The BEA released its final estimate of first-quarter 2023 GDP. The GDP vs GDI discrepancy is one of the largest ever.
Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing. They are supposed to match, and will over time, with revisions in at least one of the measures.
Real Final Sales is the bottom line estimate of Real GDP. The word real, means inflation-adjusted.
Today the BEA released its Third Estimate of First Quarter 2023 GDP and an update on GDI as well.
BEA Highlights
- Real GDP increased at an annual rate of 2.0 percent in the first quarter of 2023 according to the “third” estimate released by the Bureau of Economic Analysis.
- In the fourth quarter of 2022, real GDP increased 2.6 percent.
- Real gross domestic income (GDI) decreased 1.8 percent in the first quarter, an upward revision of 0.5 percentage point from the previous estimate.
- The increase in first-quarter real GDP was revised up 0.7 percentage point from the second estimate, reflecting upward revisions to exports, consumer spending, state and local government spending, and residential fixed investment that were partly offset by downward revisions to nonresidential fixed investment, federal government spending, and private inventory investment. Imports were revised down.
- The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 0.1 percent in the first quarter, an upward revision of 0.6 percentage point from the previous estimate.
The BEA averages GDP and GDI on the basis that it does not know which measure is more accurate. The NBER, the official arbiter of US recessions does the same thing.
However, the NBER is so late in issuing its recession calls, it will be clear which one of the current estimates is more accurate.
Largest Discrepancy in at Least 20 Years
Q&A on the Discrepancy
The average is very weak, near-zero growth letting everyone believe what they want about the strength of the economy. The divergence between jobs and employment is also in play.
Jobs vs Employment Discrepancy
I have been covering the discrepancy between jobs and employment for over a year.
My most recent update was on June 2, in Huge Jobs Divergence Returns, Jobs +339,000 but Employment -310,000
Payrolls vs Employment Since May 2022
- Nonfarm Payrolls: +4,063,000
- Employment Level: +2,422,000
- Full Time Employment: +1,734,000
Of the 894,000 rise in employment in January, 810,000 was due to annual benchmark revisions. And the BLS does not say what months were revised, just poof, here you go.
Think There’s a Strong Labor Market? Then Think Again
Hours worked data from the BLS, chart by Mish
Across the board, people are working much fewer hours per week than pre-pandemic.
The hours view and the employment vs jobs view hints that the GDI view is closer to the mark than the GDP view. For discussion, please see Think There’s a Strong Labor Market? Then Think Again
It seems amazing to me that they haven’t properly investigated this. This is a compilation error, so looking for economic drivers is potentially a mistake. The only way it could be caused by an economic impact is if the compilation error itself was affected by economics. In Nigeria, for example, they werent adequately including the telecom/technology sector so the GDP error was huge and the size of the error was affected by the growth in TTM. The proper forensic way to do this would be to take a single firm, and trace how disclosures varied between the different compilations. Unfortunately for that we need an economist who actually knows about data compilation errors, and these are few and far between. Try a comment from Morten Jerven who needs to be dragged out of retirement.
AAPL $3T ukulele
There will be no negative GDP prints before the next election outside of a huge one time event that will provide cover for the drop. Like a 9.0 magnitude Cascadia quake.
Perhaps they will find some way to show a drop is Trump’s fault.
Or perhaps Putin?
Chairman Xi?
GDP etc……..are hooey numbers to hang any investment hat on. the percentage that is government spending is outrageously high so it’s a waste of energy to pay attention to for investment purposes. The FED is concerned with one thing only. keeping the NYC banks which own it, in high cotton.
I’ll confirm the lower hours worked in manufacturing with anecdotal evidence. For our business, it is related to the hours the people WANT to work rather than hours available to work. People have changed their priorities away form work and income to leisure and down time. I think this is a cultural change that is going to endure.
link to youtube.com
Mish
Dr Lacy Hunt has some interesting comments re: declining GDI, declining workforce hours and declining worker productivity. This may force companies to cut staff.
Thanks
So is Lacy Hunt still advocating for buying long dated bonds? If you followed his advise, the last few years would have been an SVB type disaster.
NQ 1W Lazer : Jun 28 2010 to Aug 8 2011 lows, Parallel Feb 14 2011 high.
1) A bullish option : to Mar 2000 / Nov 2021 highs resistance line.
2) A bearish option : a drop to the Lazer below to form a tilting H&S.
3) Breach the Lazer. The first monthly close < the Lazer that will lead to lower
lows.
NDX 1M Lazer : Oct 2011 to Feb 2016 lows, parallel Nov 2014 high. NDX test the
resistance line. 1) A bullish option : hop to Mar 2000 high to Nov 2021 high resistance line, or breach it.
2) A bearish option : the first monthly close < the Lazer after 8 years that will lead to further drops.
