The BEA hugely revised GDI to the downside. Hmm. It seems that voters weren’t fooled. 
Chart Notes
- Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing.
- Income should match products sold, and does over time. But the discrepancies since Covid have been on the wild side.
- Real Final Sales is the bottom-line estimate of GDP. The rest is inventory adjustment that nets to zero over time.
On Wednesday, the BEA released its Second Estimate of GDP and its first estimate of GDI for the third quarter of 2024.
Current‑dollar GDP increased 4.7 percent at an annual rate, or $337.6 billion, in the third quarter to a level of $29.35 trillion, an upward revision of $4.4 billion from the previous estimate.
The price index for gross domestic purchases increased 1.9 percent in the third quarter, an upward revision of 0.1 percentage point from the previous estimate. The personal consumption expenditures (PCE) price index increased 1.5 percent, the same as previously estimated. Excluding food and energy prices, the PCE price index increased 2.1 percent, a downward revision of 0.1 percentage point.
Real GDP, Real Final Sales, Real GDI in Billions
The gap between GDP and GDI is widening again.
Also note the gap between Real Final Sales and GDP. This is inventory adjustment and inventory padding.
Due to Trump tariff threats, importers are likely padding as much inventory as they can before Trump hikes tariffs.
I expect a huge jump in inventories for the fourth quarter.
If buyers don’t show up for this stocked merchandise, merchants will get clobbered holding stuff people aren’t buying.
Updates to GDP
- The second estimate reflects upward revisions to private inventory investment, nonresidential fixed investment, state and local government spending, and residential fixed investment.
- The second estimate reflects downward revisions to exports, consumer spending, and federal government spending. Imports were revised down.
Updates to Second-Quarter Wages and Salaries
- Private wages and salaries are now estimated to have increased $65.0 billion in the second quarter, a downward revision of $91.8 billion.
- Personal current taxes are now estimated to have increased $39.8 billion, a downward revision of $15.5 billion.
- Contributions for government social insurance are now estimated to have increased $7.0 billion, a downward revision of $12.4 billion.
- With the incorporation of these new data, real gross domestic income is now estimated to have increased 2.0 percent in the second quarter, a downward revision of 1.4 percentage points from the previously published estimate. See lead chart.
The BEA explains “Today’s release presents revised estimates of second-quarter wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program.”
Mish July 26, 2024: Expect the BLS to Revise Job Growth Down by 730,000 in 2023, More This Year
At the heart of these revisions is a horribly flawed birth-death model used by the BLS. My calculation closely matches an estimate by Bloomberg’s chief Economist.
Mish August 21, 2024: BLS Revises Jobs Down by 818,000 the Most Ever, About 68,000 Per Month
Do I get to say I told you so? My advance estimate a month ago was 779,000 lower. Bloomberg estimated 730,000.
Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement
On November 20, I commented Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement
My prior comparisons and advance calls suggest we see negative revisions in nonfarm payrolls from 2023 Q2 to 2024 Q2 of well over one million. My initial stab is about 1.2 million to the downside.
The BLS Birth-Death model is seriously messed up an/or the BLS is oversampling large corporations and under sampling small businesses.
The BLS monthly nonfarm payroll reports are consistent garbage.
Reflections on BEA Revisions
If jobs overstated, income is too. And on Wednesday we found out the BEA overstated wages by a massive $91.8 billion from $156.8 billion to $65.0 billion.
This resulted in a downgrade in GDI growth from 3.4 percent growth to 2.0 percent in the second quarter.
It appears the BEA is incorporating BLS garbage into its reports as well. That massive 3.4 percent to GDI in Q2 was fiction as I suspected all along due to QCEW data analysis.
Expect more negative revisions because they are coming.
Lacy Hunt pinged me with this observation: “The economy looks more and more like 2008, when for many the economy appeared to be just fine. Then came the downward revisions. When all was said and done, the NBER determined the cycle peak was December 2007. The deep revisions are continuing just as sixteen years ago.”
Neither of us think this recession will look like 2008 or 2020. It won’t for many reasons, but the revision signs are flying high.
