Patterico's Pontifications

7/30/2014

GDP Number in Q2 is 4%

Filed under: General — Patterico @ 7:53 am

Great news — if you put a lot of stock in the GDP number (which I don’t, for reasons I have explained in detail) — and if you ignore the fact that this is a bubble created by Fed policy, and that we have done nothing to fix the structural problems with our unsustainable fiscal policy and runaway entitlements.

I won’t be popping any champagne corks. But then, I don’t even like champagne.

38 Responses to “GDP Number in Q2 is 4%”

  1. What is the average decrease from original projections to end of revisions downward?

    JD (c0a33e)

  2. And, as always, the figures will be revised as more data come in. One would expect that, in a non-partisan effort, revisions would vary between upward and downward changes fairly evenly, but the revisions always seem to be downward, for some unexplainable reason.

    The unimpressed Dana (f6a568)

  3. I like champagne.

    JD – great question. I did an analysis at an old job of our “marketing budget” vs. what we actually spent. Continuous revisions downward are like playing pretend.

    carlitos (c24ed5)

  4. It’s great if you are in the stock market. Low-wage earner, forget it.

    IOW Obama’s underbase is still hurting. Uberbase, ding great.

    Patricia (5fc097)

  5. All the downward revisions are unexpected. I mean you can’t blame government for being optimistic, right?

    Dejectedhead (a094a6)

  6. ooops….doing great.

    Patricia (5fc097)

  7. Six point swing Q1 to Q2 looks like the numbers got polar multiplexed. Very odd. Revisions will be interesting to watch. Q3 info will be out just before or delayed until just after midterms for political reasons.

    daleyrocks (bf33e9)

  8. daleyrocks you are familiar with the “typo” administration? Or is it the
    “oops” administration. How can anybody take any of these numbers seriously any more?

    elissa (b9af8b)

  9. Remember Q1 GDP as originally reported in February was eventually revised down a full 3% from an original report of +0.1% growth to -2.9%

    These initial reports seem rather optimistic and they are setting that pattern on purpose. The Q3 numbers come out right before the November election.

    crosspatch (6adcc9)

  10. You might like some Deccolio Proseco, it’s on sale right now at the Whole Foods.
    It’s good with strawberry cake or tiramisu.

    SarahW (267b14)

  11. This president sure has killed a lot of trees, printing money like it grows on them.

    mg (31009b)

  12. elissa – I was up north when the “speak-o” emerged, but this administration is no stranger to the use of “asspulls” when it comes to data, a technical accounting term for sourcing information which I believe I introduced to the blog.

    daleyrocks (bf33e9)

  13. i just noticed from the press release that former Associated Press propaganda slut Jeannine Aversa, who used to spin these same numbers for the AP, is now working for the BEA directly

    happyfeet (8ce051)

  14. Well, daley, what we obviously need now is for Ezra and Matty to ‘splain these amazing numbers to us. While you were camping you may have missed a couple more VOX treasures–like Matty’s map and chart about something or other which featured the “provinces” of the British Isles. Good times.

    elissa (b9af8b)

  15. actually since 2011

    propaganda pig is well on her way to scoring a fat little piggy pension

    happyfeet (8ce051)

  16. if you put a lot of stock in the GDP number

    The reliability of official statistics started to look shaky to me when CIA-vetted figures, no less, on the average unemployment rate for Mexico going back over 30 years showed it rarely rising above 4%. However, I notice the CIA website containing that information has since placed a cautionary asterisk under the set of figures in question. Nonetheless, if such information is taken at face value, our neighbor to the south looks like an ideal place for the unemployed.

    Whether that assumption is accurate or not is important to know and understand, because Mexico’s future may be our future.

    jonathanheath.net, March 2014: The unemployment rate has always been one of the more important macroeconomic indicators in most countries. For complex reasons, however, it has never gained much acceptance in Mexico… A general perception exists that the numbers are not very reliable, are constructed with doubtful methodologies and are even manipulated by the government in order to hide a much more painful reality.

    The biggest problem, however, is that the average unemployment rate from these studies was one of the lowest in the world, something that intuitively does not correspond to the level of development nor with the very low rate of economic growth that Mexico has experienced over the past three decades. This fact received much attention outside of Mexico, causing multiple inquiries and studies aimed at finding out whether it was a result of structural peculiarities of the Mexican labor market, an inadequate use of international standards and recommendations, or measurement problems.

    One of the more well-known studies was conducted by Susan Fleck and Constance Sorrentino of the Bureau of Labor Statistics in 1994. This study found a list of minor differences with U.S. surveys regarding the phrasing of questions and the analysis of certain circumstances. For example, workers’ temporary absences, as well as people about to start work, were classified as employed in Mexico and as unemployed in the United States. The study found, however, that if all the differences were corrected in the Mexican surveys, the country’s average unemployment rate would increase by almost 150 basis points or 1.5%, which would still place the Mexican unemployment rate far below that of most OECD countries and many emerging economies.

