Following today’s reports on factory orders, international trade, jobs, and two reports on services, the New York Fed GDP Nowcast rose 0.2 percentage points to 2.4%.
If 2.4% is the over-under line, I’ll take the “under”.
- The FRBNY Staff Nowcast is above 2% for both 2016:Q2 and 2016:Q3.
- Conflicting news over the week had on net a slightly positive effect on the nowcast.
- The largest positive contributions came from real personal consumption expenditures and the ISM manufacturing release.
2nd Quarter Nowcast
Positive and Negative Factors
The biggest positive factors since the May 27 report were personal consumption expenditures, the manufacturing ISM, and the unemployment rate.
The largest negative factor since the May 27 report is construction.
I have comments from both the Atlanta Fed and New York fed from last week on their models, and I hope to report on them next week. I intended to do that this week but there has been lots of data in a shortened work week.
Modeling Error on Unemployment Rate?
I suspect the the New York Fed has a small modeling error in the civilian unemployment rate.
In general, it’s logical to presume a decline in unemployment likely is a positive factor for growth, but I also propose one needs to look at why the rate declined.
Today, the unemployment rate dropped because close to half a million people dropped out of the labor force.
Moreover, there was a massive jump in involuntary part-time work of 468,000. Neither of those can remotely be considered positive for spending or GDP.
For details on today’s job report, please see Fed Hiking Not: Payroll Jobs +38K, Employed +26K, Labor Force -458K, Revisions -59K.
Four GDP Estimates
- New York Fed Nowcast June 3: 2.4%
- Atlanta Fed GDPNow June 1: 2.5% GDPNow Forecast Dips to 2.5% Following Construction Report
- Markit June 3: 0.7% to 0.8% Composite PMI Flirts With Contraction; Markit Chief Economist Estimates GDP 0.7-0.8%
- ISM June 3: 1.6% Non-Manufacturing ISM Much Weaker Than Expected
The estimate average is 1.8%.
Looking ahead, I see weakening employment and weakening commercial construction. For details please see Construction Employment Declines Back-to-Back First Time Since May 2012; Questions of the Day.
Mike “Mish” Shedlock