Conflicting New Economic Data Paints a Baffling Picture
Economists are struggling to make sense of new economic data. The two major indicators that tell them how healthy the U.S. economy is — gross domestic product and employment figures — don’t agree. At all.
Since the first of the year, the stock market has been heading downward, along with oil prices and corporate profits from massive companies like DuPont, BP, and Morgan Stanley, all of whom have announced layoffs. If the economy is measured by its current anemic 1% growth, it’s not very robust.
On the other hand, employment numbers tell a different story, with almost 300,000 new jobs created in December. Unemployment numbers are low, so the economy’s doing fine.
These two indicators don’t usually contradict each other like this, and economists haven’t reached much of a consensus so far.
Laura Rosner, senior U.S. economist at BNP Paribas, doesn’t think the GDP’s as bad as it looks. She told the New York Times that it’s because we combine different aspects of the economy: the services sector and manufacturing. The services sector, which accounts for 86% of American workers, grew by more than 2.3 million people, according to Bureau of Labor Statistics data. Manufacturing represents just 9% of workers, and it added only 13,000 jobs. Rosner’s view suggests employment is a leading indicator of a healthy economy.
Not so fast, David A. Levy, an independent economist, told the Times. “People commonly use employment as a leading indicator,” said David A. Levy, “but it’s a lagging indicator.” He thinks optimists are underestimating the impact from weakness overseas, and that the U.S is heading for a recession.
The bottom line? We’ll see.