    Nevertheless, most serious studies actually show that the main reason why Mexico’s unemployment rate is so low is due more to structural characteristics of the labor market rather than to methodological differences or survey flaws. For example, while in the United States there is a clear negative correlation between education and unemployment (the higher the educational level, the lower the unemployment rate), in Mexico the correlation is actually positive. The population segment with the lowest unemployment rate is the one that has “no primary education” and is associated with the poorest sectors of the economy. The two main reasons for this phenomenon are: 1) a large part of this segment lives in rural communities and is self-sufficient and therefore is not considered unemployed; and, 2) the poorest part of the population cannot “afford” to be unemployed and therefore will accept any type of work, no matter how little it pays.

    Two additional characteristics help us to understand the relatively lower unemployment levels in Mexico. There are no unemployment-insurance mechanisms or safety nets that provide income for those seeking a job. This implies a strong incentive to lower the search time and accept any type of job, even if it pays less than the person looking for a job expected. In general, studies show that insurance mechanisms provide a perverse incentive for lengthening unemployment since the money received while unemployed reduces the urgency of finding employment quickly.

    ^ It should never be said that people in hand-to-mouth countries like Mexico are the way they are because, in terms of the work ethic, they sit around eating bons bons and watching TV all day. OTOH, it should also never be said that a work-or-die ethic necessarily allows a society to move upward and onward.

    Mark (2604a9)

  17. WOO-HOO!!!!!

    Recovery Summer 2014 Baby!!!!! nothing can stop us now!

    (except reality, of course. %-)

    redc1c4 (abd49e)

  18. elissa – Matty is always good for a beclowning and proof of concept for Wapo’s decision not to fund the Vox venture.

    The lads did not manage to abscond with our white gas camping fuel while I was with them so we had no loss of eyebrows or missing hair due to aggressive fire starting procedures so far. I am hopeful the Newbie dads I left in charge will be able to maintain control.

    daleyrocks (bf33e9)

  19. ^ It should never be said that people in hand-to-mouth countries like Mexico are the way they are because, in terms of the work ethic, they sit around eating bons bons and watching TV all day. OTOH, it should also never be said that a work-or-die ethic necessarily allows a society to move upward and onward.

    Mexico is not a ‘hand-to-mouth’ country. It is a middle-income country with living standards on average similar to those of the United States in the 1920s. It has a very skewed income distribution, so there are deeper pits of poverty than you’d ordinarily see in a country with those production and income levels.

    The CIA’s book is not the production of economic metrics and it is indubitably reporting in its public reference books statistics compiled by other agencies. The thing is, a country like Mexico has a substantial informal economy where many people earn a meagre living in a state of ‘individual as-enterprise’ or ‘family-as-enterprise’. Unemployment statistics are appropriate for countries which do not have contextually large informal economies and where one can readily classify people according to their employment status (which you cannot where people typically support themselves through petty commerce and juggling odd-jobs).

    Art Deco (ee8de5)

  20. a good portion of Mexico’s GDP is cash sent there from the US, and a good portion of their available w*rkforce is here in the US, stealing j*bs & driving down wages.

    without the safety valve of sending their unemployed hordes here, Mexico might have already had the revolution it needs to destroy the corrupt scum who run the country for their own benefit.

    redc1c4 (abd49e)

  21. The 4% number – if true – still represents a net 1% annualized GDP gain for the first half of 2014.

    But its not true, half of the number represents inventory stuffing. The consumer demand simply isn’t there, and the monthly consumer spending numbers for 2Q reflect that.

    There is a near certainty of recession this year, if not a worse “correction”.

    SPQR (f1f2c3)

  22. I was recently in a Best buy looking for a new digital camera. There were many models on display, but less than half of those were in stock. The atmosphere I observed there reminded me of Circuit city’s last year of existence.

    felipe (960c75)

  23. 2014 Q1 GDP estimates:
    +0.1% April 30
    -1.0% May 29
    -2.9% June 25
    -2.1% July 30

    2014 2Q GDP estimate = +4.0%

    What is it 98 or 97 days until the election?

    And 99 days to the revised Q2 GDP estimate of -2.3% and the recognition of the technical start of the Obama Recession Part deux.

    in_awe (7c859a)

  24. without the safety valve of sending their unemployed hordes here, Mexico might have already had the revolution it needs to destroy the corrupt scum who run the country for their own benefit.

