The current problem with government statistics

In contrast to physics, there is no estimate of statistical error within economics in spite of Oskar Morgenstern’s book, On the Accuracy of Economic Observation. The problem of error in economic observations is still a widely neglected problem. The various sources of error that come into play in the social sciences suggest that the error in economic observations is substantial. As the error might be substantial, this paper argues that the usefulness of econometrics becomes questionable. - Philipp Bagus Rey Juan Carlos University

The multiple news stories about the change in leadership and the BLS miss the key point that we are facing with macroeconomic analysis. We are only as good as the data that we use. If there are significant errors with the underlying data used to make macro decisions, there will be greater market inefficiency. Major revisions will reduce he trust in the numbers. Minor modifications will help investors refocus their attention on this data. The market reaction to any announcement will decline. It is not that the market will make wrong judgments based on the data, but that no judgment will be made at all. There will be less market reaction on any announcement date, yet there is likely to be greater misallocation of resources.