Understand the Truth Behind Your Expert's Statistics

In the field of forensic accounting and economics, experts utilize government and industry studies and statistics all the time, especially when actual information specific to an individual is unavailable.

Economic Scene: Economic Statistics Miss the Benefits of Technology

I traveled to Japan with a Tandy TRS-80 portable computer, which ran on AA batteries and had plastic cups to put over the phone receiver. It transmitted copy at the blistering speed of 300 bits per second. And I wrote about Mexico’s tequila crisis of 1994 without the benefit of a full set of Mexican financial statistics a few clicks away.

From my perspective, the evolution of the tools of journalism between then and now has been nothing less than breathtaking.

Articles are more thorough — informed by complementary data and analysis, enriched with links to things like interactive charts, videos and slide shows. They get to readers much more quickly. Most important, they reach many more of them.

For all its financial troubles, never has The New York Times been read by more people: 44 million unique viewers online in the United States every month. Yet if you were to rummage through American economic statistics you would find little evidence of journalism’s technological leaps. Measured by its contribution to gross domestic product, the most prominent indicator of the nation’s economic well-being, much of this new journalistic value enabled by information technology is not worth much.

This is true not only of journalism. The failure of I.T. to deliver measurable value has been a popular meme among economists for years. Back in 1987 Nobel laureate Robert Solow posed a now famous paradox: “We can see the computers everywhere except in the productivity statistics.”

The meme is back. The burst of productivity during the dot-com revolution of the 1990s gave skeptics pause. But as productivity has slowed substantially in recent years, doubts have re-emerged about whether information technology can power economic growth like the steam engine and the internal combustion engine did in the past.

Last year, Robert J. Gordon of Northwestern University proposed that the I.T. revolution has pretty must exhausted its promise. He asked, provocatively: “Is U.S. economic growth over?” And he forecast stagnating living standards for the vast majority of Americans for decades to come.

Government statistics lend support to his skepticism: Value added by the information technology and communications industries — mostly hardware and software — has remained stuck at around 4 percent of the nation’s economic output for the last quarter century.

But these statistics do not tell the whole story. Because they miss much of what technology does for people’s well-being.

News organizations that take advantage of computers to let go of journalists, secretaries and research assistants will show up in the economic statistics as more productive, making more with less. But statisticians have no way to value more thorough, useful, fact-dense articles.

What’s more, gross domestic product only values the goods and services people pay for. It does not capture the value to consumers of economic improvements that are given away free. And until recently this is what media organizations like The New York Times were doing online.

The Commerce Department is in the process of revising the way it measures G.D.P. to take better account of the contributions of investment in research and development and artistic creation. But even though the revisions to be announced this summer are expected to make the economy look bigger, they are not devised to capture the value that Americans get from digital technologies.

“G.D.P. is not a measure of how much value is produced for consumers,” said Erik Brynjolfsson of the Massachusetts Institute of Technology. “Everybody should recognize that G.D.P. is not a welfare metric.”

G.D.P. misses what Americans gain from sharing information on Facebook or finding information on Google or Wikipedia. It misses how dating sites reduce the cost and increase the odds of finding a mate. It misses the time saved by drivers who use Google maps and the time gained by consumers from shopping online. Measured in money — what it contributes to G.D.P. — the recording industry is shrinking. Yet never before have Americans had access to so much music.

Understand the Truth Behind Your Expert's Statistics

In the field of forensic accounting and economics, experts utilize government and industry studies and statistics all the time, especially when actual information specific to an individual is unavailable.

Social Media and Electronic Communication Statistics Lawyers Should Not Ignore

Like it or not, social media and electronic communications are here to stay and they are tools that cannot be overlooked in the legal marketing strategy by law firms and lawyers. Here are 10 statistics that should not be ignored.

Understand the Truth Behind Your Expert's Statistics

In the field of forensic accounting and economics, experts utilize government and industry studies and statistics all the time, especially when actual information specific to an individual is unavailable.

Social Media and Electronic Communication Statistics Lawyers Should Not Ignore

Like it or not, social media and electronic communications are here to stay and they are tools that cannot be overlooked in the legal marketing strategy by law firms and lawyers. Here are 10 statistics that should not be ignored.

Social Media and Electronic Communication Statistics Lawyers Should Not Ignore

Like it or not, social media and electronic communications are here to stay and they are tools that cannot be overlooked in the legal marketing strategy by law firms and lawyers. Here are 10 statistics that should not be ignored.

Economix: How Bureau of Labor Statistics Tames Volatile Raw Data for Jobs Reports

7:32 p.m. | Updated

Dollars to doughnuts.

