Faulty numbers can cost jobs, jolt markets and scare buyers

April 19, 1992|By Cox News Service

WASHINGTON -- It's not exactly a topic voters can get fired up about, but the bottom line is that bad statistics can get you fired.

Here are some examples of why Michael J. Boskin, chairman of the President's Council of Economic Advisers, says it is "vitally important" that the government's statistics be upgraded:

* Early in 1991, faulty unemployment numbers made the fTC economy appear healthier than it was. That led the Federal Reserve to be more cautious than it might have been in reducing interest rates. Had it not been so cautious, the economy might have revived sooner, keeping thousands of pink slips from being handed out.

* In the first quarter of 1989, the economy began slowing more than the government knew. Early estimates of growth were fairly normal, keeping the Fed from knocking interest rates down to boost the economy.

As "revised" numbers showed, the economy already was heading toward recession. Growth was really slowing dramatically, and a little boost by the Fed might have kept the economy moving.

* Washington said retail sales fell 0.1 percent in May 1989. Later, it found that $1.4 billion in receipts had been overlooked. That meant that the Commerce Department's report on the economy's growth rate was wrong, too. The Fed ended up cutting interest rates when it didn't need to.

* In April 1991, housing statistics suggested the homebuilding market was weaker than it really was. Reports of a weak market can have psychological effects: Builders might stop building, shoppers might stop looking, and home values might drop.

A brief recovery in the housing market collapsed.

* U.S. trade numbers are considered unreliable. The Customs Service collects data on about 10,000 imported products, but counting exports, particularly service exports such as legal fees, is much more difficult. Trade data have the power to jolt financial markets -- as happened before the stock market crash in 1987.

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