Originally posted by: LegendKiller
Originally posted by: ebaycj
Originally posted by: alchemize
Why do I keep seeing this comment on TV and hearing it on the radio. It's mostly local media, but I swear I've heard it at least ten times.
Most of these reporters had to have lived through the late 70's/early 80's?
Inflation peaked at near 15%!!!!! in 1980
Unemployment was near 10% in 1982
We're definitely in for a serious slowdown - but god how can these "journalists" and editors be such idiots?
Both "inflation" and "unemployment" have conveniently changed definitions since 1980 and 1982 respectively.
"inflation" is based on the CPI, which used to be historically accurate until they started allowing "product substituitons". i.e. hamburger meat in the place of steak. Also they have recently taken energy and transportation costs out of the CPI equation, because had they left them in, the numbers would have looked bad.
"unemployment" has also been re-defined recently, to include less people, in order to make the numbers look better.
Making the numbers look better is all fine and good, but it really wrecks the historical accuracy of any reporting.
I bet if you performed the same research/calculations that they were doing in the early 80's on today's economy, you would find that it is much bleaker than today's numbers reflect.
See, this is what really pisses me off. Incorrect data I can deal with, but outright lying, I cannot.
1. The substitutions aren't from steak to hamburger. They are from one type of steak to another, suggesting what people would eat given the relative price increases/decreases in prices within the same classification of goods, mean-wise, if the goods increase in price at the same rate, nothing is substituted. If I see rump roast at 20% more than last week, but prime rib at the same price, I'd switch to prime rib because it's a better deal. Overall, if somebody is used to filet mignon, they will keep eating filet mignon, because it's the same standard of living, which the BLS keeps in mind. However, if filet goes up 20% while flank steak goes down 20%, then somebody may substitute to flank steak. I'd suggest you read up on the actual calculations.
2. They didn't take energy and transportation out of CPI. They release two CPI numbers, as has always been the case, "core" and commonly known as "headline". Headline includes energy and FOOD (transportation is not removed).
2. Give me proof that unemployment definition has changed.
All good financial and economic analysts know the pitfalls of all of the economic data releases. Core CPI is good for measuring everything outside of food/energy, which can be highly volatile (as we saw this year), which aids in economic modeling. The unemployement figures don't include "under employment", or "want full time employment" because several factors. Namely, wanting full-time employment is transitory psychologically speaking. Underemployment can be willful or not, depending on time period and personal situation.
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