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Philly Fed Professional Forecaster (Read Econ Ph.D.) Survey Reveals Economic Deterioration

Tyler Durden's picture




 

The latest Philly Fed professional forecaster (whose members are such resolute permabulls as Moody's Mark "How the Stimulus Worked" Zandi and BofA's Ethan "Goldman cutting estimates means I am raising mine" Harris) survey has been released and it is looking notably gloomier than before. "The outlook for growth in the U.S. economy looks weaker now than it did
just three months ago, according to 36 forecasters surveyed by the
Federal Reserve Bank of Philadelphia. The forecasters see real GDP
growing at an annual rate of 2.3 percent this quarter, down from the
previous estimate of 3.3 percent. On an annual-average over
annual-average basis, the forecasters expect slower real GDP growth in
2010, 2011, and 2013.The forecasters see real GDP growing 2.9 percent in
2010, down from their prediction of 3.3 percent in the last survey." The economists also see the chance of a negative Q3 and Q4 rising to 14% and 16.8%. So what they're really telling us is Q2 GDP was likely negative and going rapidly downhill from there.

As for those brave enough to share their mark-to-unicorn forecasts, that incidentally tend to be wrong by 70% within two weeks of official data announcement, the full list is below:

Robert J. Barbera, Mount Lucas Management; Jay Brinkmann, Mortgage Bankers Association; Joseph Carson, Alliance Capital Management; Christine Chmura, Ph.D. and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; David Crowe, National Association of Home Builders; Rajeev Dhawan, Georgia State University; Shawn Dubravac, Consumer Electronics Association; Michael R. Englund, Action Economics, LLC; Robert C. Fry, Jr., DuPont; Stephen Gallagher, Societe Generale; Timothy Gill, NEMA; James Glassman, JP Morgan Chase & Co.; Ethan Harris, Bank of America-Merrill Lynch; Peter Hooper, Deutsche Bank Securities, Inc.; William B. Hummer, Wayne Hummer Investments; IHS Global Insight; Peter Jaquette, PIRA Energy Group; Fred Joutz, Benchmark Forecasts and Research Program on Forecasting, George Washington University; Kurt Karl, Swiss Re; N. Karp, BBVA Compass; Walter Kemmsies and Daniel Solomon, Moffatt & Nichol; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, OSK Group/DMG & Partners; L. Douglas Lee, Economics from Washington; Allan R. Leslie, Economic Consultant; John Lonski, Moody’s Capital Markets Group; Macroeconomic Advisers, LLC; Dean Maki, Barclays Capital; Edward F. McKelvey, Goldman Sachs; Jim Meil, Eaton Corporation; Anthony Metz, Pareto Optimal Economics; Ardavan Mobasheri and Danielle Ferry, AIG Global Economic Research; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Herbert E. Neil, Financial and Economic Strategies Corp.; Mark Nielson, Ph.D., MacroEcon Global Advisors; Michael P. Niemira, International Council of Shopping Centers; Luca Noto, Prima Sgr; Martin A. Regalia, U.S. Chamber of Commerce; David Resler, Nomura Securities International, Inc.; Philip Rothman, East Carolina University; John Silvia, Wells Fargo; Allen Sinai, Decision Economics, Inc; Tara M. Sinclair, Research Program on Forecasting, George Washington University; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting; Neal Soss, Credit Suisse; Stephen Stanley, Pierpont Securities; Susan M. Sterne, Economic Analysis Associates, Inc.; Thomas Kevin Swift, American Chemistry Council; Lea Tyler, Oxford Economics USA, Inc.; Jay N. Woodworth, Woodworth Holdings, Ltd.; Mark Zandi, Moody’s Economy.com; Ellen Beeson Zentner, Bank of Tokyo-Mitsubishi UFJ, Ltd.

Some people enjoy Playboy magazine. Others, like Kartik Athreya, prefer bathroom isolation with the above list of "economist Ph.D."

More from the forecast:

The downward revision to growth is accompanied by weaker conditions
in the labor market. Unemployment is now projected to be an annual
average of 9.6 percent in 2010, before falling to 9.2 percent in 2011,
8.2 percent in 2012, and 7.3 percent in 2013. These estimates are higher
than the projections in the last survey. On the jobs front, the
forecasters have revised downward the growth in jobs over the next four
quarters. The forecasters see nonfarm payroll employment growing at a
rate of 8,000 jobs per month this quarter and 114,100 jobs per month
next quarter. The forecasters’ projections for the annual average level
of nonfarm payroll employment suggest job losses at a monthly rate of
45,200 in 2010. Job gains in 2011 are seen averaging 143,800 per month,
as the table below shows. (These annual-average estimates are computed
as the year-to-year change in the annual-average level of nonfarm
payroll employment, converted to a monthly rate.)

 
Real GDP (%)
Unemployment
Rate (%)
Payrolls
(000s/month)
 
Previous
New
Previous
New
Previous
New
Quarterly data:
2010:Q3
3.3
2.3
9.6
9.6
120.5
8.0
Q4
2.8
2.8
9.5
9.6
153.3
114.1
2011:Q1
2.7
2.3
9.3
9.4
213.8
159.3
Q2
3.2
3.1
9.1
9.3
217.3
190.7
Q3
N.A.
3.0
N.A.
9.0
N.A.
189.9
Annual average data:
2010
3.3
2.9
9.6
9.6
-37.5
-45.2
2011
3.1
2.7
8.9
9.2
184.0
143.8
2012
3.2
3.6
8.0
8.2
N.A.
N.A.
2013
2.9
2.6
7.1
7.3
N.A.
N.A.

