Nowcast GDP Estimate 1 Percentage Point Higher Than GDPNow

Following Friday's jobs report the GDPNow forecast slid from 3.2% to 2.9%.

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

"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

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

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."

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

No. 1-8

Mish since this post is old now I wonder if I might pass along a personal interesting little tidbit that u might respond to if I promise never to do it again~ok? 1965 spring break Acapulco Farrah Fawcett and I had a date at Paradise Beach~r u impressed?


whoops~standard of living taking on more and more debt with monthly payments for the house, cars, credit card, health care, insurance, private schools so that spending for anything else becomes impossible. So low interest rates reduce capital expenditures so demand falls and less taxes are payed to run our govt~so yes I agree with you guys that long rates will begin to fall again unless the govt secretly begins to pump up the money supply to try to increase inflation and demand some other way.


Mish one of the very most important thing I left out in my remarks are interest rates. Ten years ago using the average yield for say 10 years down to 4 weeks, I could get around 5.5 to 5% on my savings, and over 6% on the 30 year bond. Someone who has retired having saved 50k could get 2500 dollars a year a huge amount of money for a 80 year old couple who’s only other source of income is social security. So a millionaire, 55k, 10 million, 550k. In order to get these returns, one has to buy junk bonds or corporate debt with a lot more risk. I have a friend whose oldest son had been making 15% for years in a oil and gas pipeline master limited partnership. Very seductive reasoning here as even if the price of oil goes down, oil still has to move through these pipelines so it’s pretty much a slam dunk very little risk. Well the man had close to 2 million dollars so then his younger son tells his father, you don’t ever put all your money into only one investment no matter how good it looks. Didn’t listen and sure enough as crude crashes down to 45 from a 100 the MLP gets hammered loosing half its value. Lastly as you and Lacy Hunt keep saying debt is deflationary in this low interest rate many people try to maintain their standards


As long as official policy, at both the Fed and governments at all levels, is to maximize the share of total output that is distributed via asset appreciation mechanisms to the idle classes; which necessarily reduces the share distributed to those who do the work to create the output; it will take some really magnanimous bubble blowing, before you see price increases for goods the latter group are the predominant buyers for. Which so happens to be what the clowns providing macabre entertainment at our contemporary “economic” circus, refers to as “inflation.”

We’ll get there eventually, once the systemic transfers from the productive to the connected has gotten so rapacious, that none of the former can any longer afford to, nor are allowed to, do anything but serve as simple manservants to the latter. Hence supply of everything dries up, while demand printed out of thin air keeps exploding. Venezuela is, if only slightly in the big scheme of things, still a hair’s breadth ahead of us down that shared road. At least for now.


Sorry Mish I never mentioned whether or not I agree with u on interest rates and deflation.Well I hate to wimp out on this by saying I don’t know. It just seems like to me that anytime some kind of problem starts to manifest itself in our markets, the Fed, treasury and the bankers all get together and do whatever it takes with massive amounts of leverage jump in to deal with the problem. Maybe I’m being paranoid about all this, but even the experts in technical analysis have been saying for a long time that isn’t the way free markets operate. If everthing is being manipulated as I suggest here it can’t last forever so I don’t know.