Economists may have been flying blind all along

THE pandemic upended many of the things we thought we knew about the economy. Even now, economists struggle to answer such fundamental questions as whether Americans are better off financially. Answers vary significantly depending on the data source, sowing confusion. The end result is that business and households seem to be losing trust in the data and have become increasingly unwilling to participate in the surveys that underlie official statistics such as unemployment and inflation that, in turn, help inform decisions made by government officials and central bankers.

Sure, Covid-19 made conducting surveys extremely difficult, but the recovery still left response rates short of the pre-pandemic levels.

Take the Job Openings and Labour Turnover Survey. Bloomberg Businessweek reported earlier this year that the response rate to the survey had plunged by half to 31 per cent. At the same time that the response rate fell, the Federal Reserve drew increasing attention to the record-high unfilled openings that the survey reported. What the Fed viewed as an “extremely tight labour market” was part of its rationale for raising interest rates so rapidly, boosting the cost of everything from mortgages to credit cards and student loans.