Criticisms of GDP

There are, of course, drawbacks to using GDP as an indicator. In addition to the

lack of timeliness, some criticisms of GDP as a measure are:

It ignores the value of informal or unrecorded economic activity – GDP relies on

recorded transactions and official data, so it does not take into account the
extent of informal economic activity. GDP fails to account for the value of under-
the-table employment, black market activity, or unremunerated volunteer work, which
can all be significant in some nations. and cannot account for the value of leisure
time or household production, which are ubiquitous conditions of human life in all
societies.
It is geographically limited in a globally open economy – GDP does not take into
account profits earned in a nation by overseas companies that are remitted back to
foreign investors. This can overstate a country's actual economic output. For
example, Ireland had GDP of $210.3 billion and GNP of $164.6 billion in 2012, the
difference of $45.7 billion (or 21.7% of GDP) largely being due to profit
repatriation by foreign companies based in Ireland.
It emphasizes material output without considering overall well-being – GDP growth
alone cannot measure a nation's development or its citizens' well-being, as noted
above. For example, a nation may be experiencing rapid GDP growth, but this may
impose a significant cost to society in terms of environmental impact and an
increase in income disparity.
It ignores business-to-business activity – GDP considers only final goods
production and new capital investment and deliberately nets out intermediate
spending and transactions between businesses. By doing so, GDP overstates the
importance of consumption relative to production in the economy and is less
sensitive as an indicator of economic fluctuations compared to metrics that include
business-to-business activity.
It counts costs and waste as economic benefits – GDP counts all final private and
government spending as additions to income and output for society, regardless of
whether they are actually productive or profitable. This means that obviously
unproductive or even destructive activities are routinely counted as economic
output and contribute to growth in GDP. For example this includes spending directed
toward extracting or transferring wealth between members of society rather than
producing wealth (such as the administrative costs of taxation or money spent on
lobbying and rent seeking), spending on investment projects for which the necessary
complementary goods and labor are not available or for which actual consumer demand
does not exist (such as the construction of empty ghost cities or bridges to
nowhere unconnected to any road network), and spending on goods and services that
are either themselves destructive or only necessary to offset other destructive
activities, rather than to create new wealth (such as the production of weapons of
war or spending on policing and anti-crime measures).
Sources for GDP Data
The World Bank hosts one of the most reliable web-based databases. It has one of
the best and most comprehensive lists of countries for which it tracks GDP data.
The International Money Fund (IMF) also provides GDP data through its multiple
databases, such as World Economic Outlook and International Financial Statistics.

Another highly reliable source of GDP data is the Organization for Economic
Cooperation and Development (OECD). The OECD provides not only historical data but
also forecasts for GDP growth. The disadvantage of using the OECD database is that
it tracks only OECD member countries and a few nonmember countries.

In the U.S., the Federal Reserve collects data from multiple sources, including a
country's statistical agencies and the World Bank. The only drawback to using a
Federal Reserve database is a lack of updating in GDP data and an absence of data
for certain countries.

The Bureau of Economic Analysis (BEA), a division of the U.S. Department of

Commerce, issues its own analysis document with each GDP release, which is a great
investor tool for analyzing figures and trends and reading highlights of the very
lengthy full release.

The Bottom Line

In their seminal textbook "Economics," Paul Samuelson and William Nordhaus neatly
sum up the importance of the national accounts and GDP. They liken the ability of
GDP to give an overall picture of the state of the economy to that of a satellite
in space that can survey the weather across an entire continent.

GDP enables policymakers and central banks to judge whether the economy is
contracting or expanding, whether it needs a boost or restraint, and if a threat
such as a recession or inflation looms on the horizon. Like any measure, GDP has
its imperfections. In recent decades, governments have created various nuanced
modifications in attempts to increase GDP accuracy and specificity. Means of
calculating GDP have also evolved continually since its conception so as to keep up
with evolving measurements of industry activity and the generation and consumption
of new, emerging forms of intangible assets.

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What Is the Job Market?

The job market is the market in which employers search for employees and employees
search for jobs. The job market is not a physical place as much as a concept
demonstrating the competition and interplay between different labor forces. It is
also known as the labor market.

The job market can grow or shrink depending on the demand for labor and the
available supply of workers within the overall economy. Other factors which impact
the market are the needs of a specific industry, the need for a particular
education level or skill set, and required job functions. The job market is a
significant component of any economy and is directly tied in with the demand for
goods and services.

The employment numbers are released on the first Friday of every month.
The Job Market and the Unemployment Rate
The job market is also directly related to the unemployment rate. The unemployment
rate is the percentage of people in the labor force who are not currently employed
but actively seeking a job. The higher the unemployment rate, the greater the
supply of labor in the overall job market.

When employers have a larger pool of applicants to choose from, they can be pickier
or force down wages. Conversely, as the unemployment rate drops, employers are
forced to compete more heavily for available workers. The competition for workers
has the effect of increasing wages. Wages determined by the job market provide
valuable information for economic analysts and those who set public policy based on
the health of the overall economy.

24.9%
The highest rate of unemployment in the U.S, which was documented in 1933.

During difficult economic times, unemployment tends to rise as employers may reduce
their staffing numbers and create fewer new jobs, making it harder for people
trying to find work. High rates of unemployment can prolong economic stagnation—a
sustained period of little-to-no growth in an economy—and contribute to social
upheaval, leading to the loss of opportunities for many individuals to live
comfortably.

A report called the Current Population Survey can measure the state of the job
market. It's a statistical survey performed every month by the U.S. Bureau of Labor
Statistics. The study includes a representative sample of about 60,000 homes to try
and determine the unemployment rate of specific regions, earnings of those
surveyed, hours the respondents worked, and many other demographic factors.