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

Comments (8)
No. 1-8

Mish, are you ready to blink on your low-interest rates/deflation outlook? Trump's policies are all inflationary, except for his trade talk, which seems to be mostly just talk.

Mike Mish Shedlock
Mike Mish Shedlock


Nope el-Tedo and the long bond agrees


I’ve already mentioned what I thought has been helping growth, which is consumers taking on more debt and spending more savings, the lower dollar and the dramatic reduction in regulations. Trump picked Powell because he is a low interest rate guy. Trump gets hammered every time he tries to place tariffs on countries as his opponents say he is going to start a trade war but they have no solution. I put myself in Trumps place and the problems he has inherited as it relates to debt and a decadent culture that doesn’t understand that values are virtuous as they adhere to truth which is never changing and never relative .God help us, no wait, don’t bring God into this, His boys are hold upon in their multimillion dollar mansions with their private jets waiting on the runway!


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.


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.