    Mexico has an abnormally high crime rate and a fairly skewed income distribution. Otherwise, it’s about average for the human race. The country has had unbroken institutional continuity since 1920, replaced in stages a system of political machine rule with competitive politics over the period running from 1983 to 2000. I cannot think of any Latin American countries which would benefit from a revolution, though some might benefit from a capable autocrat for a run of years (e.g. Gen. Pinochet). Capable autocrats are not very common. There are 120 million people in Mexico and about 20 million chicanos in the U.S. (some American born). Obviously, that has had an impact. Was emigration a ‘safety valve’ or just an opportunity? Peru was poorer than Mexico and suffering more severe internal disorders during the period running from 1980 to 2004 than Mexcio has seen since 1930. Peru lacks a boundary with notably affluent states. Yet, Peru improved its relative position greatly during the period running from 1980 to 2010 and it’s streets are much more tranquil than Mexico’s.

    Art Deco (ee8de5)

  25. Here’s a link for Mr. SPQR’s comment

    Despite the positive revisions, the economy grew at an average annual rate of about 1% in the first half of this year, well below the pace of 3% or more economists had projected last year.

    happyfeet (8ce051)

  26. felipe, Best Buy has been on life support for years now.

    SPQR (c4e119)

  27. Lets wait for the real, revised, numbers!

    Rich (ddc02c)

  28. This happened in 2012, too. If you have a pliant Fed, you can give the economy an upper any time you want. Just print another $2-3 trillion and loan it out at 1% and 3 months later things pick up. You do that in spring and summer and by the time the withdrawal sets in you’re safely past the election.

    The country needs to go to Debtor’s Anonymous. Only problem is we probably have to hit bottom first.

    Kevin M (b357ee)

  29. “Yet, Peru improved its relative position greatly during the period running from 1980 to 2010″

    Art Deco – More from 1990 to 2010?

    Viva corrupt autocrats of Japanese descent!

    Out with Tupac Amaru and Shining Path.

    daleyrocks (bf33e9)

  30. 22. felipe (960c75) — 7/30/2014 @ 1:37 pm

    I was recently in a Best buy looking for a new digital camera. There were many models on display, but less than half of those were in stock. The atmosphere I observed there reminded me of Circuit city’s last year of existence.

    </i.

    Digital cameras break, and when they break, I think the companies say it's your fault and won't honor the warranty. It's best to buy a several years old camera on eBay ffor much less money.

    Sammy Finkelman (eb1481)

  31. This scene from “The Wire” showing Baltimore’s Finest being ordered to fix the crime numbers for the mayor’s re-election:

    https://www.youtube.com/watch?v=xH_6_8NOfwI

    “Murders will be held to 275 for the year!”

    Kevin M (b357ee)

  32. Whatcha wanna bet the “official” unemployment rate drops below 6 percent in October?

    Whitey Nisson (aae971)

  33. I like champagne a great deal. I’ve had no national news to prompt me to drink it since Obama was elected in 2008, though. So it’s a good thing I don’t wait for that as an excuse to drink it.

    Beldar (fa637a)

  34. Mexico is not a ‘hand-to-mouth’ country. It is a middle-income country with living standards on average similar to those of the United States in the 1920s

    I’m not too sure about your definition of “middle-income,” but if you’d rather not characterize the place as “hand-to-mouth” then I can re-phrase that to “mediocrity run amok.” Or similar to one of those very half-crocked urban areas throughout America that are always socially, economically and physically third or forth rate, full of crime, full of crooked, leftwing politicians and the type of voters who keep them in office, lousy schools, a semi-comatose local economy, all interspersed with no sense of the potential greatness of humankind, no sense of a brighter, better future.

    Mark (2604a9)

  35. HaHaHaHaHaHaa!

    Guess what happens with GDP forecasts presuming zero inflation when it’s actually running 8-10%.

    This is all ‘inventories’ built, despite declining employment, declining orders, declining deliveries, Baltic Dry index teats up, et cetera, ad infinitum.

    Total horsesheet from your government one more time, because it will make you confident and spend your grandchildren into the poor house.

    gary gulrud (46ca75)

  36. Hello,

    I am Sree Buddha Dev Ray, I read your article “GDP Number in Q2 is 4%”.I became very happy to read your article.

    If anybody read your article, he or she will be benefited.

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    Sree Buddha Dev Ray (5dd20e)

  37. i’ve got your booming economy right *here*… we need to start a pool on just how far down that 4% is going to be revised.

    redc1c4 (abd49e)

  38. I reluctantly sold all my stock on Tuesday. We’ve had a 64 month rally. It just has to end soon.
    My gf and I sell garage-sale finds on eBay. Page views are way down this year.
    I see signs of people getting liquid.

    Mr. P says “we have done nothing to fix the structural problems with our unsustainable fiscal policy” and that hits the nail square on the head. We learned nothing from Sep 2008!
    On top of that, the US govt is lawless and no longer credible.

    gp (0c542c)


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