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| Inside America’s economic machine |
| 2003-12-08 |
| EFL Subscription required for full article The US economy: what a mystery. Sceptics, especially those in the Democratic party, charge that government data are imprecise and that they obscure the true economic pain that comes as manufacturing jobs disappear. The sceptics are correct - the data are not perfect. The problem, however, is not one of right versus left but of old versus new. The methods Washington uses to collect these numbers were determined in a calmer economy where people worked for one company all their lives. Let us label it a Ford economy after its big component, the car. America is not a Ford economy any more. It is what we might call a Staples economy, after the office supply retailer. People change jobs more frequently, communicate more frequently, create start-ups and home offices more frequently. The Staples economy means some bad news but more good news. Neither kind is entirely captured by the data. Start with the bad news, a bit obscured by Friday’s news of 5.9 per cent unemployment. These days, Americans change jobs more often, and the very concept of a "job" is being eroded. The new instability generates bitterness, especially for those who insist on replicating their old job situation. The cost of Staples instead of Ford goes beyond social issues to the stability of the economy. In the first half of this year the country saw 835,000 personal bankruptcies, a record figure. The record suggests a vulnerability that will have consequences when interest rates go up. So much for the negatives. More often, the trouble with government data is that they have a hard time recording the good news. The first example of this is the much-debated Household Survey, a poll that calls families at home to inquire about employment status. ... in the era of two-parent employment, houses where no one is at home are more - not less - likely to be houses where the adults work. The study has a bias that causes it to miss employment, not exaggerate it. Then there is the Establishment Survey, a measure that focuses on collecting employment data from workplaces.... The survey sometimes fails to capture individual self-employed contractors and entrepreneurs - a ubiquitous type in the Staples economy. David Malpass of Bear Stearns thinks that the federal data fail to take into account the degree to which companies are now contracting out work. The consequence is that workers may be under-recorded. Mr Malpass points to other data that indicate hidden growth or hidden growth potential. Non-farm proprietors’ income, a measure that looks at the profitability of unincorporated business, is up strongly .... The number of self-employed in the Household Survey has risen sharply as well. The National Federation of Independent Business’s Small Business Optimism Index is likewise up sharply, Mr Malpass notes. Now we come to another big measure: productivity, which was at a disconcerting high of 9.4 per cent last quarter. The formula for determining productivity is output divided by labour and other inputs, more or less. So if the statisticians are under-counting labour, productivity may be less impressive than advertised. Still, US productivity remains higher than developed nations usually can manage. And productivity comes closest to capturing the potential of the Staples economy. That 9.4 per cent figure - or say it’s 7.4 per cent and be conservative - is a promise of future work and higher wages that will hold as long as the government doesn’t load too many costs on to employers. And the Bush administration is not loading on costs. In other words, when we evaluate the administration’s overall economic direction in these challenging years we see that it has been wise, growth-oriented and - yes - accurate |
| Posted by:rkb |