Posted on 04/09/2004 1:28:17 AM PDT by sarcasm
Measuring America's economy
Grossly Distorted ProductApr 7th 2004
From The Economist print edition
Are official statistics exaggerating America's growth?
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DESPITE the welcome leap in American employment in March (see article), America's job market has been surprisingly weak in the past couple of years—surprising, at least, to economists. Some have explained this by pointing to rapidly rising productivity figures. Perhaps firms have not needed more workers. But there is another explanation: America's GDP figures, which have been strong, may be inaccurate, and may be exaggerating the extent of economic growth.
In the two years to the fourth quarter of 2003 America's real GDP grew at an annual rate of 3.6%. Going by past recoveries, this should have meant a rise in employment of 2% a year. Instead, non-farm payrolls have fallen. Most economists say that this reflects a sharp increase in productivity growth. Jan Hatzius, an economist at Goldman Sachs, is not so sure. Other economies that have enjoyed rapid productivity gains in recent years, such as Canada and Australia, have also seen strong increases in employment.
Nor does Mr Hatzius accept the argument that the employment figures have been understating job creation. It is too soon to tell whether March's data (which were published after his study) mark the start of a delayed catching-up. This leads Mr Hatzius to suggest that GDP is being overstated. The standard measure of GDP is calculated by totting up aggregate expenditure; but another estimate, found by summing incomes—which in theory should be the same—says that GDP has grown at an annual rate of only 2.8% since the end of 2001, 0.8 percentage points less than the expenditure measure.
Another piece of evidence is the unusual divergence of the growth rates of GDP in the goods sector and of industrial production. The two series used to track each other closely; but in the past two years a wide gap has opened up (see chart). In the year to the fourth quarter, industrial production rose by only 1.4%, while goods-sector GDP surged by 8.0%.
Industrial-production figures are likely to be the more reliable of the two, because they come directly from industry reports. In contrast, goods-sector GDP is estimated indirectly by adding together final sales of goods, changes in inventories and net exports. If goods-sector GDP is replaced with the industrial-production series in estimating GDP, then the economy grew by only 2.2% in the year to the fourth quarter, not the reported 4.3%.
Why might official statisticians be overstating America's GDP—and productivity with it? Mr Hatzius suggests that they may be undercounting imports of intermediate inputs of goods and services produced abroad by American firms that have outsourced jobs to cheaper countries. Since GDP is calculated as domestic spending plus exports less imports (including imports of intermediate inputs), this would lead to an overstatement of GDP.
For example, when American firms outsource call-centre and information-technology-support jobs to India and other Asian countries, the result should be higher imports of services, yet official statistics do not show such an increase. America's recorded imports of software services from India are also much smaller than India's reported exports of such services to America.
If Mr Hatzius is right, then jobs have been slow to pick up largely because this has been, at least until now, an exceptionally weak economic recovery. That is exactly what you might have expected after the bursting of the biggest financial bubble in history.
What does "racial code words" have to do with your advice? To wit, "Try reading these...they are written by people with brains!"
That's what I'd like to know.
But that was the brilliant offering (“Outsourcing Bigotries”) of the first brainy author who waves off "outsourcing" (offshore) as fear mongering equivalent to a "racial code word." Like the local talk show host (Sacramento) and Free Republic poster waves off criticism of Gov. Arnold as "dupes of Democrat Party misinformation" so does the author wave off discourse over offshoring as Democrat Party misinformation. (Fact is dem Rats are as much for it as mainstream Republicans -- even Hillary praises it.)
Nevertheless, thank you for the sources. I have been asking for sources. There's got to be "a pony until all that crap" somewhere.
The earnings reports from companies confirm the GDP growth. Jobs always lag in an economic recovery. GWB has his weaknesses when it comes to economics, but the economy has been heading in the right direction since the second tax cut.
Is this a left-leaning magazine? No mention of historic lows in unemployment. The 8.5 million workers that kerry will give 10 million jobs to. Etc., etc,...
How about some enlightment on the use of hedonic price indexes in the measurement of real computer hardware and software expenditures in the U.S. To wit, to what extent is it responsible for the pickup in real gross domestic product (GDP) and productivity growth?
This practice was started in the 1990s and for instance I believe it tries to account for the vastly greater productivity of $2000 spent on a computer in 1990 and the same $2000 spend on a computer in 1998.
I've seen arguments that it has kept the appearance that the manufacturing portion of GDP is as high as it has always been thus giving the Limbaughs, Hegecocks, Sullivans, et al an argument that no manufacturing capacity has been lost to offshoring.
