Even though I pride myself on being a constitutional cynic, truth be told even I harbor a wee bit of optimism. For instance, even thought I regularly write about how Things Are Going to Hell, Fast, I privately assume I am a pessimist and maybe a bit of a crank too, so things might not really be as bad as I think they are. Then real grownups who’ve seen Bad Stuff at close range confirm my worst views, so I know things really are dire. Darn.
I had naively assumed that the goosing of government stats practiced by the Bushies might abate, at least temporarily, with Team Obama in charge (I’ll confess I got tired of watching the non-farm payrolls birth/death adjustments and the like, and figured I’d leave it for the hard core investment oriented sites like the Big Picture).
But I thought for at least the first year of so of the new Administration we might get more or less truthful government stats (well as truthful as they can be, given the limitations and quirks of their data gathering and models). Why?
Obama has everything to gain by making the economy look like a basket case now. The first six months or so of results can be attributed to Bush. The worse things look, the more impetus for heroic measures, and the lower the baseline against which improvement can be measured.
But weirdly, the Obama crowd (I assume they are nudging the statistician/beancounters) is releasing figures with Bush-beating “seasonal” adjustments that make results look better! If I were in their place, I’d want the numbers tweaked to look grimmer than reality.
So what gives? Is this an effort to keep “confidence” (aka markets) up? I’m mystified as to the logic.
From Alan Abelson’s column in Barron’s:
It’s a comfort in this wildly spinning world to find some things remain the same. We had feared that with the change in administrations, we’d have to revise our long-standing mistrust of government statistics. But, though it is still early days, the initial evidence gives us reason for hope. The numbers flowing out of Washington seem as dubious as ever, and so are the inferences being extracted from them by more than a smattering of investment strategists, money managers and, it pains us to say, even journalists.
The misleading figures cut across a wide swath of the economy, encompassing housing, manufacturing, employment — you name it. The leading agent of deception, unintentional or otherwise, has been that old sly villain, seasonal adjustment. As it turns out, the seasons don’t need adjustment as much as the adjustors need seasoning.
As Merrill Lynch’s David Rosenberg (who, incidentally, is planning to do a bit of adjusting himself and moving back to his native Canada; our loss, Canada’s gain) points out in a recent commentary, the official keepers of the books have been unusually aggressive in constructing seasonal adjustments for February’s economic data.
To illustrate, the seasonal adjustment for new-home sales was the strongest since 1982; for durable-goods orders, the strongest since they were first released in 1992; the retail-sales figures for February were flat (or, as David says, flattering) after such adjustment, but unadjusted fell 3%, the biggest drop on record. He also notes dryly that the 40,000 raw non-seasonally adjusted housing-start total for February “all of a sudden becomes a headline-adjusted annual rate figure of 583,000.”
Which makes David think that come the inevitably sharp downward revisions of such distorted data, first-quarter real GDP is likely to suffer a 7.2% drop. Which, together with the 6.3% skid in the fourth quarter of 2008, would be the worst back-to-back contraction in the economy in 50 years.