💸 Economy

Are Economic Statistics Accurate?

While the official statistics are legitimate attempts to capture the truth of the economy, certain decisions may steer them further from the “ground truth.”

A few key examples are unemployment, average wages, and inflation.

Unemployment

In the case of unemployment, the statistics don’t count people who have given up on finding a job. They also count any employment the same way, whether that’s someone working 1 hour a week or 60.

Researchers found that if you adjust the unemployed calculation to include severely underemployed people and people who can’t make a wage above the poverty level you’d instead have 23.7% unemployment.

Average Wages

The “weekly earnings” statistic is calculated using only full-time earnings. Including part-time employment and unemployed people in the calculation has a big impact. Without them the median US wage is around $62,000. Afterwards it drops down to $52,300, about 16% lower.

Inflation

CPI tracks price increases across 80,000 different items. You might think that a more comprehensive calculation is better. However, the average person doesn’t buy 80,000 different types of things in a year. So, a decline in the prices of certain luxury goods may hide the impact of rising food prices.

That means the average consumer, which is the driving force behind the US economy, might be facing far higher inflation than what’s present in official statistics.

Impact

Investment returns are influenced by many factors. That includes the strength of the economy, inflation, interest rates, as well as both fiscal and monetary policy.

The ability to assess and understand how these factors are performing is crucial to investment decision making. Understanding the shortcomings of the official economic statistics can help investors anticipate future conditions.

A Round Of Uncertainty From New Data

A range of new economic data includes a more complex, and mixed picture for the future of the economy.

Consumer sentiment fell to the lowest level since November of 2023. Concerns over tariffs and rising inflation expectations are potential causes.

Americans now hold $1.2 Trillion in credit card debt, up 7% yearly. Car loan debt is $1.65 Trillion, up 3% yearly.

Inflation was measured at 0.5% in January by CPI. That’s 3% inflation on a yearly basis, which is higher than expected. It’s also the worst number since June of 2024.

Lastly, Warren Buffet’s Berkshire Hathaway is now holding over $300B in cash. It’s also the largest share of company assets held in cash in company history.

On the whole, this round of data is mostly negative. This is not a backdrop that will allow The Fed to cut interest rates. It also doesn’t offer much hope for mortgages and other “market rates” to decline any time soon. That won’t help asset prices and definitely won’t help debt-laden consumers.

If inflation continues to rise, or even if consumer’s expectations of it increase too much, The Fed may actually be forced to raise rates this year. It’s also a setup that has me cautious about the future. Stagflation is still potential outcomes to be on the lookout for.

🏠 Real Estate

Slowing Population Growth Could Affect Real Estate

A new report suggests that 2025 could be the peak for the number of yearly high school graduates. As population growth slows, that could trickle into lower demand for higher-education as well.

This could result in student housing becoming a less reliable investment in the future. There’s also concern that shrinking family sizes could lessen demand for increasingly large and expensive single family homes in the long term.

Have Offices Hit The Bottom?

In the commercial real estate space, CBRE is one of the largest companies. In their most recent quarterly earnings report, they expressed some optimism about the Office space sector.

As part of results that beat expectations, they had 28% revenue growth in US office leasing activities. They spoke about companies’ growing return-to-office movements and a pickup in leases across multiple different cities and geographies as reasons for confidence in the future.

💡 Startups

Defense Tech

Discipulus Ventures is a small and new firm that is hoping to be a Y Combinator style accelerator for startups in the Defense Tech space. So far things seem relatively small. The firm’s new fund to invest in its next cohort is only $6M. However, it’s gotten the attention and support of some big names such as Andreessen Horowitz.

The combination of more geopolitical confrontations, tariffs, onshoring, and supply chain changes add a lot of tailwinds for the Defense Tech sector. It may remain a hot area of venture capital for a while.

Humane

If you were one of the early adopters of Humane’s AI assistant, kind-of-smart-phone-replacement-wannabe, wearable tech then you received bad news this week. The company is shutting down the Pin as of March 1st, leaving users with basically an expensive brick.

The company’s IP, patents, and AI employees will be joining HP for $116 Million. Humane had received $230 Million in funding to support a vision of bringing useful AI features to people’s daily lives in a new, innovative form factor.

I think it’s right for investors to be leery of companies focused solely on launching expensive new gadgets. Even Apple hasn’t been able to get their Vision Pro headset to take off. It might also be why Meta is keeping their Orion smart glasses as more of a tech demo and insider preview / R&D effort for right now. It’s very hard to displace smartphones at this point and getting consumers to shell out big bucks for new tech without a clear, everyday “killer use case” can be an uphill battle.

SSI

SafeSuperintelligence is the latest story of nonsense valuations in AI. The company was started by an OpenAI co-founder in June of 2024. It’s reportedly trying to raise $1 Billion in funding at a $30 Billion valuation. That’s about as much as Reddit is worth after their strong post-IPO performance. There’s only 312 publicly traded American companies that have a higher valuation.

AI has a lot of potential to be the future of technology companies and maybe even the economy. But we’re very far from that reality right now. The large, speculative valuations should give some pause when investing in the space. Very high valuations decrease the likelihood of strong future returns and increase the likelihood of losses. After all, price is what you pay, value is what you get.

Sources

Economy - Politico, Reuters, MarketWatch, CNBC, The Wall Street Journal,

Real Estate - MarketWatch, Fortune

Startups - Forbes, Forbes, Fortune, CompaniesMarketcap

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