Two Big Economic Shocks Coming
On top of negative revisions, the key driver of job growth, immigration, will end. So will the surge in related government handouts.
For discussion, please see my October 6 post Government Jobs Rose by Nearly 1 Million Unadjusted in Sept, What Going On?
On an unadjusted basis government jobs rose by 984,000. The BLS says jobs rose by 73,000. A reader asked about this.
Also see my November 1 post Nonfarm Payrolls Rise a Mere 12,000 with Government Jobs Up 40,000
Job Stats vs One Year Ago
- Nonfarm Payrolls: +2,173,000
- Employment: +216,000
- Full Time Employment: -1,000,600
Second, a big consumer tax hike is coming assuming Trump does what he says.
So, we have already slowing job growth and now we have a migration shock and a tax hike shock coming just as nearly everyone has given up on the recession idea.
Good luck with that. Voters weren’t fooled, just the economists.
In case you missed it, please see My Thanksgiving Thanks to Followers
Interesting. He’s still 2 months from office, ships get here faster than that.
“Voters weren’t fooled, just the economists.”
Almost half still voted for Kamala, anyway. Silicon Valley billionaire Marc Andreessen told Joe Rogan that Biden’s plans for AI were a thousand times worse than what happened with social media. Imagine if the economy was better than it is, before the election.
**Almost half of those that voted.
Less than 1/3 of eligible voters picked Trump, less than 1/3 picked Harris.
I heard a podcast last night: 1) WALMART SALES UP BIG and forecasts show MORE growth (the reason: HIGHER INCOME FOLKS are moving DOWN to Walmart to shop from the Higher costing Retailers such as Kroger and Clothing Stores). 2) Dollar Tree sales are dumping (poorest folks are “shopping” at Food Banks). 3) Target Sales have dropped. ONLY the mega-wealthy types and the top 10% (that would be my nephew and his wife who make MILLIONS and have over $20 Million Banked) are buying luxury goods and Vacation Homes (he and his wife own a Lake House in Lake Geneva, Wisc.).
New data shows US job growth has been far weaker than initially reported | CNN Business
So, they fudged the jobs numbers by about 800k for private payrolls, but at the time the MSM was touting that we didn’t need those phantom jobs because the GDP was so strong. Did anyone really believe that ?????
—- I guess some gullible bureaucrats did. DC voted over 92% for Biden.
Even Blue States were losing their believability with government numbers.
Here’s an article from when they did the job revisions. Read it if you want a laugh.
Funny numbers being manipulated once again, haven’t I seen this movie? Its all reruns since 2008.
They handed Trump an economic turd, no doubt. No surprise except to gullible dem voters. But if anyone can turn it around, it’s Trump.
“Economists at the Brookings Institution estimate AI could reduce the U.S. budget deficit some $900 billion by 2044.”
That’s enough to cover the last 3 months of deficit spending. Can AI figure how to cover the next 20 years (240 months)?
but can AI launder money through the Ukraine? black budgets and AI, a marriage made in hell….
These ever changing (Up & Down) “Financial Numbers” from the Fed is destroying our ability to plan accordingly. As a result, American Companies and Workers alike, continue to get hammered as the right hand has absolutely no clue, as to what the left hand is doing.
While voters weren’t fooled, as they see and understand what’s going on, that doesn’t make it any easier to deal with. We are blind with assumptions, until they show us…
I don’t trust any numbers coming out of Washington right now. Real Final Sales – Nope! Inventory Numbers – Nope! Etc. Unfortunately as a result of the “FED Number’s” being misrepresented, our “States Numbers” have to be questioned as well, no? Right down to Cities and Towns numbers?
I suspect a jump in inventories for the fourth quarter, will be a very large mistake. I don’t see Buyers being there after the Holidays are behind us. Always a time for spending, and one of the few, that many spend regardless of their financial situations, and a typical pause ensues, with returns, and exchanges driving the markets until mid-February or so.
I totally agree, that If buyers don’t show up for this (Over) stocked merchandise, merchants will get clobbered holding stuff people aren’t (And won’t be) buying.
