This is called “paralysis of analysis.” If it can be measured it must mean something. The Federal Reserve Bank of Kansas City, the home of statistics for the Fed, just issued a reassuring statement: “The Kansas City Financial Stress Index (KCFSI) continues to indicate that financial stress remains subdued.”
It’s an index of 11 “variables” designed somehow to measure “stress” in the economy. They provided a chart to prove it. The index hit its high point in October 2008, a year into the Great Recession. It measured 6+. Today it’s gone negative.
How much credence does such a report have? On page three there is a list of frequently asked questions. The answers to those questions don’t answer the credibility question: Instead it talks about how certain statistics may “vary” from the norm over time, leaving “coefficients” that might suggest trends. It also talks about how results may be “revised” in the future “due to recalculating the index” or including “additional data from the current month.” How to interpret such madness? Here it is:
A useful way to assess the level of financial stress is to compare the index in the current month to the index during a previous episode of financial stress, such as October 2008.
But it must mean something. At least it does to Mark Perry, an economist in whom I generally place great store:
The downward trend in the KCFSI since 2009, and the thirteen recent months below zero suggest that the US economy and financial markets have gradually recovered from the Great Recession and financial crisis, and financial stress has returned to its pre-recession and pre-crisis level that prevailed in the 2004-2007 period.
I prefer to ask people who have to make a living in the real world. I prefer Rasmussen to the Fed to tell us. Last Wednesday, Rasmussen did:
Twenty-eight percent (28%) of Likely U.S. Voters say the country is heading in the right direction, according to a new Rasmussen Reports national telephone survey taken the week ending Sunday, March 3.
Voter optimism in the nation’s current course is down six points from the previous week and is the lowest level measured since August of last year.
Things look different in Kansas City.