Our Current Economic Illusions When reading economic statistics, you should see if they are consistent (they rarely are) and make sense based on real world observations (lately they don't). On Thursday, December 3rd the U.S. productivity numbers were released, as were same store sales and weekly unemployment claims. The story these three pieces of data are telling are quite different, which means at least one and possibly two of them are not correct. Productivity in the U.S. is supposedly up astronomically. It rose by 8.1% last quarter and this is after being revised down from being up 9.5%! A downward revision of third quarter GDP from 3.5% to 2.8% reduced the productivity numbers as well (since then the GDP was revised down even more to 2.2%, new productivity numbers have not yet been issued). Productivity is essentially the amount of GDP produced per worker. Since employment is falling in the U.S. and GDP is supposedly rising (the two moving in opposite directions is illogical) productivity has to go up. According to the government, it is going up a huge amount. Is there any major new technological advance or innovation accounting for this? None that anyone knows about. Economists claim that productivity has gotten better because the least productive workers have been fired. While this might give the numbers a percentage or so boost, it wouldn't give them an 8% boost. The alternative explanation is that the U.S. government is grossly overstating GDP. There is substantial documentation that this has indeed been the case for the last three decades. Same store sales statistics are not part of a government report and the November numbers clearly show an economy in trouble. Sales were down 0.3% year over year. While this may not seem so bad initially, it looks much worse when you consider sales were down 7.7% last November during the height of the Credit Crisis meltdown. Analysts (who are almost always wrong) originally forecast a 5% to 8% increase for this November. Consumer spending accounts for 72% of U.S. economic activity and is still obviously in bad shape. Yet, the government tells us that GDP is growing nicely. There seems to be a contradiction there. If you read the mainstream media coverage of the weekly jobless claims you would have seen that the U.S. employment situation is getting better because there were only 457,000 new claims during the week of Thanksgiving. Of course, you might consider that few employers would lay off workers right before a major holiday and that state unemployment offices were closed because of the holiday, so this would obviously lower the number. The BLS (Bureau of Labor Statistics) states that they make some 'adjustments' for this though. Claims at even the 400,000 level indicate significant recession and they need to drop to the 300,000 level to indicate a healthy economy (you will see much higher numbers cited in most mainstream media reporting). Continuing claims are still rising and have hit 5.5 million. This number doesn't include an additional 4.5 million on extended unemployment benefits. A large percentage of the American work force is not eligible to collect unemployment as is, so the numbers are even worse than they appear. While there are those who claim that unemployment is a lagging indicator, statistics from the past don't support this notion. The real lagging indicator seems to be the truth about what is really going on in the economy.   Daryl Montgomery Organizer, New York Investing Meetup http://investing.meetup.com/21