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Sunday, October 6, 2013

The Economy and Car Sales

Every month I peruse select details of the monthly labor market surveys – the Current Population Survey and the Current Employment Survey – for hints on how the economy is performing. Not this month, thanks to the continuing inability of the House to pass a budget, or now even a continuing resolution. Both the Bureau of Labor Statistics and the Bureau of Economic Analysis, key sources, are hit. Ironically, this month is when such data might be most helpful, because the timing of labor day makes it hard to interpret September car sales data.

...we've lost access to data on employment and wages just when an early Labor Day makes it hard to interpret auto sales

The value of economic information comes from its wide availability; that works against any private provision. Inflation calculations provide a good illustration of the limits of private provision. That's because there is the private Billion Prices Project that uses online data. This index correlates well with the official Consumer Price Index, as expected: inflation is a measure of broad, economy-wide trends and so the full-economy CPI and the BPP ought to move together. However, the private BPP provides no detail, and for business what matters is likely what's going on in their product line, not the economy as a whole. Furthermore, due to the way in which BPP collects data, it cannot provide information on healthcare costs or education, for which online pricing isn't available – and if you delve into the details of the CPI, these do not correlate as will with whole-economy price movements.

Now all data are historic, measures of the past, while business must needs look to the future. To the extent that an economy changes slowly, however, knowing where we're coming from is invaluable. We do face surprises. The current government shut-down is a mild one – except that I live in Virginia, with a disproportionate number of government employees. But we'll be getting no data on that. And some information such as interest rates is collected by the Federal Reserve, which is self-funding (and hands over its profits to the US Treasury). So as the debt ceiling D-day approaches, we will be able to get compilations of data on certain markets. More on that later.

mike smitka