海角大神

A man with one clock always knows聽the time. A man with two clocks is never sure.

This week brings the two heavyweights of economic statistics. On Thursday morning we got the latest read on聽economic growth, and on Friday we learn how the聽job market fared in May.

Government statisticians and outside commenters usually emphasize a particular headline number in these reports. For the economy as a whole, it鈥檚 the annual growth rate of gross domestic product (GDP), which logged in at a mediocre 1.9 percent in the first quarter. For jobs, it鈥檚 the number of nonfarm payroll jobs created in the past month (115,000 in April,聽but that will be revised on Friday morning).

In each case, the government also reports a second measure of essentially the same thing.聽Jobs day aficionados are familiar with this. The payroll figure comes from a survey of employers, but the Bureau of Labor Statistics also reports聽results from a survey of people. That provides the other famous聽job metric, the unemployment rate, and聽a second count of how many people have a job. The concept isn鈥檛 exactly the same as the payroll measure鈥搃t includes a broader array of jobs,聽for example,聽but doesn鈥檛聽reflect people holding multiple jobs鈥揵ut it鈥檚 sufficiently similar that聽it can be an interesting check on the more-quoted聽payroll figure.

The downside of this extra information, however, is that it can聽foster聽confusion. In April, for example, payrolls increased by 115,000, but the household measure of employment fell by 169,000.聽Did jobs grow or decline in April?

Another, less well-known聽example happens with the GDP data. The Bureau of Economic Analysis calculates this figure two different ways: by adding up production to get GDP and by adding up incomes to get gross domestic income (GDI). In principle, these should be identical. In practice, they differ because of聽measurement challenges. As Brad Plummer notes in a piece聽channeling Wharton economist Justin Wolfers, the two measures tell somewhat different stories about recent economic growth.聽In Q1, for example, GDI expanded at a respectable 2.7 percent, much faster than the 1.9 percent recorded聽for GDP. Is the economy doing ok or barely plodding聽along?

Such confusion is the curse of having two clocks. We can鈥檛 be sure which measure to believe. Experts offer good reasons to prefer the payroll figure (e.g., it鈥檚 based on a much larger survey) and GDP (e.g., income measurement聽is difficult for various technical reasons, including聽capital gains). But there are counterviews聽as well; for example,聽at least one paper finds that GDI does a better job of capturing swings in the business cycle.

Despite this confusion,聽two clocks are better than one. They remind us of the fundamental uncertainty in economic measurement. That uncertainty is often overlooked in the rush to analyze the latest economic data, but it is real. There are limits to what we know about the state of the economy.

In addition, a weighted average of two readings聽may well provide a better reading than either one alone. If one clock says 11:40 and another says 11:50, for example, you鈥檇 probably do聽well to guess that it鈥檚 11:45. Unless, of course, you have reason to believe that one clock is better than the other.

The same may well be true for GDP and GDI聽- the truth is likely in the middle. (This is less true with the jobs data; because of the larger sample, I weight the payroll measure much more heavily than the household measure, at least for monthly changes.)

P.S. For more on GDP vs. GDI, see Dean Baker聽and Binyamin Appelbaum.