GDP Growth: Are The Numbers Too Rosy?

Forget faulty jobs data. An overstated GDP may help explain the economic reality gap

The economic statistics collected by the U.S. government are probably as honest and accurate as any in the world. Perfect, though, they're not. Collecting data about the American economy is a boundless challenge on a limited budget. And it's even harder in periods of dramatic change -- like today.

Take the puzzling case of stagnant hiring. Economists have been scrubbing the Labor Dept.'s employment surveys to account for the gap between strong reported growth in gross domestic product and the anemic 61,000-a-month pace of payroll job creation since August. But they've been looking in the wrong place: There's fresh evidence that GDP, the most closely watched economic statistic, may be overstated -- and that lackluster job prospects may present a truer picture of what's happening now than the strong growth number.

That evidence is popping up in several measures, including income and manufactured imports. But the most intriguing is summed up in one figure. From 2002 to 2003, U.S. imports of services from abroad, adjusted for inflation, didn't grow at all -- a nice, round 0% change. That comes after only 1.4% reported growth in 2002. That seems implausible. Take one key component of service imports: U.S. companies' transfers abroad of a range of service work, including computer programming, customer support, tax-return preparation, and research and development.
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http://www.businessweek.com/magazine/content/04_14/b3877044.htm

Defense spending and Gas prices. There is no real growth.