The unemployment rate fell to 7.8 percent in September, its lowest level since President Obama took office. With just a month to go before the election, the news seemed too good to be true, at least for some Mitt Romney supporters.

Almost immediately some conservative pundits began accusing the Labor Department, which released the jobs numbers on Friday, of cooking the books. After all, the household survey — the survey that the unemployment rate comes from — showed that the number of people with jobs rose 873,000 in September, though the gain had averaged 164,000 each month earlier this year.

These numbers are always tremendously volatile, but the reasons are statistical, not political. The numbers come from a tiny survey with a margin of error of 400,000. Every month there are wild swings, and no one takes them at face value. The swings usually attract less attention, though, because the political stakes are usually lower.

Look how noisy these numbers are, and always have been!

The numbers, by the way, are especially imprecise (and prone to revision) when the economy is making a turn, or when regular seasonal patterns start to change. And there is reason to believe that one particular seasonal pattern — the start of the college school year — may be partly responsible for the big swing in September.

One of the biggest sources of volatility in the last couple of months (and one of the major contributors to the big bump in job-getters in September) was the group of workers between 20 and 24 years old.

Historically, the employment levels for that group have dropped sharply in September, probably because many people in their early 20s are leaving summer jobs and going back to school.

For each year since 1948, the average level of employment for this group has fallen by 398,000 from August to September. In fact, before this year, employment for this age group had risen just two times in that period: 1954 (a gain of 5,000), and 1961 (a gain of 22,000).

This year was the third time on record that the number of people in this age group gained jobs in September, and the gain was big: 101,000.

Source: Bureau of Labor Statistics. Numbers are not adjusted for seasonality.

How to explain this major deviation from the historical trend, other than conspiracy theories?

If you look back at August, an unusually high share of this age group stopped working, compared with past employment patterns in August. From 1948 to 2011, the number of those 20 to 24 who had jobs fell by an average of 98,000 from July to August. This past August, it fell by 530,000, the biggest loss on record.

Over the last couple of decades, in fact, the job losses for this age group have been growing each August, suggesting that over time young people have been leaving their summer jobs earlier and earlier.

Source: Bureau of Labor Statistics. Numbers are not adjusted for seasonality.

In other words, seasonal patterns might be evolving — people starting school and leaving their summer jobs earlier in the summer — which has big implications for how the Labor Department digests and reports the monthly employment data.

The Bureau of Labor Statistics adjusts its raw survey data to correct for seasonal patterns, and since a decline in employment is expected for those 20 to 24, the economists at the bureau increased the level of employment for this group in the seasonally adjusted numbers.

Changes in seasonal patterns like this one can introduce more error into the headline numbers, and can at least partly explain why the overall change in household employment looked so much bigger in September than seems plausible. After seasonal adjustment, the increase in employment among those 20 to 24 was given as 368,000. That’s about 42 percent of the overall increase in employment growth for people of all ages. (After making seasonal adjustments on the August figures, the employment level for 20- to 24-year-olds was reported as declining by 250,000.)

All of which is to say the bureau aims to release the most informative numbers it can. But it is seeking to measure the state of the American job market quickly, based on surveys that are inherently incomplete — and the adjustments that are meant to fill in the gaps have their own shortcomings, particularly when seasonal trends change.

In case you still believe that the models the bureau uses are being manipulated to put President Obama in a better light, note that there are no political appointees currently serving in the Bureau of Labor Statistics. The employees are all career civil servants who have worked under both Republican and Democratic administrations. (The commissioner of the bureau is supposed to be a political appointee, but that position is vacant. The acting commissioner, John M. Galvin, has held the position since January, and he is a career civil servant.)

Economists at the Bureau of Labor Statistics regularly adjust the models they use to account for factors like seasonality and the number of new companies entering the economy, and the revisions are often very large.

Economists outside the bureau have been weighing in, too, both on how the latest numbers should be adjusted and what the next few months of jobs reports should look like. A paper presented last month as part of the Brookings Papers on Economic Activity series, for example, incorporated data on people flowing into and out of unemployment to forecast that the unemployment rate would most likely stagnate for a few months to come.

Social Media and Electronic Communication Statistics Lawyers Should Not Ignore

Like it or not, social media and electronic communications are here to stay and they are tools that cannot be overlooked in the legal marketing strategy by law firms and lawyers. Here are 10 statistics that should not be ignored.

Social Media and Electronic Communication Statistics Lawyers Should Not Ignore

Like it or not, social media and electronic communications are here to stay and they are tools that cannot be overlooked in the legal marketing strategy by law firms and lawyers. Here are 10 statistics that should not be ignored.