Top government statisticians now acknowledge that a 'Phantom GDP' problem exists, and say it could prove to be significant.
The short explanation is that the growth of domestic manufacturing has been substantially overstated in recent years. That means productivity gains and overall economic growth have been overstated as well. And that raises questions about U.S. competitiveness and "helps explain why wage growth for most American workers has been weak," says Susan N. Houseman, an economist at the W.E. Upjohn Institute for Employment Research who identifies the distorting effects of offshoring in a soon-to-be-published paper.
http://www.businessweek.com/magazine/content/07_25/b4039001.htm?chan=top+news_top+news+index_businessweek+exclusives BTW, Government inflation reporting is distorted too, and GDP is inflation-adjusted.