Updates:
Private wages and salaries are now estimated to have a downward revision of $91.8 billion. >>> Is that a Record?
Personal current taxes are now estimated to have a downward revision of $15.5 billion. >>> Is that a Record?
Contributions for government social insurance are now estimated to have a downward revision of $12.4 billion. >>> Is that a Record?
>> Mish, You have mentioned the “ horribly flawed birth-death model” often, I do believe? Do you know if anything has been addressed at all regarding these flaws?
– Do I get to say I told you so? My advance estimate a month ago was 779,000 lower. Bloomberg estimated 730,000.
> You do indeed, yet again, Your On Top of it!!
– It appears the BEA is incorporating BLS garbage into its reports as well.
> Everyone had joined the party, in the hopes they would be ALL celebrating together right about now… Unfortunately they brought a whole lot of us down with them!!!
“Mish, You have mentioned the “ horribly flawed birth-death model” often, I do believe? Do you know if anything has been addressed at all regarding these flaws?”
No but I have a proposal. QECW data is comprehensive. Why wait for the end of the quarter to use it?
Why not monthly QCEW instead of quarterly. MCEW Even if it’s preliminary it would be better than this garbage.
Where it would be off is people who do quarterly taxes. But instead of applying a Birth/death model to garbage numbers it would apply to a 95% sample instead. And instead of revising the B/D model once a year, they can revise it quarterly.
So, that is my idea.
Good Day Mish, so I reviewed the best I could for now, the data on (Census) of Employment Wages. I definitely am with you on the data being comprehensive, but this makes me ponder as such, that the data may not be “streamlined enough” to allow it to be available on a timeline any shorter than quarterly?
I suppose that would then beg the question, can it be streamlined to do so, and how long, and most importantly “How Much” if it can be, so we can decide whether or not to do so perhaps? Is the information only available and vaguely reported, because people want it that way? I guess the better question would be, has the question been asked before, and was there any resistance of any kind, and if so by where? If not then who would need to be asked that question? Now is the time to ask, but to the right incoming group or individuals.I agree 100% as “Accurate and Timely Data” is “Useable Data” in my experiences.
Q1. Why not monthly QCEW instead of quarterly?
– Where it would be off is people who do quarterly taxes.
> Would it cost them more? How so and how much(%)? Can it be prevented or is it because it’s accurate and will work itself into a more consistent level at a point?
– And instead of revising the B/D model once a year, they can revise it quarterly.
> “Accurate and Timely Data” is “Useable Data” in my experiences.
– So, that is my idea.
> I Love the idea Mish, and mostly for the timely data that will flush out more accurate numbers and eventually more consistent ones as well!!! For the data w&$*5s this is precious! I believe you fit that mold (my Wife is).
>> As with most Government data, and prompt access to accurate data, it is virtually impossible. That’s the giant hurdle I see in getting it done, and that’s if you can even get it into a decision makers eyes to see and then ears to hear more from you. Most good ideas die on the vine as a result.
Thoughts?
Bad numbers is why Williams (shadow stats site) started doing his own stats — his economic forecasts for his clients stopped working and he found out it was because the govt stats on which they were based were fairy tales.
Garbage in, garbage out. If he didn’t trust government numbers, why did he use them? He should have created his own statistics organization and gathered all the numbers himself. Then he would know if the government numbers were garbage or not.
There will be no recession. Trump is already leading us to a new Golden Age and he isn’t even President yet. He is off to a great start, threatening our trading partners with big tariffs if they don’t do what he wants. I will be watching with great interest to see the concessions he will extract and the tariff money roll in and our national debt begin to disappear.
In addition, he says he can get US oil companies to “drill baby drill”, and produce so much oil that oil prices will drop significantly. I know that they have no interest in doing this, as it will hurt their profitability, so it will be interesting to see how he will accomplish this. I’m sure he has a plan though.
Miserable even on tg. Sad
You need to be more supportive of Trump. Like me. Let him do whatever he wants. It’s going to be great!
Or do the opposite, and carry on with how great things have been going?