IMO given that "free" trade v. free trade is the real argument. Proving "free" trade is good is going to require a whirling dervish. Bruce Bartlett spins mightily but no dervish he.
“Outsourcing Stikes Back” mentions Stephen Roach, chief economist for Morgan Stanley and his opinion that Forrester Research's projection of U.S. jobs losses to be "pretty flaky." But there was no mention of the "rest of the story" such as Mr. Roach's writings about leakage, labor arbitrage, imported producitivity, lost consumer demand, and other affects on our economy and jobs.
He cites the Global Insight study that says IT outsourcing results in net good for the US Job Growth without mentioning the ITAA connection.
He points out that the study says the new jobs will be construction, transportation and utilities, education and health services, and wholesale trade. Fine. But these have been cited elsewhere as gainers without regard to offshoring.
He throws in a couple of platitudes saying free trade is good -- who says it is not good?
I object specifically to "free" trade with China. There is one of the socialist/communist countries that murdered at least 100 million of their own citizens last century. Now they are a key trading partner?!!
Here the whirling dervish wannabe (Bartlett) tries xenophobia. To wit, in “The (Out)Source of All Confusion” he says
"Holman Jenkins of the Wall Street Journal recently put it, 'The current griping over 'outsourcing' seems almost a species of psychological dysfunction, one that blames foreigners over any explanation that doesn't.'"
Though he did calm down and became more rational he, IMO, overstates the automation concerns of the 1960s and the concerns about Japan years later characterizing them as hysteria. We expressed our opinions and all were happy when the impact was as most expected.
For example, we'd been exposed to the promise of automation for years and as far as Japan was concerned let 'em make our TVs we had IT exploding all around us. Plus, they got the attention of Detroit! Screw Engine Charlie Wilson, we wanted better cars from Detroit and we got 'em. Most of us were more trusting in those days, however.
He talks about retaliation if we limit offshoring. Retaliation! Like how? He fails to mention that US Trade Representative Robert Zoellick recently criticized India for wanting more and more offshoring from us but remains "one of the most closed economies of the world." Of course there is no mention of our WTO complaints against the Chi-coms obstructions.
It's "free" trade v. free trade, stupid!
Finally, I found evidence of a pony under all that crap. At least, it's a pony for some.
In "Cut Outsourcing = Cut Profits," Mr. Bartlett stopped spinning and finally addresses "free" trade v. free trade except that he omits free trade and praises "free" trade. This is about corporate profits. Period. Nothing wrong with that.
This is about cheap labor. It's about sending technology and jobs offshore and importing our goods and services. He praises that. Fine.
I feeeeeeeeel better that "free" traders can put BS aside and talk straight.
Stop calling us names, Mr. Bartlett, et al. if we ask about such things as replacing our guys by partnerships with state owned enterprises (SOE) where the state murdered tens of millions of their own citizens.
That is because the US firms are lying about it. It numbers also do not capture "in house" offshoring - a US firm offshoring through a sholly or partly owned subsidiary. My guess is that this even larfer in terms of job loss.
This article from the Economist points out a couple things. First, imports may be understated. Second, this is a weak recovery.
The first issue, underreporting, smacks of Enron style dishonesty. The second issue is significant because people vote their pocketbook - a weak economy does not bode well.
If you want on or off my offshoring ping list, please FReepmail me!
There is another ECONOMIST article that, unfortunately, under the New Regime, I cannot Excerpt...
April 3rd-9th Edition page 65 "Indian Innovation"...Please don't call it outsourcing.
They list the companies Indian Subsidiaries, and the number of Patents: Texas Instruments == about 225; Intel ~ 125; Oracle ~ 125; Cisco ~ 120; GE ~ 95; IBM ~ 75; ICI ~ 50; Whirlpool ~ 25; SAP ~ 25.
Interestingly, Texas Instruments has been there for at least 25 tears, Intel only Five.
I guess that puts the Patent Law Offshoring in context.
Also, the German SAS has NOT laid off a single R&D type in Germany...the bad news is they are Ramping Up operations in India, so no more R&D people will ever be hired in Germany...that is it!!!
6 - read
"For example, when American firms outsource call-centre and information-technology-support jobs to India and other Asian countries, the result should be higher imports of services, yet official statistics do not show such an increase. America's recorded imports of software services from India are also much smaller than India's reported exports of such services to America."
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