Jeff  Carter

A lot of statistics are bandied about in conversations, idle gossip, the media and then used by politicians for political advantage. They are actually meaningless when it comes to analyzing the health of an economy when viewed by themselves, or in a vacuum.

Here they are:

1. Trade Balance (deficit) with China, or any particular country-It doesn’t matter that we import more goods than we export to China. It simply means US consumers are getting cheaper goods and we are saving money. Businesses in the US analyze where its more efficient to manufacture and distribute goods. If it’s out of the US, who cares? All that means is US companies need to figure out more efficient ways to make things here-or start new businesses here.

2. Income disparity-because the wealthy don’t always stay wealthy, it’s a bullshit statistic. Income isn’t static. It’s volatile. There is income mobility in the United States. Just because you are rich today doesn’t mean you are going to be rich tomorrow. Vice versa for the poor. The real stat to look at is if all incomes are rising. The rich are better off than they were twenty years ago in the US, but so are the poor. In addition, women don’t earn less than men. Most of the time they are employed in jobs that pay them less, like domestic help. Women choose careers that allow them to have families. Many times that choice means making less money.

3. Unemployment levels in certain communities-ethic, gender or age based. Stats like these are used to create division, when they can be purely explained by educational levels and/or skill level. Income level is almost always predicted by educational level, and poor people of all races have a tougher time of it than more educated people.

4. Diversity of company or board based on gender or ethnicity. It just doesn’t matter. Get the best possible people for your company or board of directors without regard to what they are. Diversity of experience and thought means far more than picking based on any other factor.

5. US median income. Because costs of living are so variable, and people make a lot of different individual choices, median income makes no sense. If I make 200k a year in a place like San Francisco versus 200k per year in a place like Louisville there is a huge difference in my standard of living. Levels of income in a city simply indicate that there is better income potential in that city. New York is expensive because a lot of people make a lot of money there, so demand is higher driving up the cost of living.

Then there are the stats that really matter. The ones that you need to pay attention to.

1. Unemployment-shows the health of the economy. It’s a seminal predictor for a lot of other stats.

Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.