Over the past two weeks we’ve seen contradictory headlines about the state of the American economy. On the one hand, equity indexes and employment levels reached record levels, and the IRS collected record tax receipts when tax payments for the first quarter are included. Businesses as diverse as Boeing, Chevron, and Alltel reported record earnings.

On the other hand, the Bureau of Economic Analysis released disappointing “advance estimates” of 2007 first quarter gross domestic product of 1.3% annual real growth, a slow rate not seen for several years. That was much less than half of the 3.3% annual growth in 2006.

Is the economy doing well, or not? Where is it going?

Pessimists point to the precedent of the first quarter of 2000, when labor markets were tight and stock markets registered historic highs. By the first quarter of 2001, the economy had entered a shallow recession. Today, many forecasters predict that not only is our growth slowing, but our competitors will overtake us: China will grow more than five times as fast as America this year, and even over-regulated Europe may grow faster than America.

This pessimism is exaggerated. For several reasons, our economy is doing much better than the 1.3% growth suggests. The initial “advance estimates” are often revised upward. These advance estimates reflect only the incomplete information available in the first few weeks after a quarter closes. BEA itself finds the average upward revision from advance to final estimates is 0.4%, a rather large error.

There is good reason to expect the BEA first quarter advance estimates will be revised upward. For example, much of the slowing of measured GDP is in the construction sector generally and housing in particular. BEA measures the housing sector as having peaked in the third quarter of 2005 and having steadily declined by a total of 16% in the following six quarters. Economic activity in the housing sector is measured as equivalent to the level in the third quarter of 2003. Some observers claim the housing cycle might still decline for another quarter or two before recovering.

Another interpretation is that the broader construction sector, which includes both residential and nonresidential structures, is already in recovery. Although BEA data measure this broader construction sector with an annualized decline of nearly 10% for the first quarter of 2007, construction employment in America as measured by the Bureau of Labor Statistics was relatively stable, and even increased during March, belying a dramatic decline in American construction.

The Census Bureau finds that housing starts and building permits rose in March relative to February. Also, various government price indexes for both private residential and nonresidential structures increased during the quarter, suggesting an increase in the value of new construction projects.

BEA’s advance estimate also shows weakness in the international sector, with unusual shrinkage in exports of both goods and services. Governmental international trade data for March are largely incomplete. The most recent federal data on the trade deficit from the Census Bureau shows a shrinking trade deficit, not the widening gap reported by BEA.

Even incorporating all of the adjustments discussed above, America’s economic growth would still likely be less than the 3.3% real growth measured last year. Is the economy slowing?

Measuring the health of the American economy with a single number is an impossible task. Gifted economists, both inside and outside government, work on improving our understanding and our measurement of the economy through the national income and product accounts. They produce the best numbers available, but the net result is still a potentially large gap — a measure of our ignorance — between the economy we can measure and the ever-changing economy beyond our grasp.

Part of the gap is the large underground economy for individuals who, for any number of reasons, do not want our government to monitor and document their activities. Other parts of the gap are on the Internet and in new technologies, where our government’s ability to measure economic activity is less precise than for physical transactions. Allocating the economic activities of international businesses is always a challenge.

Our economy is doing better than the data show. How much better remains to be seen.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He is organizing the seminar series at the Hudson Institute. He can be reached at hfr@furchtgott-roth.com.