The Economy: How Do We
Know What We Know?
Lucas Hitt
U.S. Bureau of Economic Analysis
November 6, 2014
Let’s Talk About Economic Data
 Federal Economic Statistics
 National Accounting
 Lessons from the Great Recession & Evolutions to
Come
 BEA 101
 Online & Other Resources
www.bea.gov
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Origin of the GDP Accounts
“One reads with dismay of Presidents Hoover and then
Roosevelt designing policies to combat the Great Depression
of the 1930’s on the basis of such sketchy data as stock price
indices, freight car loadings, and incomplete indices of
industrial production. The fact was that comprehensive
measures of national income and output did not exist at the
time. The Depression, and with it the growing role of
government in the economy, emphasized the need for such
measures and led to the development of a comprehensive set
of national income accounts.”
Richard T. Froyen
www.bea.gov
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National Accounts & GDP: 75 Years of Responding to
Policy Needs and Changes in the Economy
www.bea.gov
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Contribution of the National Accounts to
Stability and Economic Growth
“Much like a satellite in space can survey the weather
across an entire continent so can the GDP give an overall
picture of the state of the economy. It enables the
President, Congress, and the Federal Reserve to judge
whether the economy is contracting or expanding,
whether the economy needs a boost or should be reined in
a bit, and whether a severe recession or inflation
threatens. Without measures of economic aggregates like
GDP, policymakers would be adrift in a sea of unorganized
data. The GDP and related data are like beacons that help
policymakers steer the economy toward the key economic
objectives.”
Paul Samuelson and William Nordhaus
www.bea.gov
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Contribution of the National Accounts to
Stability and Economic Growth
 National accounts, in combination with better
informed policies and institutions, contributed to a
reduction in the severity of business cycles and strong
post-war economic growth.
 1854 – 1945: Twenty two financial panics and
depressions, longer and deeper than post-war
recessions, with an average duration of 21 months.
 During the great depression U.S. GDP contracted by 26
percent.
 1945-2013: Eleven recessions, with an average duration
of 11 months.
 During the great recession U.S. GDP contracted by 4.3
percent.
www.bea.gov
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Contribution of the National Accounts to
Stability and Economic Growth
 Post WW II era a period of unprecedented growth.
 Real GDP per capita and real wealth has more than
doubled during the post war era.
 Dramatic improvement in standards of living that
contributed to large improvements in social conditions,
cutting poverty in half, raising life expectancy, and
adding to leisure time.
www.bea.gov
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Challenges: Looking Forward
 Addressing gaps revealed by the Great Recession
 Improved measures on key issues including innovation,
health care, pensions, and human capital
 Improved measures of economic welfare, including
distribution of income
www.bea.gov
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Gaps Revealed by the Great
Recession
www.bea.gov
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Gaps Revealed by the Great Recession
www.bea.gov
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Gaps Revealed by the Great Recession
www.bea.gov
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Post Financial Crisis & Great Recession
Challenges: How Did We “Miss” the Stock Price
Bubble?
www.bea.gov
Source: BEA, S&P
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Better Understanding the Impact of
Innovation on Growth
 Intellectual property products (new category including R&D,
software and entertainment, literary and artistic originals)
increased the growth rate of real GDP by .19 percentage point, a
7.6% share of growth.
 From 1995-2012, incorporating R&D investment increased the growth rate
of real GDP by.07 percentage point, a 2.8% share of growth.
 Even if IP spillovers are as large as direct effects, the
contribution of IP appears to explain only part of the 1/3 of
long-term share of growth accounted for by multi-factor
productivity.
www.bea.gov
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Better Understanding the Impact of
Innovation on Growth
 In comparison, private investment in commercial and other
types of structures accounted for just over .4 percent of
average real GDP growth from 1995-2012.
 The contribution to average real GDP growth from IP
products is larger than private investment in computers
and peripheral equipment.
