Diversity of Economic Indicators

Economists—as well as politicians, traders, and the media—use indicators to assess and describe the economy. They’re like measurements your doctor might take to evaluate your health: heart rate, blood pressure, reflexes, etc.. Economic indicators range from straightforward, official measurements of intuitively “economic” statistics (such as the BLS’s Consumer Price Index) to unofficial, indirect methods of gauging economic activity. In our healthcare analogy, indirect indicators might be like your doctor trying to determine your overall health by investigating how well-used your pillow is (to guess the quality of your sleep). Think that sounds clever? Check out these economic indicators:

+ using “Craigslist prices for furniture, concert tickets, haircuts and other goods and services to measure changes in local prices” (planet money)
+ predicting San Francisco sales-tax revenue by monitoring subway ridership (planet money)
+ using Diesel purchases by truckers as a predictor of industrial production and GDP (planet money)
+ describing the employment market using Google searches for “unemployment office” and “jobs” (planet money)
+ forecasting global trade based on “the cost of shipping dry, bulk commodities, like iron ore, coal, and grain”–known as the Baltic Dry Index (marketplace)
+ the unclaimed corpse indicator—based on the idea that family are less likely to claim a loved one and shoulder the burden of burial costs in a recession (business insider)
The Federal Reserve Open Market Committee, of course, relies heavily on official statistics, but they also rely on unofficial indicators to guide their decision-making. At a FOMC meeting in 2008, Janet Yellen bro1ught a number of anecdotal indicators to  the group’s attention: “East Bay plastic surgeons and dentists note that patients are deferring elective procedures. [Laughter] Reservations are no longer necessary at many high-end restaurants. And the Silicon Valley Country Club, with a $250,000 entrance fee and seven-to-eight-year waiting list, has seen the number of would-be new members shrink to a mere thirteen. [Laughter]” However humorous, she brought up these anecdotes for a serious purpose: to argue that a widespread cutback in discretionary spending was taking place. She turned out to be in the right—September 2008 marked the beginning of a long global economic downturn.
The past decade has seen a marked increase in the number of indicators released every day. According to data from Cleve Rueckert of Binrinyi Associates  the average number of of indicators released per trading day has jumped from approximately one in 1996 to five around 2010.
One might assume that more economic indicators means better information and therefore better decision-making, but Rueckert disagrees. He wrote, “On a daily basis we are bombarded by an average of five indicators, many of which are overlapping or redundant and frequently contradictory.” As of yet, I know of no attempts to make economic extrapolations from this data. Based on the trajectory of indicator frequency, though, the meta-indicator seems only a matter of time.

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