The government numbers are not fake. They're just noisy.
i worked with detailed goverment survey data on gdp, retail & consumption, household & employer jobs for 30 years.
noah gets it absolutely right: initial prints are noisy, updates are systematically produced using more info, and surveys rebenchmarked to periodic censuses.
so it's messy but honest, & probably as good as it gets. thx noah!
Thanks, this was helpful.
As a fellow tech guy, my hunch is Balaji and Sacks are operating from the tech perspective that nearly everything you care about in your app/service/etc can be measured consistently and in real time. And the need to go back and revise isn’t there. I can see how this could lead them to think there’s something wrong with government stats on something as noisy as employment.
Most insightful and thoughtful. Thank you.
I have some really odd/newbie questions. This seems like a redundant inaccurate way to collect data that everyone seems to drool over. When any business issues a paycheck, if everything were automated and made anonymous, wouldn't the IRS (had it been updated and fully funded of course) have real time data and more accurate models? Especially if there interoperability, data sharing and eliminating redundancy?
I'm sure lots of people have already thought of these issues but I'm curious since I was surprised by how the data is actually collected.
Barring under the table jobs of course.
Also I'm assuming it makes more sense to look at 6 months, Year over year data?
But in critical moments, in order for fiscal/monetary policy work in tandem you'd want month to month trends? Not sure if I articulated that well....
Every two weeks when I get my paycheck I see some money gets taken out for payroll taxes. Is it possible to use some sort of tax data as a way to measure employment on a faster interval?
I swim in the world of normie tech people, but they are tech people who are rational. There are many tech people who have their heads screwed on straight. In fact most are in that category, I'd guess.
Love this analysis.
If macroeconomics is based on the rational behavior of buyers and sellers, why are there more than few irrational economists?
The key insight for me: “we shouldn’t put too much stock in any one month or even one quarter of data “
Good reminder of difference between the two surveys, thanks. Divergence between the two has been pretty high since Covid. The way the government does seasonals (and each survey has its own) doesn’t really work well after precipitous events like Covid or the Great Recession. Eventually the two surveys come back into line (or in line with explanations, eg changes in self employment) so it is good to look at both surveys and draw one’s own conclusions.
Divergent numbers do not necessarily mean that the government is faking anything- why not fake both surveys, then? However, one would be a fool to place great faith in government. A good example is the 2020 census data, which was likely faked to benefit blue states in the electoral college (probability of several different states all being slanted in the same, wrong direction by accident is very low) , and the government was happy to correct the stats fairly quickly afterwards…maybe because there won’t be another adjustment for 10 years.
While in general government statisticians are very professional, and FBI agents are very professional, we know the deep state bias and most professional employees keep their mouths shut if they know what is good for them, meaning government workers cannot be trusted. I assume things are usually on the up and up in most cases, but I also have to leave a little room for doubt.
Good article. You have a hanging “The” at the end of one of the paragraphs.
I think anything David Sacks writes needs to be seen in the context that he’s the finance chair for Ron DeSantis and hosted that disasterousTwitter launch for DeSantis’ campaign.
I’m not even trying to say this in a cynical or harsh way (trust me, I have many many harsh things to say about Sacks) but just as a framing that we should treat his utterances the same way we would if the DNC chair or RNC chair were making a public statement. It’s politics 101 for Sacks to highlight anything that may put President Biden in a bad light and would maybe help strengthen the case that Ron DeSantis should be President. In this case, that means trying to twist employment data to make it seem like the economy is worse than it really is and to make it seem like job losses are worse than they really are.
So, I think it’s completely fair to say that Sacks is being willfully dishonest as it serves the narrative interest he’s invested in; Biden is bad for the economy and this is why we should elect Ron DeSantis.
Thank you for this great thread Noah!
Your comment about forecasts being lazy to update their model make me remember about Reserve Bank of Australia, its forecast for wage growth was consistently wrong from 2013 to 2021, and that's why its governor (Philip Lowe) got a lot of criticism.
Binder prompted me to look up the ADP numbers:
I wonder how those two would respond?
Noah, your explanations are always excellent. If people are interested in detail review of these type government report they should listen to the podcast "Inside Economics" from Moody Analytics and Mark Zandi, it is very good. Odd Lots is also an excellent podcast on economics.
They’re a pair of cranks, nothing more to it than that
I'm sure Sacks and Balaji did some research and asked some economists about the discrepancies they noticed before posting to Twitter. Right? *Right*??!?