 Recognition of private R&D as investment raises private
fixed investment by 10 percent in 2012.
www.bea.gov
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Entertainment, Literary and Artistic
Originals
Share of Investment in Entertainment, Literary and Artistic Originals by Type
Misc.
Music
Theatrical Movies
Books
Long-Lived Television
Source: BEA
www.bea.gov
Total Investment in 2012: $74.8 billion
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Improved Measures of Economic Welfare:
Happiness & the Financial Crisis
Unemployment rate
Gallup Well-being Index
Source: BEA, Gallup
www.bea.gov
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Improved Measures of Economic
Welfare: Distribution of Income
www.bea.gov
Source: BEA & Census Bureau
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About BEA
 The Bureau of Economic Analysis (BEA) is an
Executive-branch agency.
 BEA is one of the world’s leading statistical agencies
 BEA is very small (500 employees) compared to other
statistical agencies.
 Most input data collected for purposes other than the
development of our statistics.
 No BEA employee is a political appointee.
www.bea.gov
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BEA’s Role in the Federal Statistical System
 Comprehensive Measures of the U.S. Economy
 Double-entry sets of economic accounts
 National, International, Regional, and Industry Accounts
 Except for its International Surveys, BEA accounts are
built on a mosaic of public and private data collected for
other purposes
 Mine-Shaft Canary for U.S. Statistics
www.bea.gov
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Source Data for BEA Accounts
Other source agencies: EIA - DoE
NASS, ERS, NCES, and HHS-CMS
www.bea.gov
Lots of private data
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BEA’s National Economic Accounts
 The National Income and Product Accounts (NIPAs)
are a set of economic accounts that track economic
flows within the U.S. economy. Two key NIPA
measures are:
 Gross domestic product (GDP): Measures the total value of
goods and services produced within the U.S. in a period.
 Gross domestic income (GDI): Measures the incomes earned
and the costs incurred in producing those goods and services.
www.bea.gov
2
1
Expenditure Components of GDP (2013)
GDP = C + I + G + X - M
Consumption
68.4%
+
www.bea.gov
Investment
Government
Exports
Imports
15.9%
18.6%
13.5%
16.4%
+
+
-
= GDP
2
2
Dating the Business Cycle
www.bea.gov
How are GDP Estimates Used?
 Policymaking
 Academic research
 Business decisions
www.bea.gov
2
4
The Right Trade Off Between Accuracy
and Timeliness?
www.bea.gov
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BEA’s International Economic Accounts
 Balance of payments (International transactions
accounts)
 Trade balance
 Current-account balance
 International investment position
 Operations of multinational companies
 International services
www.bea.gov
2
6
BEA-Developed Source Data
 BEA surveys provide important international data
 Direct investment (U.S. and abroad)
 Operations of multinational companies (MNCs)
 Trade in services
 Mandatory surveys are sent to:
 U.S. MNCs and U.S. affiliates of foreign companies.
 U.S. companies that import or export services
www.bea.gov
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How are International Statistics Used?
