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Misleading indicators: The case for ignoring GDP, unemployment and more

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The most important economic indicators

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The most important economic indicators

The most important economic indicators
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Yellen: The Fed Is Not Behind the Curve

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Yellen: The Fed Is Not Behind the Curve

This week we'll get data on housing and inflation -- the latest economic indicators to help economists gauge how the economy is doing and to help investors navigate markets.

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But if you take a cue from Zachary Karabell, author of The Leading Indicators: A Short History of the Numbers That Rule Our World, you might want to ignore them.

In his new book, Karabell takes to task key economic datapoints like the unemployment rate, which markets focus on once per month and which the Federal Reserve has tied its interest rate policy to. In The Wall Street Journal, Karabell writes that while it's one of the most consequential numbers shaping economic policy, "unfortunately, it is also one of the most misleading," and in the accompanying video, he explains why.

"We live and breathe by these [numbers] and there's an entire industry…which talks about these numbers as they come out," he says. "But there's a big disjuncture between what these numbers measure and the world that we actually inhabit."

Karabell explains that these indicators were largely created in the early part of the 20th century to measure the economy. They're "really good at measuring the 1950s when we lived in an industrial world," Karabell argues, but the world we live in today is not about making stuff in factories anymore, he adds.

Related: Top five myths about the U.S. economy

In the above video, he tells us what data he thinks individuals, businesses and policymakers should use to shape their opinions and economic forecasts.

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