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Wall Street is a place that runs on numbers. But, as Carl Bialik explains in his most recent column, the numbers that we get from the government are far fuzzier than many people realize.

For example, when the government tells us how many jobs were created or lost last month, it’s really just an estimate—and a very broad estimate at that. The most recent report said that 134,000 jobs were lost during February, but the Bureau of Labor Statistics really only says that it’s 90% confidence that actual number was somewhere between a loss of 500,000 and a gain of 200,000. That’s an enormous spread.

A lot of people like to blame the government or cite a political agenda. Sure, that’s certainly there, but even without it, collecting economic stats is a tricky business. The national economy consists of millions and millions of people making many decisions every day. It’s hard to boil down something so complex to just a few hard numbers.

There’s another issue of the government making countless revisions to its data. The GDP growth figure for the third quarter of 1983 has been revised ten times since it first came out. The most recent revision was just a few months ago.

This is why the data I like to rely most is price data from the markets—stock prices, bond yields, spreads and commodity prices. Of course, marker prices have their own biases as well.

When you face the fact that so much time and energy goes into debating the economy, and truthfully we can’t say what it’s doing with a high degree of confidence, it’s rather disquieting. Imagine watching a football game and neither you nor anyone else has any idea what the score it. That’s a lot of economics.

Posted by edelfenbein at April 17, 2010 2:24 PM