www.forbes.com/sites/eriksherman/2023/10...-up/?sh=d30df4c29931
Economists want to see trends, understandably. But real data, how things actually happen, becomes too complex and ill-mannered to understand. And so, economists alter the data, smoothing out volatility and unpredictability to understand the basic trends that might be at play.
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But, by definition, seasonally adjusted data doesn’t resemble the vagaries of reality. Economists change the numbers in front of them in pursuit of pure trends that may be buried in data. Unfortunately, those shifts can have big impact.
Take a look at a first series of data in the form of seasonally adjusted real disposable personal income — the money people have left to spend after taxes.
From the artificially smoothed out annual results, income started dropping after 2021.
Total personal income after taxes, seasonally adjustedFederal Reserve Bank of St. Louis
Not only is the data adjusted, but it is a calculation of al disposable income on an annual basis. The peak comes in 2021, presumably with inflation having its biggest impact.
Now, instead, look at a different view of disposable income. Not only is the data not seasonally adjusted, so you can see what has been happening as it occurred, but it focuses on median income, the experience of the people in the middle. Here’s the graph.
Without manipulated numbers, median households started seeing their incomes fall in 2019.
Median household income after taxes without seasonal adjustmentFederal Reserve Bank of St. Louis
For the great unwashed, the turning point comes in 2019, a couple of years before. In other words, incomes have been falling in real terms for most of the country for years.
Now, combine this with real growth in consumer spending. The month-to-month numbers out of the Census Bureau don’t consider changes in prices, and even as inflation slows, it is still positive and there haven’t been rollbacks in pricing.
The people who have to experience economics as it happens, rather than indulge in the luxury of seasonally adjusted numbers, and who are not insulated from events through financial resources, have seen their real income decrease since before the pandemic even arrived, even as prices grew significantly higher. If that isn’t a good reason to lose confidence in the economy, what is?
TRUTH IS IN THE EYE OF THE BEHOLDER....