The forward looking ‘market’ sure isn’t acting like there is a recession coming and to be frank I’m a bit confused by where all this money is coming from but let’s take a look at some other data. The S&P 500, Russell 2000 and Bitcoin are all up by billions. Oil is the only thing down but it’s not that far off from where it was back in January.
If you had told me the Fed had hiked 500% and this was the result I would have said you’re crazy but here we are…with at least two more rate hikes coming and maybe more.
SPY (S&P 500) Top Companies are Up 15%
January 3 – SPY at 380.82
June 29 – SPY at 438.11
IWM (Russell 2000) Small Companies are Up 7.5%
Jan 3 – IWM at 173.40
Jun 29 – IWM at 186.38
Bitcoin Almost double of what it was January!
Jan 3 – 16669
June 29 – 30396
Oil Down 9% but more likely this goes back up with production cuts and disruptions than further down.
Jan 3 – 76.93
Jun 29 – 69.97
The only thing that will cause a recession in my view is some massive disruption and perhaps the Teamsters shutting down UPS will do it. Otherwise a new plague, war, or massive solar flare will do it.
Funds are being shifted from time deposits (gated deposits), to transaction accounts. This is demonstrated by the graph M2/GDP.
link to fred.stlouisfed.org
Any shift from bank CDs to MMMFs increases the supply of loan funds.
You do realize the stock market doesn’t actually have money. It’s just a place where equities are traded. The index values are based off the last transaction price.
So, for example, I could sell you my car A for $50k and then you could sell it back to me for $55k, so the car A index is now at $55k. But there’s no increase in money.
That also works, repeatedly, for low income apartment buildings.
Until the insurance fire.
If I buy your car for 50k and I sell it back to you for 55k where the f$#! does the 5k come from? Do you ever think before you post something?
You still don’t get it. An index isn’t a measure of money. It’s a measure of last transaction prices.
No, you don’t get it, the index is made up of equities that are bid up by someone, this means money is flowing in. If there are no bids (no money flowing in) then equities and the index goes down.
We really need that ignore button because you’re the first one I’m going to click ignore.
It is Mathematically IMPOSSIBLE for money to flow into stocks.
Period.
You are right Kid,
All you have to do for an example is watch a penny stock and see how little shares, purchases, money, buyers and sellers move a market.
There is often no value to represent Market capitalization. There are perhaps 50 High Weighted Companies that are pushing up the indexes , and the rest are either neutral or declining. It is said that 37% of the S&P is Zombie and survives exclusively on borrowing money and fundraising through new stock issues and perhaps low graded bonds. Guess what…. new issues and borrowing money at today’s interest rates does not currently pencil out.
All the talk about billionaire net worth is based on the last price of their stock holdings times the current price. If they tried to liquidate any significant portion of their holdings the stock price would crater. The system’s only Caper to deal with this problem is Stock buybacks by the board controlled corporations. It is said that 5% of GDP is allocated to Corporate Stock Buybacks which allow insider’s to cash out without cratering prices. Company doing stock buybacks are not enhancing the Corporations True Value. Perhaps just lining the pockets of insiders.
Even though stock indexes have regained strength, it is just a handful of them that are doing the Market Capitalization Heavy Lifting. Also the indexes are about where they were 2 years ago and dollar value has diminished 12% -18% in that time frame. If indexes were inflation adjusted like GDP, the indexes would be at about the same level as pre-covid and trienniel compound inflation destruction of dollar Value. Maybe 10k-11k NASDAQ. It gets worse in that relative to stock prices 3 years ago, other items in the basket of goods at that time were way better priced comparatively. When stocks make a big crescendo in prices, a lot of other things do not go up at the same rate.
The question of where does the new money in Stock Price Gain come from???? It has not come from productivity increases. It has come from the person or institution who sold their last PONZI position, or from Stock Buy Backs, or from PONZI Public Pension Funds that are funded by Mandated Confiscation.
I tell you Horn…. we might not always agree on everything but you are still the brightest Kid in the neighborhood.
It never matters if there are no bids, EVER.
For a price to change, someone has to want to SELL for less than the market price.
No sellers, no transaction.
Doesn’t matter how many bidders.
Bidders don’t set prices.
Duh.
Ok. let me explain it better. You just bought stock A for $50. I just bought stock B for $50. So the A+B index is $100. A week later, You buy my stock B for $55 and I use that money to then buy your stock A with the same $55. So now the A+B index is $110. All the happened was I traded my stock B for your stock A.
Yes, Virginia, it is that simple.
For every buyer thinking it is a good time to get in, there is a seller who can’t wait to get out of their position.
More middle class got eliminated during the pandemic. Doesn’t bode well for the long term health of the economy. Most economic growth comes from the middle class. Both the very rich and the very poor tend to be leeches.