06/18/2015 04:24 EDT | Updated 06/18/2016 05:59 EDT

Expert advice to reading choppy economic data: you may never really know

OTTAWA - With an ocean of available economic data out there, one can be left seasick trying to get a handle on all the bobbing numbers designed to explain the health of the economy.

Rather than attempting to follow the choppy monthly stats, experts recommend stepping back to examine more reliable, longer-term readings on key indicators like jobs, gross domestic product and inflation.

Others suggest piecing together the many economic measures to come up with a reading, almost like a "jigsaw puzzle."

But even then, they warn, you may never really know.

Canadians will begin scrutinizing the state of the economy in the leadup to the fall election when the issue once again emerges as a crucial ballot-box concern.

The economy has struggled in recent months, particularly after a disappointing stretch to start 2015 that was blamed on weaker-than-expected U.S. demand, the oil-price collapse and the failure of some sectors to pick up the slack.

Experts, including Bank of Canada governor Stephen Poloz, have predicted the economy will bounce back later this year.

But trying to figure out how the economy is actually faring by monitoring the swings in monthly data — from good news to bad news and back again — is a difficult task.

For example, Canada's employment numbers have see-sawed between gains and losses each month from December to May.

To get a better grip on the economy, a professor at Ottawa's Carleton University recommends focusing on annual data rather than monthly or even quarterly numbers.

"It evens out the hiccups," Ian Lee, who teaches at the Sprott School of Business, said of seeking out longer-term figures.

For his students, Lee says he illustrates how tricky it is to read the ever-volatile economic data by comparing it to the more-precise field of demography, which studies social statistics.

Lee notes, for example, how demographers can predict the average life expectancy of a man and woman in Canada with remarkable accuracy.

"The economy, by contrast, is precisely the opposite," Lee said. "It's very badly behaved because you get extraordinary variability."

He said most economic indicators, such as Statistics Canada's labour force survey, are based on polls — which can be unreliable.

To overcome some of the deficiencies of a single dataset, economists are left to build a mosaic out of numerous economic indicators.

"There's no single measure that's going to tell you the whole picture," said Douglas Porter, BMO's chief economist. "It really is almost like a jigsaw puzzle where you have to put all the pieces together and even then you might not get a true picture."

There is one reading, however, that Porter believes does a decent — though imperfect — job of taking the pulse of the economy: the unemployment rate.

Porter said it's worth watching to see if the jobless rate falls or rises as well as how its status compares to historic levels.

The most-recent reading of Canada's unemployment rate was 6.8 per cent in May. Over the last five years, it has gradually fallen from above 8.0 per cent, a level it reached after soaring during the recession. Since September, the rate has hovered just under 7.0 per cent, struggling to make headway.

In a truly robust economy, Porter said, he'd expect the unemployment rate to still be falling.

"I think that's about right," Porter said of how the rate reflects the state of the overall economy. "The economy is still growing, just enough to employ the new people who are entering the labour force, but no better than that."

And what about all those monthly numbers that have been lurching back and forth?

Porter said different sectors — and segments of industries — grow at different paces, while others are known to move in opposite directions.

"I would say unless the economy is absolutely on fire or, on the contrary, on the deepest steps of despair, you're always going to get contradictions between indicators at any time."

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