 Macroeconomic policy decisions
 Determining market size, share, and direction
 Analyzing size and composition of inbound and
outbound direct investment
 As a measure of globalization
www.bea.gov
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Monthly Exports and Imports: Goods & Services
www.bea.gov
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BEA’s Industry Economic Accounts
 Input-Output Accounts (Benchmark & Annual Tables)
 GDP-by-industry statistics
 Gross Output
 Intermediate Inputs
 Value Added
 KLEMS
 Travel and Tourism Satellite Account
 Research and Development Satellite Account
www.bea.gov
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Input-Output (Use) Table
INDUSTRIES
Natural
TransporResource Construc- Manufac- tation and
and Mining
tion
turing
Utilities
C
O
M
M
O
D
I
T
I
E
S
V
A
L
U
E
A
D
D
E
D
Natural
Resource and
Mining
FINAL USES (GDP)
Trade
Services
Personal
Government
Total
Consumpconsumption
Intermetion
Private
Change in Exports of Imports of expenditures
diate
Expendifixed
private goods and goods and and gross
tures
investment inventories services services
investment
Uses
Other
82
11
286
63
2
10
10
463
Construction
8
1
12
12
4
74
42
153
Manufactured
Products
58
232
1,337
74
103
406
200
2,410
1,248
566
14
495
Transportation
and Utilities
22
21
158
96
77
150
69
593
333
19
0
Trade
14
74
201
12
47
86
30
463
1,093
123
Services
84
146
544
154
381
2,487
440
4,235
4,695
1
0
31
31
23
77
27
190
268
485
2,570
442
636
3,290
817
8,508
Other
Total
Intermediate
Inputs
Compensation
of employees
61
368
765
260
700
2,809
1,135
6,097
Taxes on
production and
imports, less
subsidies
10
5
33
49
276
364
-12
724
Gross operating
surplus
116
109
483
164
285
2,487
207
3,851
187
483
1,280
473
1,261
5,659
1,330
10,672
455
968
3,851
915
1,897
8,949
2,146
19,180
Total Value
Added
TOTAL INDUSTRY
OUTPUT
www.bea.gov
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30
-7
25
-119
Total TOTAL
final
COMuses MODITY
(GDP) OUTPUT
-22
442
217
879
1,032
-1,015
84
1,393
3,803
59
-13
2
400
994
2
68
20
10
1,317
1,780
290
0
165
-42
28
5,135
9,370
80
-83
4
98
-166
1,636
1,569
1,760
7,499
1,608
14
910
-1,335
1,977
10,672
19,180
663
Industry Output
=
Commodity Output
Total Industry Output = Intermediate Industry Purchases
+ Value Added
GDP by Industry
www.bea.gov
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How are Industry Statistics Used?
 Study production capacity and productivity across
industries
 Examine effects of a strike or a natural disaster on
the U.S. economy
 Measure the impact of trade policies
 Assess cross-industry impacts of economic and
regulatory changes
www.bea.gov
BEA’s Regional Economic Accounts
 Gross Domestic Product
 State/Territory, Metropolitan Area
 Personal Income
 State, Metropolitan Area, County
 Regional Input-Output Multipliers
(RIMS II)
www.bea.gov
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How are Regional Statistics Used?
 Analysis of state and local economic impacts of
national or state economic trends
 Project tax revenues, the need for public services, or
promote economic development opportunities
 Conduct market research
 Allocate federal funds to states
www.bea.gov
BEA Regional Income & Product Account Estimates
Used to Distribute $ 320 Billion in Federal Funds, FY2012
Medicaid
Medicaid Grants
Medicaid
$204,053
$262,389
Medicaid
Grants
Medicaid
Medicaid Grants
$262,389
$262,389
Grants
$262,389
$262,389
bea.gov
All other
$23,098
111 Largest Counties
Account for ½ U.S. Personal Income
www.bea.gov
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Personal Income
www.bea.gov
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Regional Example: Oklahoma City
Compensation
71 % growth
www.bea.gov
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Regional Example: Hawaii GDP
Industry GDP
350
300
250
200
125 % growth
150
100
50
0
2008
www.bea.gov
2009
2010
2011
40
BEA’s New Regional Data Products
BEA is releasing several new statistical products in 2014, as a
part of an ongoing effort to better measure the dynamic
regional economies.
 Quarterly GDP by State
 Real Personal Income for State and Metropolitan Areas
 Personal Consumption Expenditures by State
 U.S. Quarterly GDP by Industry
www.bea.gov
BEA home page features
www.bea.gov
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Automated Feeds
www.bea.gov
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Research
www.bea.gov
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Economy at a Glance
www.bea.gov
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Twitter
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 Follow us @BEA_Jobs to stay on top of job openings at
BEA and career fairs
 Seriously, take a minute and follow us now – it’s OK
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Media
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47
Email
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Questions
 Contact Information:
 Lucas Hitt
Chief of Communications
U.S. Bureau of Economic Analysis
 Lucas.Hitt@BEA.gov
 202-606-9223
www.bea.gov
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