer Price Index for all items.)

The GDP final sales information can be found at
http://research.stlouisfed.org/fred2/series/FINSAL/viewdata

[agincourt]

38. Even as long ago as the Reagen administration,

The MSM would crow about an economic recovery that wasn't happening.
When a RW republican is in power I don't believe any economic "news" anymore.

[PsycheCC]

39. I Had No Idea of The Degree of The Lies!

I knew you couldn't trust them, but I recently read an article from a link on a DU thread about something called Hedonics. I'm sorry I cant recall the link, but the idea of Hedonics is that the government has a creative way of erasing inflation. They say that even tnough the price of a product increased, if the quality of that item did too, then the consumer got a better value and therefore, the price didn't really go up!

One example was of a Chevy truck costing 40% more than at some previous time, but they claim the quality of the truck has also increased by 40%, so in fact, you get the same value and the price really hasn't increased at all. They have formulas they use to compute this so it looks like price didn't increase, and therefore, inflation is under control. Well, obviously some of us would have chosen the less expensive Chevy if we could have, and in our world 40% higher cost is a definite price increase.

Anyway, this article gave me new respect for the creativity of the Bush numbers racket. The author said if they don't like a number, they just "define it away," redefining what constitutes a problem so the problems just magically disappear.

I'm a relatively new student to the subject of economics, so this concept of Hedonics may be familiar to others, but wow, what a shocker this was to me! Maybe someone out there can recall the link to this article? It was quite enlightening.

[unlawflcombatnt]

40. Right-Wing Fact "Creation"

I don't believe any of the statistics the Right-Wing government is publishing either.

I just finished an online debate with a poster regarding our deficit and national debt. He sent me a link to the CBO. The CBO, along with Fox News, should be televised on the "Sci-Fi" channel. The only difference is that everyone knows Fox is lying. But some people still mistakenly think CBO estimates are
"fact"-based. "Fantasy"-based is more like it.

unlawflcombatnt
EconomicPopulistCommentary

___________
The economy needs balance between the "means of production" & "means of consumption."

[jfern]

42. Take into account inflation and population (or labor pool) growth

And it's all negative.

[unlawflcombatnt]

45. Population growth

Yes, you're right on that. It's the aggregate wages that really count. But if they're spread out over more people, there will be less available to spend beyond the basic necessities, such as food and rent, since the aggregate total spent on basic necessities is higher.

unlawflcombatnt

[unlawflcombatnt]

46. Labor Pool Growth

The growth of the labor pool actually decreases aggregate wages. The demand for labor is created by demand for production. Increased supply of labor, without increased demand for labor, wages will decline. As the labor pool increases, the laws of supply & demand work against American workers. If there is an increase in number of workers available, and no increase in jobs, it drives wages down. Any increase in supply decreases price. In this case, the "price" is worker wages.

Thus, the effect of a constantly increasing labor force is a decrease in average wages. Since aggregate consumer income decreases, so does labor demand and labor income. The decline in income further decreases consumer income and spending, further decreasing demand for production.