Tuesday, May 20, 2008

Business Week found ShadowStats

In line with my recent economic series, a librarian showed me that Business Week last year in a front page article blasted the BLS for producing phantom Gross Domestic Product numbers. They say that out-sourcing has blown the economic statistics to Hell and the productivity, inflation and GDP numbers could be worthless.
By BusinessWeek's admittedly rough estimate, offshoring may have created about $66 billion in phantom GDP gains since 2003 (page 31). That would lower real GDP today by about half of 1%, which is substantial but not huge. But put another way, $66 billion would wipe out as much as 40% of the gains in manufacturing output over the same period....

In terms of trade policy, the new perspective suggests the U.S. may have a worse competitiveness problem than most people realized. It was easy to downplay the huge trade deficit as long as it seemed as though domestic growth was strong. But if the import boom is actually creating only a facade of growth, that's a different story.
There are a number of linked stories and charts. Here is a follow-up.

The one thing they don't mention by name is shadowstats which had a good primer on the GDP in 2004. Note that John Williams of Shadowstats is not convinced by the BusinessWeek analysis which is separate from his issues with the numbers. I find a lot of the BW argument compelling with their evidence that the sectors most affected by out-sourcing and imports have the most unbelievable inflation and productivity figures.

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