GDP in the United States – Misleading data? How GDP may not be a good representation of the actual economy.

Interesting look at GDP in a weekend article.  There have been recent debates about GDP really reflecting the true health of an economy.  When we hear that GDP is going up we generally think that wages, jobs, the stock market, all go up in tandem.  But in today’s market it would appear that the only thing that had a significant rally is the stock market.  More directly, profits in big investment banks have been soaring and this does skew GDP up but this key doesn’t examine government transfer payments.  We could in fact make GDP soar by funneling trillions more into the economy but all this would be diluted by inflation.

Worth a read this weekend:

“(NY Times) Whatever you may think progress looks like — a rebounding stock market, a new house, a good raise — the governments of the world have long held the view that only one statistic, the measure of gross domestic product, can really show whether things seem to be getting better or getting worse. G.D.P. is an index of a country’s entire economic output — a tally of, among many other things, manufacturers’ shipments, farmers’ harvests, retail sales and construction spending. It’s a figure that compresses the immensity of a national economy into a single data point of surpassing density. The conventional feeling about G.D.P. is that the more it grows, the better a country and its citizens are doing. In the U.S., economic activity plummeted at the start of 2009 and only started moving up during the second half of the year. Apparently things are moving in that direction still. In the first quarter of this year, the economy again expanded, this time by an annual rate of about 3.2 percent.”

“As it happens, all those things — cooking, cleaning, home care, three-week vacations and so forth — are the kind of activity that keep Low-G.D.P. Man and his wife busy. High-G.D.P. Man likes his washer and dryer; Low-G.D.P. Man doesn’t mind hanging his laundry on the clothesline. High-G.D.P. Man buys bags of prewashed salad at the grocery store; Low-G.D.P. Man grows vegetables in his garden. When High-G.D.P. Man wants a book, he buys it; Low-G.D.P. Man checks it out of the library. When High-G.D.P. Man wants to get in shape, he joins a gym; Low-G.D.P. Man digs out an old pair of Nikes and runs through the neighborhood. On his morning commute, High-G.D.P. Man drives past Low-G.D.P. Man, who is walking to work in wrinkled khakis.”

In 2009 productivity of American workers went through the roof while corporate profits soared.  Squeeze the bottom so the top can get their lemonade.

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