On Topic: Red, white and beige

With all the economic information that's thrown at us these days, it's a lot like that cable television program, “Storage Wars,” in which various eager folk squabble over repossessed storage units.

You, the viewer, can't always believe what you're seeing is “real.” And, just as it is for Barry, Brandi and Jarrod, sometimes it's hard to know what you're getting yourself into.

We already know that the frequent unemployment reports that are pumped out by the U.S. Labor Department's Bureau of Labor Statistics are followed by a later report that will revise those earlier numbers, up or down.

Moreover, we have to keep in mind those numbers do not include folk who are no longer seeking work, who have cycled out of the system, who now have lower-paying, part-time jobs - the so-called underemployed - or who are on some disability program.

That is, some 33 percent of the general population of this nation.

I'm not suggesting there is anything untoward going on here. The bureau's figures are “as accurate as it can be” using its current formula, as Kerry Koonce, Iowa Department of Workforce Development, noted in a Gazette story last autumn.

But, again, like those storage-unit optimists rummaging through the detritus of their latest purchase, you have to pay close attention to what you're really getting.

We need to bring a similar dose of skepticism to those euphoric news items trumpeting how the stock market once more has surpassed a new, highest-ever milestone. This past March, when the Dow Jones industrial average moved above 14,164.53, it was as if a parade were declared along every Main Street in America.

But as Jeff Cox of CNBC noted at the time, “In inflation-adjusted dollars, the Dow would need to hit 15,731.54 to break the record.”

Oh, right - inflation. As Cox pointed out, the Dow - which measures the activities of only a scant 30 companies from across America's broad, diverse mega-economy - was still far below its high from 13 years ago.

(As Gazette business editor, I try to insert an explanatory caveat in wire-service stories when space permits.)

And that brings us to the revered Beige Book. Begun in 1970 and put out eight times a year by the 12 districts of the Federal Reserve Bank, this survey of newspaper articles and conversations with business owners and market experts purports to give a snapshot of economic conditions.

Markets react to the tea-leaf readings divined from this Beige Book. Business decision makers plan based on what comes out of these findings.

But here's the thing, and the clue is right there in the Fed's own website description of the Beige Book: The reports are based on “anecdotal information.”

That is, huge extrapolations are fetched up from a small sampling of attitudes and opinions.

I recall the first time I read through an actual Beige Book, rather than relying on a summary or a wire service list of highlights. And I thought, what? They only talked to how many companies … ?

Robert Sadowski, an analyst with the Fed's Cleveland district, notes in an FAQ-like column from this spring that on average his district will speak with “at least 150 knowledgeable people about their views.”

Its broad swath of territory covers from Cincinnati, in Ohio's southwestern corner, east to Wheeling, W.Va., and north to Erie, Penn.

Indeed, in this most recent Beige Book, released just a couple weeks ago, the Boston district mentions researchers spoke with 13 manufacturers for the whole of New England.

From this meager cadre, researchers opine on the area's current sales, hiring plans and other expectations for that category.

Now imagine using these tiny samples from all dozen districts to draw conclusions about the past, present and future economic pace for the entire country.

While going the July Beige Book, I did spy far fewer references to exactly how many companies were included in the surveys than I recall from earlier reports. Perhaps some Fed official also wondered about how much confidence readers would have in a report that draws such big conclusions from such an arguably little bunch of a sources.

I don't mean to say all this data and all these viewpoints are of no value. They do reflect sentiment, and sentiment can drive wide-ranging decisions.

But as with those storage units, it helps to shift through the contents with a cautious eye.