Print this

Email this

Submit a Question

"Like dreams, statistics are a form of wish fulfillment."
-- Jean Baudrillard

Welcome to the spin zone, a parallel universe to the Twilight Zone and Bizarro World.

Think of it as an alternate reality where all enemies appear as friends, all news turns into your propaganda and all numbers mean whatever you want them to.

In the spin zone, all statistics are "subject to revision" and one of my favorites is durable goods orders, which measures demand for big ticket items designed to last three years or more. The durable goods number gets headlines and is usually strong, since it also includes aircraft and defense orders, but here's a little secret: It's almost always revised downward in the "factory orders" report released about a week later. Of course, that revision is hidden and seldom mentioned, perhaps because it lacks the headline-grabbing effect of the durable goods report.

The non-farm payroll part of the unemployment report is also subject to change, but like the corrections to newspaper articles, those revisions are often relegated to sections where few people look. And for those who actually bother with updated figures, just use a different axis on which to spin a report.

Take the federal government's official payroll survey as an example. According to the Bureau of Labor Statistics, the economy has lost 2.3 million jobs since January 2001. But if you use the household survey which follows conditions outside the corporate sector, 689,000 jobs have been created. Doesn't that make you feel better?

(Mind you those jobs are generally low wage jobs, many of which are held by undocumented workers, but let's not confuse the issue with facts)

Many Americans wish they were employed, either in the payroll survey or the household survey. Yet the Pennsylvania Avenue statisticians are trying to tell you that Main Streeters are happily involved in gainful work.

As always, it boils down to the economy and politics. Many a politician has lost his job for ignoring the economy and its impact on mainstream voters, so the incumbent administration can't stop issuing upbeat comments about the economy, labor market, and great things coming out of Washington, D.C.

Yet that's not the refrain I'm hearing from Main Street. Yes, the December unemployment rate fell, but not because not because more people are working. Instead, the labor pool shrank. People who have been unemployed for a long period of time and unable to find another job became so discouraged that they gave up hope. And there is another group of people who are "underemployed" -- working, but in jobs paying less than what they used to earn. Many of them may lack benefits, especially if their job is part-time. But they've settled for the only jobs they can find because they have to pay the bills, support a family and maintain some self-respect.

Of course, if you're cutting through spin then you have to reckon with the "early retirees" and the "self employed" (they were called "consultants" in the early '90s), those that are out of the labor force involuntarily, and are trying to turn that lemon into lemonade. These people are not counted in the labor pool, but it's not because they don't want to work, it's due to the methodology. Changing the methodology is slow and cumbersome. It's a lot easier to change the message.

And what happens when the message is bad? You spin the message or discredit the messenger.

Wall Street did it all the time. Part of the reason investors lost confidence in Corporate America and Wall Street is the revelation of the spin that analysts put on their public recommendations compared to their private musings.

Earnings season is a prime example of corporate spin. Companies would routinely low-ball their profit expectations so that investors would be pleasantly surprised -- and thus buy the stock -- when the actual numbers were released and came in pennies above expectations. With that kind of attitude, it's no surprise that we entered a period where so many books were cooked. Thanks to Enron, WorldCom and their ilk, investors could no longer afford to trust any company's numbers.

Unfortunately, economic figures are no different.

Whether pointing to the unemployment rate, GDP or the budget deficit, statistics can bolster any position. Sure the economy is robust, growing at more than an 8 percent annual rate, but most of that expansion was fueled by the Iraqi invasion. Taking government spending for that campaign out of the equation leaves a picture of overextended consumers and cautious businesses -- not quite the formula for continued strong economic growth. Even Fed Chairman Alan Greenspan has suggested that we temper our growth estimates.

The federal government's budget deficit hit $375 billion in 2003, the highest in dollar terms ever, and almost 30 percent higher than the previous record of $290 billion in 1992. The fiscal 2004 budget deficit is estimated at $477 billion, which is actually down from earlier estimates of $500 billion, if you're looking for that positive news that will help you sleep better at night.

If not, then come back to the spin zone, where you can hear administration officials say that the more important measure is how the budget deficit compares to the size of the U.S. economy. By that measure, today's red ink is smaller than it was in the 1980s.

It all boils down to where you are in relation to where you want to be, and whom you want to believe. But I think you know if you're employed or not, and if you and your children are living the American dream. Either way, you can find reasons to sleep tight - depending on how you spin the situation.