QZ.Com: Trump was right about industry, but blame computers

[Quartz]

Quartz (the e-zine, not me) has an interesting article on Trump and industry here.

Looking back, there were two kinds of people who lived in America in 2016: people who believed Donald Trump, and people who believed data.

You can put me in the latter group.

Trump claimed on the campaign trail that globalization had destroyed US manufacturing—and in the process, the American economy—by letting China and other countries steal American factory jobs…

The data camp didn’t get it. Yes, the US had hemorrhaged manufacturing jobs, losing close to 5 million of them since 2000. Trade may have been a factor—but it clearly wasn’t the main culprit. Automation was…

Unfortunately, it seems that if you strip out computers, then things look very different.

Government data wizards do this sort of quality adjustment for all sorts of products, including automobiles. However, the biggest adjustments show up in processors and the other goods made by the computers subsector, in which the blazing pace of technological change makes for dramatic and ultra-fast leaps in quality.

In other words, the method statisticians use to account for these advances can make it seem like US firms are producing and selling more computers than they actually are. And when the computers data are aggregated with the other subsectors, the adjustment makes it seem like the whole of American manufacturing is churning out more goods than it actually is.

So the data was faked or - at best - not reality-checked, and had been for decades, so it’s not a fault of one side or the other but both. Governments have been manipulating statistics for ages, of course. One only has to think of the UK’s unemployment figures from the 1980s. That said, computers are still things that get sold at a profit and contribute to the US’s trade figures.

As an aside, with specific regard to computers in the PC market space, there’s really been CPU stagnation for the past 5 years or so. A CPU from 5 years ago is still a solid performer and more than enough to run MS Office and the like. And monitors are still largely stuck at 1080p, so no movement there.

[Jophiel]

Without any actual knowledge of it, I’m surprised there’s enough computer manufacturing in the United States for it to matter. I assumed most of that was done overseas and even US companies like Apple or Western Digital were building their stuff in Asia.

[Grey]

What don’t I get? Per the US Dept. of Commerce the “computer” industry isn’t that big at all.

With Manufacturing in 2008 it made up 12.9% growing to 13.2% in 2016. However as % of the US’ GDP in those years that piece only came in at 1.6% and 1.5% respectively.
Within Professional services “computers” made up 10.1% in 2008 and 12.4 in 2016 but again a mere 1.2% and 1.5% overall.

Of course you could combine the two but even then it accounted for only 2.8% in 2008 and 3.0 in 2016.

So what (or where) is the massive damage to the economy here?

[Quartz]

@Grey

So what (or where) is the massive damage to the economy here?

It’s not that it’s massive damage but that the computer industry has been used to disguise the damage. See the graph ‘The real gap in output growth’ a bit over halfway through.

[Voyager]

There are a few things I don’t get.
First, what counts as US manufacturing? I’m unaware of many computers made in the US, so if output of factories is what counts, I don’t see how computers make much of a dent in the manufacturing output numbers. Or do they count computers manufactured abroad for US companies? In that case there is a real disconnect between jobs and output.
Second, they seem to be claiming that the manufacturing output numbers are tweaked for “quality,” but I don’t see they give any evidence of this. Manufacturing output is a pretty simple thing to measure, and I’ve seen no news stories about it which discuss these tweaks, which you would think would be pretty controversial.

Also, what is the computer industry exactly? Does it include phones, which have grown far faster than PC in the past five years at least. Given the vast growth in smartphones (and in their prices) in the past five to ten years, an increase in the computer sector doesn’t seem that hard to believe.

[Quartz]

@Voyager

There are a few things I don’t get.
First, what counts as US manufacturing? I’m unaware of many computers made in the US, so if output of factories is what counts, I don’t see how computers make much of a dent in the manufacturing output numbers.

Intel is the obvious one.

Second, they seem to be claiming that the manufacturing output numbers are tweaked for “quality,” but I don’t see they give any evidence of this.

Yes, they don’t detail the fudge factors applied.

[wevets]

@Quartz

Intel is the obvious one.

Yes, they don’t detail the fudge factors applied.

So I don’t get it - is the claim that people are paying more for computers than they should be?

The problem is, the processor released in 2017 is superior to that sold in 2016 in many tangible ways. But how do you account for the fact that a 2017 processor provides users with more value? In general, statisticians assume the difference in value between the two models is just the difference in their prices. If, say, the 2017 processor costs twice as much as the 2016 one does, then selling one 2017 processor counts as selling two of the 2016 versions in the statisticians’ books.

The epic mistake about manufacturing that’s cost Americans millions of jobs

The problem with that claim is that inflation in computer prices doesn’t seem consistent with that (it’s in a pretty downward direction, and to mask declining output, it would have to trend upward maybe?): Consumer Price Index for All Urban Consumers: Computers, Peripherals, and Smart Home Assistants in U.S. City Average (CUSR0000SEEE01) | FRED | St. Louis Fed
There might be a “there” here, but I don’t think the linked Quartz article does a good job of explaining what that “there” is.

[Grey]

@Quartz

It’s not that it’s massive damage but that the computer industry has been used to disguise the damage. See the graph ‘The real gap in output growth’ a bit over halfway through.

I looked at the charts - the data visualization person should be shot.

Even if we reduce the Manufacturing piece to 80% of the posted values the overall GDP % attributed to “computers” shift the 2208 value from 2.8% to 2.5% and the 3.0% to 2.7% - that’s a flat shift.

I suppose that something?

As for the relevant paper, I have to admit the topic to unfamiliar to me. maybe you could run through it and point out the problem?

[Voyager]

@Quartz

Intel is the obvious one.

But the PCs which have a lot of the value are not made in the US, and a lot of the steps of making a processor, like packaging, are done overseas also.

California’s manufacturing is growing. That isn’t Intel - there is only one small fab in California used for first silicon and process development.

Yes, they don’t detail the fudge factors applied.

Which I would think would be a point of controversy. The basket used in computing the CPI was back when inflation was a big issue, remember.

[Voyager]

@wevets

The problem with that claim is that inflation in computer prices doesn’t seem consistent with that (it’s in a pretty downward direction, and to mask declining output, it would have to trend upward maybe?): Consumer Price Index for All Urban Consumers: Computers, Peripherals, and Smart Home Assistants in U.S. City Average (CUSR0000SEEE01) | FRED | St. Louis Fed

Smartphone prices are trending up - top of the line ones, anyhow, but PC prices are not, and neither are processor prices.

If a 2017 model costs twice as much as the 2016 one, yeah, manufacturing output is double, assuming equal sales. If a luxury car is twice as costly as a standard car, do you count it for full value in manufacturing or do you discount it because its “value” to the driver is not twice as much by some weird standard of quality. I doubt anyone does that, and would love to see a cite if they do.

[Quartz]

@Grey

As for the relevant paper, I have to admit the topic to unfamiliar to me. maybe you could run through it and point out the problem?

I lack the expertise to do that - I swiftly got lost and I lack the patience to follow up every citation. It was the article to which I linked that piqued my interest. But the article is saying that fudge factors applied to the computer industry disguise a real manufacturing decline.