In recent months, GDP estimates from the Atlanta Fed GDPNow Model were typically way higher than those by the New York Fed Nowcast Model.

The situation is now reverse.

4th Quarter GDPNow Forecast December 8

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"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 2.9 percent on December 8, down from 3.2 percent on December 5. The forecasts of real consumer spending growth and real private fixed-investment growth declined from 2.8 percent and 8.1 percent, respectively, to 2.5 percent and 7.0 percent, respectively, after this morning's employment report from the U.S. Bureau of Labor Statistics. The model's estimate of the dynamic factor for November—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—declined from 1.13 to 0.47 after the report," according to Pat Higgins, creator of GDPNow.

4th Quarter Nowcast Forecast December 8

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The Nowcast model did not react to the jobs report, but the GDPNow model reacted with a 0.3 percentage point decline.

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An even bigger dive happened following the jobs report in November when the GDPNow model plunged from 4.5% to 3.3%

Dynamic Factor Volatility

In November, I pinged Pat Higgins at GDPNow asking if it the decline was wage related.

Higgins explained the model uses "something like 22 payroll employment series from different industries at various levels of aggregation and two from the household survey to estimate the dynamic factor but It doesn’t use any wage data."

For more details please see Email From Pat Higgins On the Dynamic Factor Volatility of GDPNow.

Dynamic factor volatility hit GDPNow again this month.

Anemic Wage Growth

Year-over-year wage growth in the jobs report was anemic once again. For details, please see November Jobs +228,000: Employment Only +57,000.

Mike "Mish" Shedlock