It angers me when graphs are “misused”

Any reader of this blog knows that I love to “illustrate” my stories, and I try to do that diligently so as not to confuse or misguide the reader. Unfortunately, many others don´t take that particular care and reach conclusions based on “optical illusions”.

Recently I took Joe Wiesenthal to task for picking on a bad chart in a post by James Pethoukoukis and actually making things worse. Now JW is back at it, this time reproducing bad charts from a deeper study about the impact of housing on the recovery.

Something´s wrong with the charts shown, leading to the JW´s conclusion that:

Still though, what the above charts (plus others in the paper) show is that this recovery is just not that unusual compared to past ones. There are a couple areas that really stand out to the downside, but in most of the categories, the bounce back has been alright.

That´s the sort of (wrong) conclusion you arrive at by looking only at “growth rates” and ignoring “levels”. And the defining characteristic of the present “contraction” is that it gave us the first negative growth i.e. “contraction” in nominal spending (NGDP) since 1938, during the “second leg” of the great depression. The chart illustrates.

And if look attentively at the charts JW presents, you´ll observe that in most the fall was the largest among the cycles compared. This means that although you might say that the “recovery is not just that unusual”, the economy (and most of its “categories”) is still “languishing” deep inside the “hole” it “fell into”.

In other words, if you´re “crawling out” from a “deep hole” at the same rate (speed) that you “crawl out” from a “shallow hole”, it will take you much longer (and require much “suffering”) for you to again see the “light of day”. (Where the “light of day” is the LEVEL you should be at NOW if you hadn´t dropped into the “abyss”).

Update: “Rolling in the deep, but we could have had it all”


3 thoughts on “It angers me when graphs are “misused”

  1. Sure, if you have a safe job, or are not invested in real estate or a small business, perhaps the recovery seems okay.

    But this have been horrible for anyone with the slightest exposure to the real world.

    Each unemployed person is a story. Sure, they are not exemplars—indeed, excuse them for being average. Moreover, the whole economy suffers from the lost output associated with GDP being 13 percent below trend.

    There is a sickness in the world of economists, to obsess with inflation and to say things are not so bad. It is different if you are trying to make a living in the business world, or are just some average guy who would like a job.

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