Metrics: Widely used economic gauges and what they mean

Get to know the technical significance of commonly cited economic indicators.

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Economic indicators are not always exactly what they seem. Titles may use terms that have plain meanings in common usage, but they are also often terms of art with precise meanings in their technical context. This guide presents the technical significance of commonly cited economic indicators.

Size of the economy

Gross product is the volume of all goods and services produced by the US economy. Gross Domestic Product (GDP) is the value of goods and services produced in the United States for US consumption or for export. It is the measure most commonly used for domestic policy and investment discussions. Gross National Product (GNP) is less commonly used and represents the value of goods and services produced by people and entities based in the United States, regardless of where those goods might be consumed.

GDP and GNP are typically reported on a quarterly basis and the values are frequently revised as more detailed data becomes available. Moreover, the totals reported each quarter are annualized equivalents. In any given quarter, the dollar amounts for GDP and GNP reflect current price levels.

At the same time, historical amounts are adjusted to determine their equivalents based on current price levels. Percentages and other time-period comparisons that use these adjusted historical values are called “real” because they distinguish between growth in actual volume and increases in price, or inflation. Comparisons based on values that were not adjusted for inflation are called “nominal.”

The information used to calculate GDP comes from the National Income and Product Accounts, which are essentially the government’s master income statement and balance sheet for the US economy. Total compensation (wages, pensions, entitlements and such) and business proceeds (proprietor’s income and corporate profits) account for the lion’s share of national income. Consumption expenditures represent the bulk of expenses. These figures are collected and maintained by the US Department of Commerce.

Employment and unemployment

The jobs picture in the United States is measured monthly by a pair of surveys run by the US Department of Labor’s Bureau of Labor Statistics (BLS). The Current Employment Statistics survey (CES, or “establishment survey”) provides detailed industry data on employment, hours, and earnings of workers on non-farm payrolls. The Current Population Survey (CPS, or “household survey”), conducted by the Census Bureau for the BLS, uses sampling techniques to measure the number of adults who work, the number who are looking for work, and the number who cannot or choose not to work. The headline Unemployment Rate refers only to the percentage of people in the labor force who are actively seeking work. A related measure is the labor force participation rate, which estimates the proportion of the population that either has a job or wants one. It is measured by the same CPS survey.

Jobless claims statistics reflect the number of people opening or continuing claims for unemployment insurance. The data are reported weekly and looked to as signals of future unemployment trends.

Inflation and prices

The most widely followed price statistics in the United States are the BLS’s Consumer Price Index (CPI) and Producer Price Index (PPI). The CPI measures what a consumer pays each month for the same predetermined mixture of goods and services. The PPI tracks a similar bundle of supplies and services used by businesses. The price changes recorded by the indexes may not readily capture long-term changes in behavior or show the impacts of price changes over time.

Another inflation indicator are the "Implicit Price Deflators" used to create the real GDP statistics. It is based on comparing unit prices for the same goods in different time periods. It seeks to measure the overall impact of inflation on the economy rather than the impact on any individual.

Consumer behavior

Consumer spending patterns are captured by the BLS’s Consumer Expenditure Survey (CE). Its reports show how much money people in different geographic areas, different income levels, and different demographic groups spend each year for food, clothing, shelter, recreation, health care, and other common categories. The Federal Reserve Board’s Survey of Consumer Finances (SCF) shows important aspects of household balance sheets, such as debt levels, investment ownership, and retirement savings.

Core CE data is released once a year; core SCF data, once every three years. Various government agencies, industry groups, and specialty publications provide statistics that can give early indications of direction in key economic sectors. Among the widely watched statistics are the Case-Shiller Home Price Index, Automotive News’s vehicle sales reports, and the Census Bureau’s Retail Trade indicators.

Business behavior

The business cycle is often seen as a primal force shaping all aspects of the economy. But its ups and downs can only be determined after they have occurred. The generally recognized arbiter of recession start and finish points is the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER). Its formal determinations may be made weeks or months after the economy has turned a corner.

As with consumer behavior, many government and industry sources provide indicators that can provide quicker, if less precise, measures of business cycle trends. The Federal Reserve provides monthly reports on Industrial Production and Capacity Utilization. The Institute for Supply Management’s Manufacturing Report on Business and its Non-Manufacturing Report on Business offer indicators of business expectations, hiring and investment plans, and other important metrics. And the Census Bureau reports on New Residential Construction.

Each provider of technical statistics offers detailed discussions of the importance and limitations of their data. These discussions can provide additional insight for any detailed analysis.

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