Federal Reserve Chairman Ben S. Bernanke watches a baseball game between… (Carolyn Kaster / AP Photo )
WASHINGTON -- As economic datapoints have gone recently, last week's unemployment report was good news: 163,000 net new jobs created in July, exceeding analysts expectations.
But such broad statistics don't tell the whole story, Federal Reserve Chairman Ben S. Bernanke said Monday. They mask the actual struggles of average Americans in an economic recovery still straining to gain traction.
"Even though some key aggregate metrics -- including consumer spending, disposable income, household net worth and debt service payments -- have moved in the direction of recovery, it is clear that many individuals and households continue to struggle with difficult economic and financial conditions," Bernanke said in a pre-recorded video speech for a Massachusetts conference (see below).
He noted that “aggregate measures, such as gross domestic product and personal consumption expenditures, are useful for monitoring people's ability to meet basic material needs and for tracking cyclical and secular changes in the economy as a whole.”
“But … aggregate statistics can sometimes mask important information," he said.
A former economics professor at Princeton, Bernanke told the meeting of the International Assn. for Research in Income and Wealth that advancements in the ability to broadly monitor the economy through a variety of measures has helped “improve economic policymaking and our understanding of how the economy works.”
“Indeed, the experience of the recent financial crisis and the ensuing recession was strongly reflected in nearly all of these aggregate measures, indicating the severe economic stress felt by millions of people and hundreds of communities across the country,” Bernanke said.
But focusing solely on that data, such as readings of GDP growth, “is likely to paint an incomplete picture of what many individuals are experiencing,” Bernanke said.
More attention should be paid to microeconomic data, which can give a better sense of what’s happening to specific types of households and businesses, he said. And economists should try to find better ways to measure “economic well-being.”
In a commencement address two years ago, Bernanke talked about “The Economics of Happiness." He said studies have shown that income and wealth play a role in how people define their own happiness, but there are other factors as well – “a strong sense of support from belonging to a family or core group and a broader community, a sense of control over one's life, a feeling of confidence or optimism about the future and an ability to adapt to changing circumstances.”
Alternative measures of well-being are being developed around the world and have started to play a role in policy debates and statistical analysis, he said.
Bernanke cited Bhutan, which stopped tracking its GDP in 1972 in favor of a Gross National Happiness index that factors in other indicators. And the the Organisation for Economic Co-operation and Development has a "better life index" that compares countries based on indicators of quality of life.
He said some conventional economic indicators could be used to gauge quality of life, such as distribution of income, confidence about future employment prospects and the ability of households to deal with financial shocks.
“All of these indicators could be useful in measuring economic progress or setbacks as well as in explaining economic decision-making or projecting future economic outcomes,” Bernanke said.