Www.bea.gov 1 Report on the Income- and Product-Side Estimates of Output Growth Comments Steve...
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Transcript of Www.bea.gov 1 Report on the Income- and Product-Side Estimates of Output Growth Comments Steve...
1www.bea.gov
Report on the Income- and Product-Side
Estimates of Output Growth
Comments
Steve Landefeld
Brookings Panel on Economic ActivityMarch 19, 2010
2www.bea.gov
Report on the Income- and Product-Side Estimates of Output Growth
▪ Excellent and imaginative paper. BEA appreciates work such as this on measurement issues relating to its accounts. External research, complemented by
research at BEA, has been the source of a wide range of statistical improvements ranging from chain to hedonic indexes.
bea.gov 3
GDP and GDI Source Data
Both income and expenditures have
measurement strengths and weaknesses BEA devotes substantial resources to updating and
maintaining both measures
Nevertheless, we think there are good reasons for us to
feature a single measure GDP measure and for
preferring the expenditure-side measure.
In general, we feature the expenditure estimates
because of the timeliness of the quarterly source
data and the consistency of that data with BEA
concepts and definitions and with the annual and
benchmark data
bea.gov 4
GDP and GDI Source Data: Timeliness
Quarterly source data for GDP is more timely
than GDI Improvements in coverage being incorporated in GDP
(services)
Improvements in coverage being incorporated in GDI
(wages)
Picture is more mixed for annual and
benchmark data
QCEW quarterly employment and unemployment tax
data for GDI available with one quarter lag
Census annual business statistics data available with
1-2 year lag
IRS annual data are available with a 2-3 year lag
bea.gov 5
GDP vs. GDI – Source Data for the Third Estimate of the Quarter
GDP23% based on
judgmental trend
77% based on early source data
|||||||||||||||||||||||||
63% based on judgmental trend
37% based on early source data
GDI
bea.gov 6
GDI Source Data
Judgmental trend
Early source data Table 1. GDI source data – estimates for 2007
(percent of GDI)
Description of early source data / estimation method
Gross domestic income Compensation of employees Wages and salaries Nonsupervisory & production workers 17.1% BLS Current Employment Statistics: payroll survey Supervisory/nonproduction workers 20.6% Judgmental extrapolation based on payroll survey Government 7.7% Payroll survey employment and ECI Supplements 10.3% Judgmental trend extrapolation Taxes on production and imports, less subsidies Property taxes 2.8% Judgmental trend extrapolation Other 4.1% Federal Monthly Treasury data; Census data for sales taxes Net interest and misc. payments 6.8%
FDIC data for commercial banks; judgmental trend extrapolation based on interest rates for most of the remainder
Business current transfer payments 0.7% Judgmental trend extrapolation Proprietors' income 7.8%
Judgmental trend extrapolation based on BLS payroll survey, Census data, and other indicators
Rental income of persons 1.0% Mixture of actual source data and judgmental extrapolation Corporate profits 8.5% Census Quarterly Financial Report, FDIC, Compustat data Current surplus of government enterprises 0.0% Judgmental trend extrapolation Consumption of fixed capital 12.5% Judgmental extrapolation based on BEA capital stocks Total 62.6% 37.4% Percent based on early source data that are conceptually consistent with annual/benchmark data 11.8%
bea.gov 7
GDP and GDI Source Data: Consistency
The source data for GDP is mainly data Census collects using consistent definitions and surveys that reflect BEA’s needs and that can be consistently benchmarked to the once-every-five years Economic Census.
The source data for GDI is mix of mainly administrative data that are collected for non-statistical purposes using multiple definitions across the sources and over time.
There may be significant timing differences between
the source data for expenditures and income.
bea.gov 8
Growth in Wages and Salaries-- Census, BLS, and SOI
-2
0
2
4
6
8
10
1999 2000 2001 2002 2003 2004 2005 2006 2007
Year
Per
cen
tag
e
Census Business Patterns (CBP) BLS QCEW SOI Salaries and Wages
Different Measures of Wages and Salaries
bea.gov 9
Different Measures of Profits
Percent Change of Profits Measures
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
1999 2000 2001 2002 2003 2004 2005 2006 2007
Year
Y/Y
Per
cen
t C
han
ge
S&P Operating Earnings NIPA Profits (current production)
SOI (Total Receipts less Total Deductions) QFR Profits (Mining,MFG,Trade)
bea.gov 10
GDP and GDI Source Data: “Accuracy”
The Census-based GDP estimates are within 1
percent of the comprehensive revisions based on
the once-every-five year Economic Census.
