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June 23, 2009

Making economic comparisons

Economic indicators are in the news almost every day, and comparisons using these indicators are made to try to predict where the economy is headed. But what factors must be considered to make sure these comparisons are accurate? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Many, many factors; I think one of the most important is the seasonal adjustment. Oftentimes, what we want to do is compare data from month to month - for example, employment or unemployment rates. But oftentimes those indicators fluctuate based on seasonal factors. For example, when we hit May and June, we have a lot of college and high school graduates coming into the labor market, and that's going to affect the number of jobs available. Also, it's going to affect the unemployment rates. So we need to account for that. Another factor that we need to account for obviously is inflation, so we must make sure that when we're comparing indicators over time if they denominated in dollars, we have to take inflation out. And then for retail stores specifically, when you're comparing sales from one year to another, you have to adjust for the fact that some stores may not have existed a year ago. So what you typically want to do is compare what are called same-store sales. So what this does is make it much more complicated to compare data from one month to another simply by looking at those raw numbers. You do need to take these various adjustments into account."

Posted by Dave at June 23, 2009 08:00 AM