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What Data Can We Trust?
By: Chris Martenson   Tuesday, April 24, 2012 11:37 AM
However you choose to describe it, the "headline number" of unemployment reflects political expediency, not reality.

The same can be said of the CPI and a slew of other headline data points issued by the government and blithely accepted by a corporate mainstream media committed to presenting the "recovery" as real.

If We Can't Trust Headline Indicators, What Can We Trust?

If these headline indicators are not a reliable reflection of economic reality, what is?

To the degree that any government statistic can be massaged, seasonally adjusted, or simply rejiggered behind the curtain, we must always be alert to the possibility that numbers have been gamed for political expediency.

But the farther we move away from headline numbers, the farther we also get from the political pressure to make the numbers either positive or benign. For example, relatively few people are going to study chart PRS85006173, showing labor's share of the non-farm business sector (i.e., the vast majority of the economy).

This charts reveals that labor's share of the economy has been falling sharply since the dot-com top in 2000, and has been in a downtrend of lower highs and lower lows since 1982. This suggests that the number of counted jobs (which includes part-time, temporary, and self-reported self-employed) may be less valuable as a metric of economic recovery than income and labor's share of the economy.

Indeed, if income is adjusted for inflation, then real household mean incomes have been declining since the housing-credit bubble topped in 2006-7:

In the following chart, income is not adjusted, and so it appears to be resuming its decades-long ascent. But if we add household debt, then another picture emerges, one of household debt rising far faster than income. Debt must be serviced, and rapidly rising debt imposes a burden on household income. Income may be rising in nominal terms, but if it is declining in real terms and the debt that must be serviced out of that income is skyrocketing, then how meaningful is nominal income?

Rather than reflecting meaningful growth, the apparently rising nominal income deceptively masks the reality of declining real income and avoids the costs imposed by a stratospheric rise in debt.

Since income is taxed, then tax receipts are another measure of income. Obviously the amount collected depends on the tax rates that are in effect for that year, so tax receipts may decline if tax rates fall.


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