The GDI estimates are also within 1 percent of the
comprehensive revisions based on the once-every-
five year Economic Census. Despite being estimated using very different source
data and methods the closeness of these two 5-year
extrapolations suggest that for trend growth, the
two estimates appear to tell a consistent story.
bea.gov 11
GDP vs. GDI Tests
Cyclical indicators used may not be a good measure of output turning points: NBER Cycles: Use and reliance on GDI data
Employment and real personal income less transfers as a monthly measure of output
S&P 500: Good financial indicator, but checkered history as cyclical indicator
May move with GDI, if capital gains and losses are “leaking” into GDI
This may help explain relation of the Statistical Discrepancy to the business cycle
Employment and Unemployment: Employment determinant of wages and salaries in GDI
bea.gov 12
GDP vs. GDI Tests
Historically revisions to GDI may have helped reduce revisions to GDP, but gain would have been small Use of GDI could have reduced early GDP estimate
MAE by 0.07 percentage points, from 1.25 to 1.18, 1994-2006
Revision pattern over this period reflected many changes in source data and methods. With major new source data and methods being
introduced in GDP (all services) and GDI (all employee wages), it is difficult to predict result of using averaging going forward.
bea.gov 13
GDP vs. GDI Tests
Okun’s law isn’t a law but an empirical relationship. Relationship has varied over time and over the business cycle;
progressive reduction in the responsiveness of unemployment
to GDP
Okun’s law seems to be broken for both GDP and GDI GDI flat to falling mid 2006 to mid 2008, but unemployment
falling
GDP slower growth but rising 2006 to mid 2008 and
unemployment falling
Both GDP and GDI steep fall since mid 2008 and steep rise in
unemployment.
Unlikely that revision to GDP would completely erase
productivity gains and the good economic explanations for
the changes occurring in labor markets.
bea.gov 14
GDP vs. GDI Tests
GDP and GDI early estimates produce the same general picture of economic activity. GDP available 1-2 months before first GDI estimate.
The last two cycles, GDP and GDI latest estimates present the same general picture, but with significant differences in specific quarters. Most recent period: Slowing of growth in 2007 both
GDI and GDP Peak to Trough cumulative decline, GDP -3.1%; GDI -4.2%. Significant revisions to come:
GDI: New annual IRS data for 2008 and revised data for 2007
GDP: New annual Census data for 2009 and 2008 and revised data for 2008
bea.gov 15
Early Real GDP and GDI Estimates (3rd Estimates)
-8
-6
-4
-2
0
2
4
6
8
10
1984
Q1
1984
Q4
1985
Q3
1986
Q2
1987
Q1
1987
Q4
1988
Q3
1989
Q2
1990
Q1
1990
Q4
1991
Q3
1992
Q2
1993
Q1
1993
Q4
1994
Q3
1995
Q2
1996
Q1
1996
Q4
1997
Q3
1998
Q2
1999
Q1
1999
Q4
2000
Q3
2001
Q2
2002
Q1
2002
Q4
2003
Q3
2004
Q2
2005
Q1
2005
Q4
2006
Q3
2007
Q2
2008
Q1
2008
Q4
2009
Q3
Pe
rce
nt
GDI GDP
bea.gov 16
Latest Real GDP and GDI Estimates
bea.gov 17
Early Real GDP and GDI Estimates (3rd estimates)
bea.gov 18
Latest Real GDP and GDI Estimates
bea.gov 19
Early GDP and GDI Estimates(3rd estimates)
Third Estimates of Real GDP and Real GDI: Current Recession
-8
-6
-4
-2
0
2
4
6
8
2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4
%∆GDI_R$(3rd) %∆GDP_R(3rd)
bea.gov 20
Latest Real GDP and GDI Estimates
Latest Estimates of Real GDI and Real GDP: Current Recession
-8
-6
-4
-2
0
2
4
6
8
2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4
%∆GDI_R$(latest) %∆GDP_R(latest)
bea.gov 21
Averaging GDP and GDI
BEA will incorporate a better means of presenting data on GDI, without unduly confusing the general community of users.
We aren’t convinced that averaging the estimates would provide enough benefits to our broad range of users to make it worth the costs in terms of larger revisions to the early estimates, explaining the approach to users, etc.
bea.gov 22
Next Steps
Incorporation of the new Census data on services and more experience with the new BLS payroll and QCEW data should produce significant improvements in GDP and GDI.
Further research into balancing, now being conducted in the industry accounts.
Research on finance, and the role of capital gains, could prove helpful in better understanding and addressing the statistical discrepancy.
Data Synchronization could prove extremely helpful in resolving inconsistencies between BLS and Census data.