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7/30/09

VDARE.com: Statistical Deceptions - by Paul Craig Roberts

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Statistical Deceptions - by Paul Craig Roberts

Currently, Wall Street, the White House, and the media are hyping a new sign of economic recovery--"surging" June home sales. John Williams at shadowstats.com predicted this latest reporting deception. Here is the way Williams explains how statistics can produce false signs of recovery. The economy has been contracting for so long that a plateauing of the falloff in home sales compared to the previous time period’s more rapid contraction can appear like a gain. The Census Bureau itself notes that the reported 11% increase in June home sales might be illusory. The reporting agency says that the gain is not statistically meaningful at a 90% confidence interval and that "the Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero."[PDF] Williams explains other data distortions likely to create false hopes and lead to investment losses. Financial stresses from the current state of the economy have changed behavior. This means that normal seasonal adjustments to statistical data can result in misleading information.

For example, the recent decline that was reported in seasonally-adjusted new unemployment claims was a result of the normal adjustments for the retooling of auto lines that did not, in fact, take place to the normal extent due to the bankruptcies and uncertainties. Adding in seasonal adjustments that did not in fact take place artificially reduced the unemployment claims. Consumer confidence typically is swayed by "good news" hype. The drops in the Conference Board’s and the University of Michigan’s measures of consumer confidence in July suggest that Americans are becoming inured to recovery hype and are realizing that the government and the media lie about the economy just as they lie about everything else.

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