Nope. Let him do everything he wants. Time for a change. Let’s experiment with something new.
Trump simp.
– He is off to a great start, threatening our trading partners with big tariffs if they don’t do what he wants.
> Wasn’t that just to force them to re-enact the “Stay in Mexico” Policy (Canada too)?
– he says he can get US oil companies to “drill baby drill”,
> Only if it makes sense, but doesn’t it? The EU and Other locals around the World, will be looking for more oil and cheaper if available, will get gobbled up, No?
– I’m sure he has a plan though.
> I am Going to agree with that, even though you don’t mean it…
>> Maybe all the cost savings from all the unspent money he can claw back, and all the new hires he doesn’t have to, or can let go. The end to Aid to everyone but Americans will also end, so that’s more, and DOGE will add a few Trillion More!
We shall see, but you do agree changes for the better are on the way perhaps? I certainly do, and am hoping so…
I agree that it is worth letting Trump do whatever changes he wants. If it all works out great and he leads us to the new Golden Age, then what’s not to like. He has a better chance to make a difference than any President in recent times. He has almost complete control of the government. He can implement almost any policy he wishes. I say; “go for it”. Then we will find out what policies work and which do not. It’s an interesting experiment. And people here can stop arguing all their theories about what will work and what won’t work. I say, let’s try it and see. Tariffs or threats of tariffs. Go for it. No taxes on tip, SS, overtime; why not? DOGE: of course. Drill baby drill; lets see him do it, even though I don’t know HOW he will. Some folks here seem to think I am being sarcastic. I am not. I truly want to see him try to accomplish everything he said he would do, with whatever tools he has at his disposal. If he succeeds I will praise him. If he fails, then at least we know what doesn’t work. As many here often say: I’ve got my popcorn ready. Let the show begin!
No he doesn’t
He has a majority in the House. The last uncalled race has the democrats ahead.
If it holds its 220-215
But Two of Trump’s appointments are from the House.
For a couple months it may be 218-215
That means Republicans can only lose a single vote on any piece of legislation. One of the seats is in NY which the Governor is in no hurry to fill. So we may see a 434 member House for quite some time.
Good luck with that.
PapaDave is a troll, Mish.
My “hope” is he gets as much control as possible. Then, using his legendary deal making skills, he convinces whoever he has to, in order to accomplish all his plans. It could be that he will lead us all to his promised Golden Age. He will make all our lives better and we will worship the ground he walks on.
However, as a pragmatist, I will also continue to do what I do every day: work hard to improve my health and wealth. Because that is far more important to my quality of life than anything any President can do for me. Even if he accomplishes every single promise he made.
There are many Americans, however, who are relying on Trump to make their lives better, because they don’t seem to be able to do that on their own. So, for their sake, I want to see Trump’s plans all be implemented as quickly as possible. These folks are depending on him to bring back their jobs and prosperity. Lets see what he can do.
Losers always seek a savior. Trump promised to elevate the angry losers. He didn’t last time, or they wouldn’t still be angry losers. Definitely this time though…
Let’s find out! It won’t matter to me as I don’t need a savior to make my life better. But many people need a savior; and here he is! I say; let him do what he wants. Let him lead us all to the promised Golden Age.
What’s funny is how they are still angry, even though they won!
NO ONE WINS. Let’s get back down to earth here.
Also, to support your position, Mish, there are those RINO’s – largely silent right now. What does THAT signal? They do not support Mr. T.
– I agree that it is worth letting Trump do whatever changes he wants.
> It won’t be that easy, as many roadblocks (Ex. RINO’s and Very Small Majority = No Support from the Republican Party), if your threatening to take there toys away. They have just as many, but are better about hiding them is all.
– He has a better chance to make a difference than any President in recent times.
> Actually I’m pretty sure the Dems have had a couple of much better chances, and recently, but they keep eating each other up, and as a result miss their opportunities.
– Go for it.
> He will be, and No taxes on tips, and S/S, And overtime, could be a game changer. DOGE is going to blow peoples minds. Elon is a visionary, much like Trump, but much better at it, smarter intellectually of course, and wealthy beyond understanding.
