Watch Your Statistics Or Face Lempert
LEONARD LEMPERT is an agreeable fellow - until it comes to journalistic mistakes in economic statistics.
When those are made, as he acknowledges, he has become "more and more cantankerous."
Mr. Lempert has the background to criticize. He started publishing a newsletter on the latest economic statistics in 1954 from his home in North Egremont, Mass., a town of about 1,200 people. In those days, many statistics on the economy were not "seasonally adjusted"; they did not take account of seasonal trends, such as the upswing in retail sales before Christmas and the slump in construction during the winter. Lempert pioneered seasonally adjusting the numbers and delighted even then in taking verbal
pokes at the foibles of the financial press.
His work was used by economists Geoffrey Moore with the National Bureau of Economic Research and Julius Shiskin of the Bureau of Labor Statistics when they were working more than three decades ago on the modern versions of the leading indicators, coincident indicators, and lagging indicators.
When the Commerce Department published the leading indicators for April on Wednesday, the miniscule rise of 0.1 percent in this chief forecasting gauge of the government was no surprise to Lempert. He has been writing about the "lackadaisical" pace of the recovery in his weekly newsletter for some time.
In his May 26 letter, after reviewing the various leading indicators (such as common stock prices, length of the work week, vendor delivery performance, plant and equipment contracts, and unfilled orders), Lempert concludes that despite the sluggishness, "the thrust of economic activity is still up."
Lempert has a nothing-but-the-facts attitude. He does not offer economic policy prescriptions. But he loves taking shots at widespread economic assumptions that the statistics indicate are incorrect. In a May assessment of the economy he notes:
"Political rhetoric had convinced the public the 1980s were good economic years. The fact is the 1980s and early 1990s lacked the growth of earlier years." Lempert provides some charts showing the clear slowdown in growth in the past decade. He says the Reagan era "claims of economic rescue from the pre-1980 catastrophe of high interest rates, unbridled inflation, etc., bringing about a new economic era of great growth with millions of new jobs was a public relations put-on to end all put-ons."
Lempert adds that he is not assigning blame, noting that no one knows what would have happened without the two "corrective recessions" in the first two years of Reagan's reign.
A recent article on the Monitor's economy pages quoted a source understating the growth in retail sales. "This anecdotal baloney is not fit for publication," Lempert snaps in a letter. Then he offers the correct numbers, showing a goodly hike in these sales last year and so far this year.
Another Lempert pet peeve is the business reporter or economist who says consumer spending is two-thirds of economic activity. Lempert points out that consumer spending is part of demand in the economy, but it is not part of production or the supply side. The National Income Accounts purport "to measure the production of goods and services through a whole mess of known, estimated, guesstimated, and unknown statistics based on a theoretical concept of measure. The major popular statistic which has emerged
is gross domestic product, a statistic revered by economists." Lempert terms it "infamous nonsense" when consumption is confused with production.
Looking at the current economic scene, Lempert holds that "struggling economic activity is not coming alive ... economic problems have not been solved. The weakness in economic activity worldwide, the declining money supply, the restrained commercial and industrial loans, and falling industrial raw materials prices are a few of the hints that all is not well."
The recent rise in inflation numbers is "a blip," Lempert says. "We don't normally get much inflation pressure if the economy is not doing anything."
Though a couple of copies of Lempert's analysis still go to the Fed, his Statistical Indicator Associates newsletter does not have as big a following as it did decades ago. "I'm not a force in the world," Lempert says. Sifting statistics is not for everyone.