What I Learn from Government Economic Statistics

Thomas Jefferson once said, "Knowledge is power, knowledge is safety, knowledge is happiness". The media often presents government statistical information to the public, but few families really understand how these statistical numbers affect their daily lives. Government statistics such as state and federal unemployment rates, inflation and Gross Domestic Product (GDP) are often just numbers that we hear on the radio. Understanding how these figures affect consumer prices and the economy, you and your family can make better financial decisions.[1]

Unemployment Rates

The unemployment rate represents the government's estimate of unemployed workers as a percent of the complete labor force. When you hear of higher unemployment rates, it indicates that business growth has slowed and the opportunities for employment are low while competition to find jobs has increased because more people are looking for work.

You cannot protect against unemployment but you can take measures to mitigate the damage done by being unemployed. Learning new skills on the job, keeping your resume updated and networking with colleagues is vital to your employment health especially during high unemployment periods. [5][6 see impact of unemployment]

Inflation

I learned about Consumer Prices Index (CPI) fluctuations during the 1970's recession. CPI indicates the inflation average percentage. Higher CPI indexes indicate high inflation, which can hinder economic growth. High inflation creates business uncertainty as to future economic conditions. This causes businesses to act conservatively when growing, conserve resources and to stop hiring. Inflation causes a rise in food, goods and energy prices so predicting an inflationary period becomes vital for economic safety since family have to budget these increases into their overall living costs.

Inflation also causes a rise in the cost of borrowing money. At the government level, it increases the cost of financing state and federal debt that can cause a rise in taxes to pay for it. On a personal level, the cost of consumer debt increases since interest rates move higher. [2][4][3]

Gross Domestic Product

Many people hear the term Gross Domestic Product but few realize that the GDP details are the best place to determine the health of our economy. The U.S. Bureau of Economic Analysis provides a detailed GDP quarterly report that can provide interesting information on the real economy that can prepare your family for inflation, possible industries for investment and for employment.

For example, the fourth quarter GDP report of 2010 reported that personal current taxes increased nationally by $28.7 billion. This increase was an additional increase over the third quarter GDP report's personal tax increase of $28.6 billion. After viewing these quarterly GDP reports, I decided to reduce our family spending and budget to pay for possible extra tax increases. [7 see GDP link]

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References:

[1] NASA: Quotes Related to Knowledge Management or Collaboration

[2] The Economist: The mystery of clothes inflation and the formula effect

[3] North Carolina State University: Why is Inflation Bad?

[4] Federal Reserve Bank of San Francisco: What are the goals of U.S. monetary policy?

[5] U.S. Bureau of Labor Statistics: Glossary

[6] Quick MBA: Unemployment

[7] U.S. Bureau of Economic Analysis: U.S. Economic Accounts