A recent phenomenon occurred in the summer of 2016; economists and statisticians everywhere were shocked to learn that Gross Domestic Product (GDP) fell below zero. In a statistical mindset, this is unbelievable given that in quarter one of 2016 America’s GDP was at $18.281 trillion. That is a 100% decrease in GDP in merely three months. This data was initially reported by our President of the United States while giving a speech at Liberty University in June of 2016. During the same he stated, “our real unemployment is anywhere from 18 to 20 percent.” This unbelievable statistical phenomenon seemed to occur in merely seconds. Econometricians everywhere were looking for p-values and other tests of significance, but none were provided from our current POTUS. He defended his stance by saying, “it maybe even 21 percent, and nobody talks about it, because it’s a statistic that’s full of nonsense.” But how did countless statisticians and econometricians somehow miss these calculations?
Trump supporters may defend these statements by referring to what Donald, calls rhetorical tools like “truthful hyperbole” or “an innocent form of exaggeration” in his book, Art of the Deal. However, I argue that there is an argument to support the claim that gross domestic product is now zero. The far-left will claim that this statistic is not possible, especially given that this massive shrinkage in GDP would easily make Barrack Obama the least favored president of all time. Ultimately, statisticians at the Bureau of Economic Analysis calculated America’s imports to be $634,422,000,000 in 2016. While Donald Trump has not revealed his data source, it’s obvious that members of the BEA have simply forgotten to add five or six zeros to their imports calculation.
How could we be so blind not to see that the statistics were lying to us? Unemployment, which the President calls the “statistic that’s full of nonsense”, has now reached relative highs. In 2016, this statistic was nearly as high as the great depression (25%). However, some of the most powerful people in the world deem the unemployment statistic ‘useless’. The current unemployment rate only measures people “actively” looking for jobs, not those that have given up. It’s almost as if the Bureau of Labor Statistics (BLS) has not thought through possible alternatives, or are not thorough with their calculations. So why are people not getting on board to dump a statistic even if we have no reliable, useful backup measure?
All joking and satirical nonsense aside, I want to express my concern of incorrect statistical interpretations. I sincerely want to know how we have stumbled so far from the truth. Have I been blind to human ignorance my entire life? First, let’s talk about Donald Trump’s statement about GDP. Many of the arguments supporting his statement claim around that fact that perhaps he is talking about GDP growth. While this may be the case, it is drastically important to report the correct statistic when you are a presidential nominee. When you have influence over half of a nation, it is also important to note that growth as a percentage varies substantially from an aggregate calculation. Assuming that he is talking about GDP growth, how did he attain a zero percent growth rate? Graph 1 below shows that GDP growth as a percent change has reached zero or below zero only three times since 1990. None of those instances have been in the last 5 years, including 2016.
Graph 1 below shows the percent change in Gross Domestic Product from January 1990 to October 2016. Provided by the FRED.
Politicians for the last one hundred years have been using the unemployment rate as a measure of the economy’s strength or weakness. To genuinely believe that the unemployment rate is at twenty percent is to discredit the strength of the United States economy for the last century. I willfully admit that the unemployment does not perfectly measure the population; however statistics are estimations of populations by definition. In my opinion, the BLS does an incredible job measuring the unemployment rate. While there are arguments to support the U-6, another statistical interpretation of unemployment rate, there are systemic problems within the labor market that will never be captured. The U-6 also includes questions that bias the statistic towards unemployment. On the other hand, the BLS measures the labor force participation rate that accounts most of the arguments against the current unemployment rate. While people complain about the calculations of the unemployment statistic, they should simply examine multiple statistics to get a full picture.
Statistics and econometrics can be misleading; however incorrect interpretations lead towards overstating (understating) biases and encourage cognitive biases that are harmful in the education of voters. I shift the blame to the ethics of politicians who spit out these numbers time and time again which are nothing more than overwhelming fabrications. However, as voters there are a few questions we might want to ask ourselves. How do we make educated decisions when politicians are incorporating falsehoods into their speeches? Who should I trust with providing truthful statistics? There are simple answers that can response to both questions. First, make educated decisions that have statistics to support them, and second only trust the statistics from reliable sources (BEA, BLS, FRED). Finally, if a politician has no source for statistics that come spewing from their mouths, then do not restate until you can find further confirmation of said statistic.