For years, I’ve waited for some honesty about economic data. The official numbers have not made sense. The labor numbers were all over the map with growing disparities between data-collecting methods. The output numbers did not fit with on-the-ground realities. The price numbers from government did not reflect sources from private industry. Putting it all together, we have been surrounded for years by an unannounced inflationary recession with awful jobs numbers.
We published that study and awaited the blowback and refutations. They never came. Not one communication to me took issue with the numbers. Not one expert wrote to say we had distorted anything. Not one person in a position to know pushed back on the conclusion. I admit that this spooked me. How many people know that the United States is in recession but simply are not saying for professional reasons?
In the world of economics, practitioners cling to data sources as firm doctrine. As they used to say in the Soviet Union, the data might be fake but it is all we have! What if the same is true in the United States? It seems perhaps unthinkable since the reports from the Bureau of Labor Statistics and the Commerce Department have long been considered the gold standard of truth. What happens if we discover that no one really knows what is going on?
Here we are only a month into the second Trump term. The truth is suddenly coming out.
A former comptroller of the currency, Eugene Ludwig, has written an astonishing article for Politico, of all places. He throws cold water on every major data source we have. His conclusions fit well with what we had said six months ago and what I’ve intuited since 2020. He flat-out says that output is far lower than we know, effective unemployment is far higher, and prices have risen as much as twice as government has admitted.
The author begins by reminding readers of a top narrative from last year, namely that voters were unhappy about economic conditions. And yet, reporters would always say, the data is actually quite strong. The thinking was essentially that people were being quite silly and were ignorant of what the data mongers were finding. In other words, if you were among the smart set, you should know that actually inflation is falling and that all is well with labor and output.
Dr. Ludwig offers another explanation very similar to what I and others have argued for a long time, namely that the voters were not wrong; the real problem is that the data were not probably reporting real-world conditions. “What if the numbers supporting the case for broad-based prosperity were themselves misrepresentations?” he asks. “What if, in fact, darker assessments of the economy were more authentically tethered to reality?”
He goes on to explain unemployment, for example. The main unemployment numbers do not consider the quality of jobs, the hours worked, the extent to which people have underemployed, or whether they had just given up entirely. A clue was always there in the form of the employment-population ratios, which never recovered. They never considered, for example, what it means that multiple jobs holders had reached new records and whether the wages earned were enough to keep people from having to live on the streets.
And on income, the numbers do not consider the sheer number of people barely getting by. You might have averages that look fine but masked the millions of people trapped below levels capable of providing for a family. When you consider median instead of average wages, people are “making 16 percent less than the prevailing statistics would indicate.”
And on prices, here is where we find real deception. By looking at so many goods, the consumer price index (CPI) masks the price increases that matter the most for the goods that people actually buy on a regular basis. He writes: “Our alternative indicator reveals that, since 2001, the cost of living for Americans with modest incomes has risen 35 percent faster than the CPI.”
He and many other researchers have figured out that the true cost of living might have risen by twice what the CPI indicates. This affects output data, which has been seriously distorted by the explosion in government spending and debt. Once you adjust private productivity by a realistic measure of inflation, you get numbers consistently within the red zone of negative real growth.
And the conclusion: “The problem isn’t that some Americans didn’t come out ahead after four years of Bidenomics. Some did. It’s that, for the most part, those living in more modest circumstances have endured at least 20 years of setbacks, and the last four years did not turn things around enough for the lower 60 percent of American income earners.”
Yes, this is the sort of article that causes one to want to scream: Now you tell us!
I’m guessing that we are going to get more truth now that Trump is in charge but it is not a truth we want to hear. Already we are seeing hot inflation numbers, revised jobs numbers, and lower inputs to the output numbers. It would not surprise me to see a back-dated recession being admitted by the summer, which will be trumpeted as proof that Trumponomics has failed and must be abandoned.
Do you see how this works? The numbers have become so politicized as to be nearly useless. Even this article does not take the extra step of adjusting output by prices, which would have revealed the technical recession about which we’ve written.
The official numbers might be fake. And yet we all cling to them... because they are all we have.
