The numbers: What the big indicators really measure

Every month, the papers announce four numbers: growth, unemployment, inflation, rates. They seem simple. They are not.

Let's start with GDP, gross domestic product. It adds up the value of everything a country produces and sells in a year.

When it rises, it is called growth. When it falls, recession. It is the most watched thermometer in the world.

But it ignores a lot. Housework, volunteering, pollution, inequality: none of it shows up.

Worse: repairing storm damage pushes GDP up. The country is not richer, it just spent money rebuilding.

One of its fathers, Simon Kuznets, warned as early as nineteen thirty-four: national income does not measure well-being.

Second number: unemployment. Everything depends on who counts as unemployed.

Under the international definition, you must not have worked a single hour that week, be available, and be actively looking.

One hour of work in the week, and you are no longer unemployed. You stopped looking, discouraged? Not you either.

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In France, two numbers coexist: Insee's, using this definition, and the count of people registered with France Travail. They do not match.

The same country, the same week, and two different answers. The definition changes the result.

Third number: inflation. It measures the rise in prices of an average basket, meant to represent an average household.

But nobody is an average household. For the example, say rents rise five per cent, and everything else one per cent.

If rent makes up forty per cent of your budget, your inflation is two point six per cent.

If you own your home and housing is only ten per cent, it is one point four per cent. Same country, same year.

Official inflation is not wrong. It is an average. Your real basket is your own.

Fourth number, the only one that is not measured: the policy rate. It is decided.

In the euro area, the European Central Bank meets roughly every six weeks. It sets the price at which banks borrow from and deposit with it.

This price spreads everywhere: home loans, savings accounts, business loans, and even bond values.

Between July two thousand twenty-two and September two thousand twenty-three, the deposit rate went from minus zero point five to four per cent.

To curb inflation that had passed ten per cent in the euro area. In France, the average home loan rate more than tripled in two years.

The twist: three of these numbers are measurements, with their blind spots. The fourth is a decision, made by looking at the other three.

Before reacting to a number, always ask two things: what exactly does it measure, and what does it leave out?