– I truly want to see him try to accomplish everything he said he would do, with whatever tools he has at his disposal. If he succeeds I will praise him. If he fails, then at least we know what doesn’t work.
> I do believe that, and am with you 100%. Try everything BUT what we have been doing, because that BS Obviously Doesn’t Work!!!
Yes. Add Elon to the equation. Give them all a chance to fix everything. Trump and Musk. What a team!
Just remember; I personally, would never rely on someone else to make my life better. That’s MY job.
But I also understand that many people seem incapable of making their own lives better and will need Trump and Musk to do it for them.
Well stated!
Leon will make a lovely First Lady.
Hey look at this:
Perhaps tariffs don’t work as an economic policy. They do have an effect in terms of foreign policy, however, and Donald Trump has succeeded in generating resets with both of our neighbors ahead to taking office. Canada’s Justin Trudeau has already signaled a willingness to renegotiate security concerns, and Mexico’s president followed suit yesterday.
Even Mexico understood Kamala & Biden’s Policies, or lack thereof, were simply Horrible for America. Once a President who is “For America” steps in, they back right down with envy… MAGA!
Still bitter about the election and grasping at straws, I see. Hopium springs eternal.
Bitter about what? The voters have made their choice. And I am looking forward to the next 4 years. This is all going to be incredibly fun to watch. I am looking forward to it.
its amazing how many want to continue doing the things that don’t work, certain it will be different this time, they keep banging their heads against the wall.
Trump offers a turning away from the repeated failures. He might f’k up, but it will be at least a new failure and he may succeed, but we know to continue the failed paths of his predecessors will not lead to a land of success.
So many haters hypnotized by a complicit press, and a corrupt political system, refuse to look around at the decline of this great nation. I often wonder if they are on the same planet as me…
Yep. Let Trump have free reign. Try whatever he wants. Let’s see if those tariffs will do everything Trump says they will do.
Papa doesn’t vote, so he can’t get upset about the election, as he didn’t partake in it.
This is the only reason that I do vote, because as I know my one vote doesn’t make any difference overall, but I can get upset about it all I want to, and because I did vote I have the right to! It just makes me feel better about myself, that I at least took part!
Correct. I don’t vote. And I don’t think that any government will do much for me. Which is why I never rely on government to make my life better.
Whether Trump succeeds or fails makes very little difference to my life. So, I candidly admit, Trump can do whatever he wants, and I doubt it will matter to me. Which is why I am cheering for him and I am looking forward to the next four years. Let’s see what he can do.
Historically, Republican administrations have been terrible; by any economic metric you choose to look at. But past performance is no guarantee of future performance. Let’s see if the Trump/Musk team can lead us to the Golden Age.
A different perspective would have it that you participated in the process and if your preferred candidate loses you need to accept the result without complaint.
It would be like playing a sporting game and losing– if you participate and lose, don’t be a sore loser.
Not at all, but it would be: Like telling the Coach to use the righty against the righty, and he says no, the righty can’t hit a fastball, and the lefty’s a much faster pitcher.
The Hitter promptly hits a 3-run homer and wins the game!!
Who has the “Right to Complain”
Hmm… That just occurred over the past 4 years ironically, don’t you think?
With the election over and the DNC down the toilet, the pretense for the cooked numbers is no longer useful. The inflationary depression will rage on as every viable limit is tested again and again. The staggering losses and looting will pile on exponentially. The underestimated depressive forces will gradually choke down the rampant inflation, thus planting the seeds of a slow recovery.
DOGE. So few people (2), so much to do.
The BEA liars club should be defunded and eliminated.
And the lies from those we elected to SERVE us and their appointees continue.
Perhaps you could consider a career at the BLS since they are so awful at their jobs and after you clean up that mess perhaps the CBO could be next for you!!!
Maybe the White Supremacists will start working after the illegals get the boot. And they can’t do as much fentanyl. If it all works out. Which is a coin toss. I hope it works out. But seriously, 98bn revision down? Wow.
I’ve already been working, and I’ll do as much fentanyl as I want to.