The New York Times uncovers a rather disturbing oversight that economists are just now focusing on.

Actually, disturbing isn’t the right word. Terrifying is much more of an accurate descriptor.

In any event…

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.

American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics.

“We don’t have the data collection structure to capture what is happening in a real time way, or what is being traded and how it is affecting workers,” said Susan Houseman, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., who has done pioneering research in the field. “We have no idea how to measure the occupations being offshored or what is being inshored.”

Yeah, this is a tricky one because the government would literally have to account for every single import, how much it was bought for, etc. And there’s no way big business will go for that.

So it does indeed seem like our economic data has a big, gaping hole in it that is impossible to fill. But if we can’t point to the GDP as an accurate measure, which number do we point to? Employment and median wages seem to be the most obvious indicators since the more people are employed, the more likely they are to spend and the more our economy will flourish…given that it’s driven by consumer spending.

But maybe I’m missing something. What do you think the focus should be on if the GDP is a big boatload of nonsense?

Business Is Our Economic Data Fatally Flawed?