I think of two other imperfect measures - the Dow Jones Industrial Average, and the relative temperatures (Windchill, Head Index).
The S&P 500 is a better index than the Dow. There are other indexes that are even more accurate. Yet the average layman 'gets' the Dow much better. Almost no one knows that the Dow is just a few dozen companies, and that the actual composition of the index changes all the time. Likewise, no one actually knows how windchill and heat index are calculated.
Yet, everyone can compare those things to past experience and 'get' what is going on. Holy crap, the Dow is up 400 points? Wow, it's going to feel like 105 tomorrow? Unemployment is 9%? Something is wrong.
If we suddenly switched to U6 as the 'official' measure, it would take a long time for people to adjust. Is 10% U6 good or bad? I have no idea without looking it up, even though I know what U6 is.
Right now it seems like the fed is working off of the higher unemployment numbers and semi-ignoring U3. I believe that is a good thing. But it is confusing to many.
The S&P 500 is a better index than the Dow. There are other indexes that are even more accurate. Yet the average layman 'gets' the Dow much better. Almost no one knows that the Dow is just a few dozen companies, and that the actual composition of the index changes all the time. Likewise, no one actually knows how windchill and heat index are calculated.
Yet, everyone can compare those things to past experience and 'get' what is going on. Holy crap, the Dow is up 400 points? Wow, it's going to feel like 105 tomorrow? Unemployment is 9%? Something is wrong.
If we suddenly switched to U6 as the 'official' measure, it would take a long time for people to adjust. Is 10% U6 good or bad? I have no idea without looking it up, even though I know what U6 is.
Right now it seems like the fed is working off of the higher unemployment numbers and semi-ignoring U3. I believe that is a good thing. But it is confusing to many.