Big Take DC: Economists May Be Using Bad Data to Make Big Decisions

Episode Summary

Executive Summary: The episode argues that policymakers, especially the Fed, may be making major economic decisions with imperfect or outdated data, as pandemic-era shifts distorted surveys like JOLTS and lowered response rates across government statistics. Claudia Somme, Tracy Alloway, and Joe Weisenthal discuss how this uncertainty complicated recession forecasts, inflated or blurred signals on labor demand, and may matter for the 2024 election because voters and policymakers rely on the same flawed economic narratives.

Main Topics: Fed policy and the limits of economic data (Priority: 5/5): The discussion frames the Federal Reserve as trying to steer inflation and the economy using statistics that may not accurately reflect reality, making policy decisions harder than they appear. JOLTS and labor-market measurement problems (Priority: 5/5): Claudia Somme argues that the Job Openings and Labor Turnover Survey became less reliable after COVID because job listings, labor hoarding, and remote hiring changed how openings are reported. Declining survey response rates (Priority: 5/5): The episode highlights a broader decline in public participation in government surveys, especially on sensitive topics like income, debt, and wealth, which undermines the representativeness of official data. Hard data vs. soft data (Priority: 4/5): Tracy Alloway and Joe Weisenthal contrast objective business outcomes with sentiment-based survey responses, noting that perceptions of the economy can diverge sharply from measurable results. Soft landing vs. recession narrative (Priority: 4/5): The conversation revisits how widespread recession forecasts for 2023 proved wrong and how inflation fell without the expected unemployment spike, challenging dominant economic models and stories. Political and electoral implications (Priority: 4/5): Because the economy is the top issue for many voters, flawed or incomplete data may affect election-year judgments, public sentiment, and interpretations of how the Biden economy is performing. Possible fixes: administrative data and trust-building (Priority: 3/5): Somme suggests combining surveys with administrative records and rebuilding public trust in government to improve data quality and policymaking.

Key Arguments: The Fed can only be as good as the data it uses, and some key indicators may no longer reflect the post-pandemic economy accurately. JOLTS became harder to interpret after COVID because employers changed posting behavior, including listing the same job in multiple locations at little cost. Lower survey response rates are not just a statistical nuisance; they threaten whether survey samples reflect the broader population. Public distrust and privacy concerns are making people less willing to answer government surveys, especially about sensitive financial information. The gap between hard economic data and soft sentiment data can widen dramatically, meaning people may feel pessimistic even when measurable activity is holding up. The 2023 recession call was widely expected, but the economy instead achieved a soft landing, showing how uncertain economic forecasting can be when inputs are shaky. Policymakers should use multiple data sources, including administrative records, to improve measurement and reduce dependence on weak surveys.

Data Points: Stock Movers report length: 5 minutes or less - Described in the Bloomberg promo as a short audio report delivered throughout the day. Bloomberg journalist/analyst network: 3,000 journalists and analysts - Mentioned in promotional copy for Bloomberg reporting. Claudia Somme Fed tenure: 12 years - Her background is cited to establish her expertise on labor and policy data. Survey response rate example: about half - Somme says some housing surveys now receive responses from only around 50% of those contacted. Previous survey response rate example: two-thirds - The same housing survey is described as having once gotten responses from roughly two-thirds of contacts. Pew Research finding: two-thirds of adults - Pew found two-thirds think the risks of responding to surveys outweigh the benefits. Economy scale: $20 trillion-plus - Somme uses this figure to illustrate how hard it is to measure a huge, dynamic economy. Recession expectation timing: last year / going into 2023 - The conversation notes that economists broadly predicted recession before the economy avoided one.

Pivotal Quotes: "Economists may have been flying blind all along." — Claudia Somme: Headline and central thesis of her Bloomberg Opinion argument about flawed economic measurement. "Data doesn't come down from heaven." — Narrator: Explains that official statistics are constructed and can be imperfect rather than purely objective truths. "We measure quote-unquote reality." — Claudia Somme: Her explanation that policymakers rely on human-made measures, not direct access to truth.

Implications: The episode warns that weaker surveys and distorted indicators could lead to policy mistakes, skew public debates, and misread the economy in an election year. Better trust, better measurement, and more data sources are needed.