Friday’s jobs report looked pretty good, didn’t it?
Interestingly, the GDP forecasts did not think much of it, and neither did I.
The chart is amusing. Nowcast seems impervious to darn near anything while GDPNow likes to swing wildly while steadily trending lower over time.
If you think that makes Nowcast more reliable, then another curious aspect is that the final forecast of GDPNow tends to be better.
GDPNow Latest forecast: 2.5 percent — March 9, 2018
- The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 2.5 percent on March 9, down from 2.8 percent on March 7.
- The nowcast of first-quarter real consumer spending growth fell from 2.5 percent to 2.2 percent and the nowcast of first-quarter real private fixed investment growth fell from 3.4 percent to 2.4 percent after this morning’s employment report from the U.S. Bureau of Labor Statistics.
- The model’s estimate of the dynamic factor for February—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—declined from 1.62 to 0.96 after the employment report.
Nowcast Latest forecast: 2.8 percent — March 9, 2018
- The New York Fed Staff Nowcast stands at 2.8% for 2018:Q1 and 3.0% for 2018:Q2.
- News from this week’s data releases decreased the nowcast for 2018:Q1 by 0.2 percentage point and decreased the nowcast for 2018:Q2 by 0.1 percentage point.
- A negative surprise from exports data accounted for most of the decrease.
GDPNow Volatility
One reason for GDPNow volatility is that it forecasts more frequently. Nowcast forecasts once a week, on Friday, provided there is not an FOMC blackout.
For some reason, Nowcast is blacked out near FOMC days while GDPNow isn’t.
Regardless, that does not come close to explaining the difference between the reports.
Dynamic factors are the major contributor to GDPnow volatility.
I discussed this at least twice before, most recently on March 7 in Another GDPNow ISM Spike Fades where I shared some Emails with Pat Higgins, creator of GDPNow.
Predictably Wrong
My comment today is the same as it was then:
- ISM has not been a reliable indicator of anything for quite some time. All of the diffusion reports from the Fed regions suffer similar flaws.
- It strongly appears that ISM is influencing the GDPNow model factors in a predictable and wrong way.
For a discussion of Friday’s jobs report, please see Little Wage Inflation But February Jobs Jump 313,000.
I have to wonder: What the heck was GDPNow forecasting that this report was a disappointment? One might also wonder why there was no reaction at all by Nowcast.
Mike “Mish” Shedlock
@Realist
The core issue is, that no matter what timeline you, nor anyone else, focus on; unless you bring to the table information that is not available to anyone else (as in, you’re not “insider trading”), you are not contributing meaningfully to price discovery; nor to anything else. IOW, you’re just another random punter. Adding incrementally more noise to what is already 99% a noise generator. No different from Warren Buffet, back before he was big and useful enough to be privy to insider knowledge and asymmetric regulatory treatment.
Which doesn’t mean you can’t “make money” in the markets. Just that you are not adding any value by participating in them. None of what you do, in any way aids in price discovery, capital allocation nor any other of the shallow feelgoodisms that the regime apologists claim benefit from having an ever-growing financial cancer growing in the country’s midst; consuming resources society’s productive members then must work ever harder, at ever lower pay, to produce.
Instead, you are simply availing yourself of value added by someone else; then stolen via debasement and asset pumping by the Fed, regulatory overreach by the Government and legal overreach by the ambulance chaser corps; and handed out to those sufficiently privileged to be able to afford spending a significant share of their wealth in “markets” that serve little other purpose than obfuscating the crass theft that has powered the vast, vast majority of “financial market returns” since Nixon took the country full retard, and to a lesser extent for a century before that.
Nothing personal, as it’s not as if you’re doing anything evil by simply playing the hand you re dealt; and you’re hardly the one to blame for a “system” rigged to maximally reward those who have, rather than those who do; and to facilitate the former expropriating as much as possible of the value created by the latter. But from a societal POV: Ostensibly intelligent, potentially productive people being rewarded for idly sitting around piling noise on top of noise in financial “markets,” rather than spending that time, and those resources, on something productive, hardly contributes to wealth creation. Nor equitable wealth distribution. Nor anything else worth lauding nor giving half a toot about.
Last time that there was an excellent jobs report from the BLS, David Stockman showed that there was NO increase in withholding taxes from wage earners.
As is the case with every other harebrained attempt at empirically “measuring” and “forecasting” anything economically relevant: Rational actors will specifically make use of all the information available for such measurements and forecasts, to ensure noone is able to reliably and consistently use these measures and forecasts to gain even the slightest stable edge over them in anything economically relevant.
Which resolves to: To the extent the measures and forecasts measure and forecast anything at all, it is only how economically irrelevant said measure (in this case GDP) is. So, at best, all you have is some sort of measure if the economic irrelevance of GDP. At worst, you have random noise, packaged to sound impressive to the uninitiated.
this is too good to be true!After the “stellar” jobs report,9000 straight months of “seasonally adjusted” job gains,12000 straight months of 2% growth “rate”,record low unemployment “rate”,job gains in perpetuarty tens of millions of newly minted gov’t employees.suppose the half a trillion DC borrows every quarter just to get by is only a temporary blip on the road to perpetual recovery
a country with 20 trillon bucks in debt, should love to see NOMINAL GDP growth at around 6% and strong job numbers. We all know that inflation, GDP and unemployment numbers are the fabrications that emerge from hedonistic adjustments (which “stuff” exclude i-phone inflation of 15% per annum). A contrqcting trqde deficit – via exports growing faster than imports = the US turn for “free trade” benefits (comparted to “rigged trade” as exists today) strong jobs – as evidenced by a RISING LABOR FORCE PARTICPATION RATE – and strong nominal gdp are what matters. the rest is smoke and mirrors – you can’t eat ot or pay back debt with the smoke,