Show 1 W I J k C Economic Eco l Solstice S Statistics and Economic Reality At this point in history th the central issue of national economic economic eco policy might be stated staled as follows Will the United States in t 1976 and 1977 1917 turn once again to scale large-scale fiscal stimulation larger budget deficits deficits def def- and monetary stimulation more rapid increase in the money supply in an effort to hast hasten n the decline in unemployment unemployment Or will it persevere in a program program program pro pro- gram of steadier and more restrained restrained restrained re re- re- re strained policies to stabilize the economy and initiate a new period of ot sustainable growth We can hardly hope that this about two months from now indicate a substantial slowing stowing of the pace of the economic upswing This warning is not motivated by a feeling that in any real sense this recovery is about to slow stow down and may be approaching approaching approaching ap ap- ap- ap its termination For 1976 at least I believe that the recovery is solidly based and that the year will wilt be a far better bet beta ter one than mot most observers had hoped for six months back But the real trends in the economy are arc one thing and the quarterly statistics we rely on onto onto onto to keep track of them as each and it w was S back to euphoria That is all alt very well since the economy is in a good recovery and the euphoric mood helps to ward off political demands for new scale large-scale government intervention But what if when the second quarter figures appear ap apt pear in mid-July mid they suggest that the recovery has again slowed down To ask that question is not notto notto notto to forecast that the pace of recovery is in fact going to slow down in the tho second quarter quarter quarter ter or even that the statistics will turn out to suggest t that at it has But the see saw nature of the data during the past three quarters should prepare us for forat forat forat at least the possibility of such an an- an outcome If that possibility materializes in midsummer 1976 we will be faced with a apolitical apolitical apolitical political outcry for government to do something something just just when the political season is beginning to heat up It could all alt be a false alarm as it was in Janu January anu- anu ary when the data suggested that the recovery was petering out To raise these questions is not to disparage the statistics They are good statistics statistics statistics-as as statistics go It is just that we impose an unreasonable burden on them if we expect them to give a close fine measure of to quarter-to-quarter growth The measure of the annual rate of growth from one quarter quarter quarter ter to the next in real gross national product is the end result result result re re- sult of a long series of calculations calculations calculations lations each involving a certain margin for error Adjustment for seasonal is a necess necessary ry step but it too can be a source of error When to quarter-to-quarter changes are converted into annual annual annual an an- nual rates the error is multiplied multiplied multiplied multi multi- plied by bya a factor of f four The apparent wide fluctuations in inthe inthe inthe the economic growth rate over the past year might be no nomore more than reflections of the cumulative cumulative cumulative tive margin for error in the whole process Mr Hagedorn is vice president and chief economist of the National National National Na Na- Association of ur rs 1 |