The charts below provide some insight into the degree of uncertainty
the forecasters have about their projections for the rate of growth in
the annual-average level of real GDP. Each chart presents the
forecasters’ previous and current estimates of the probability that
growth will fall into each of 11 ranges. The forecasters have revised
downward their estimate of the probability that growth will fall into
the range of 3.0 to 4.9 percent in 2010, 2011, 2012, and 2013.

The forecasters’ density projections, as shown in the charts below,
shed light on the odds of a recovery in the labor market over the next
four years. Each chart presents the forecasters’ previous and current
estimates of the probability that unemployment will fall into each of 10
ranges. The forecasters have raised the estimate of the probability
that the annual average unemployment rate will be in the range of 9.5 to
10.9 percent in 2010 and 2011 compared with their previous estimate.

Forecasters Reduce Projections for Inflation, but See Little Risk of Deflation

The current outlook for the headline and core measures of CPI and
PCE inflation during the next two years is lower than it was in the last
survey. Over the next 10 years, 2010 to 2019, the forecasters expect
headline CPI inflation to average 2.3 percent at an annual rate, down
from 2.4 percent in the last survey. The 10-year outlook for PCE
inflation of 2.11 percent is slightly lower than that of the last
survey.

Short-Run and Long-Run Projections for Inflation (Annualized Percentage Points)
 
Headline CPI
Core CPI
Headline PCE
Core PCE
Previous
Current
Previous
Current
Previous
Current
Previous
Current
Quarterly
2010:Q3
1.8
1.4
1.4
1.4
1.7
1.3
1.2
1.1
Q4
1.8
1.6
1.5
1.2
1.6
1.5
1.3
1.1
2011:Q1
1.9
1.8
1.5
1.2
1.8
1.7
1.4
1.4
Q2
2.0
1.6
1.6
1.4
1.7
1.5
1.5
1.4
Q3
N.A.
1.9
N.A.
1.6
N.A.
1.7
N.A.
1.5
Q4/Q4 Annual Averages
2010
1.6
0.9
1.0
0.9
1.4
1.2
1.2
1.1
2011
2.0
1.8
1.6
1.5
1.8
1.7
1.6
1.5
2012
2.4
2.1
2.0
1.9
2.0
1.8
1.8
1.7
Long-Term Annual Averages
2010-2014
2.19
2.00
N.A.
N.A.
1.80
1.82
N.A.
N.A.
2010-2019
2.40
2.30
N.A.
N.A.
2.15
2.11
N.A.
N.A.

The figures below show the probabilities that the forecasters are
assigning to the possibility that fourth-quarter over fourth-quarter
core PCE inflation in 2010 and 2011 will fall into each of 10 ranges.
For 2010 and 2011, the forecasters assign a higher chance than
previously that core PCE inflation will fall below 1.5 percent. Notably,
the probability that inflation will be less than zero is small and
nearly unchanged from the last survey.

Increased Chance of a Negative Quarter

A slightly higher chance of a downturn accompanies the forecast. The
forecasters have revised upward the chance of a contraction in real GDP
in any of the next four quarters. For the current quarter, they predict
a 14 percent chance of negative growth, up from 9.8 percent in the
survey of three months ago. As the table below shows, the panelists have
also made upward revisions to their forecasts for the following three
quarters.

Risk of a Negative Quarter (%)
 
Previous
New
Quarterly data:
2010:Q3
9.8
14.0
Q4
12.3
16.8
2011:Q1
14.1
16.5
Q2
14.8
15.0
Q3
N.A.
14.9

Equilibrium Unemployment Pegged at 5.78 Percent

In third-quarter surveys, we ask the forecasters to provide their
estimates of the natural rate of unemployment — the rate of unemployment
that occurs when the economy reaches equilibrium. The forecasters peg
this rate at 5.78 percent, the highest rate over the last 15 years. The
table below shows, for each third-quarter survey since 1996, the
percentage of respondents who use the natural rate in their forecasts,
and for those who use it, the median estimate and the lowest and highest
estimates. Sixty-four percent of the 25 forecasters who answered the
question report that they use the natural rate in their forecasts. The
lowest estimate is 4.50 percent and the highest estimate is 6.80
percent.

Median Estimates of the Natural Rate of Unemployment
Survey Date
Percentage Who Use The Natural Rate
Median Estimate (%)
Low (%)
High (%)
1996:Q3
62
5.65
5.00
6.00
1997:Q3
59
5.25
4.50
5.88
1998:Q3
47
5.30
4.50
5.80
1999:Q3
43
5.00
4.13
5.60
2000:Q3
48
4.50
4.00
5.00
2001:Q3
34
4.88
3.50
5.50
2002:Q3
50
5.10
3.80
5.50
2003:Q3
41
5.00
4.31
5.40
2004:Q3
46
5.00
4.00
5.50
2005:Q3
51
5.00
4.25
5.50
2006:Q3
53
4.95
4.00
5.50
2007:Q3
52
4.65
4.20
5.50
2008:Q3
48
5.00
4.00
5.50
2009:Q3
61
5.00
4.00
6.00
2010:Q3
64
5.78
4.50
6.80

 

 

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Fri, 08/13/2010 - 10:28 | 519774 firstdivision
firstdivision's picture

This is about as worthless as the UMic survey.  Economic PhD's couldn't forcast their own checkbook let alone the economy. Additionally, they are a little late to the reality party.

Fri, 08/13/2010 - 11:46 | 519979 mephisto
mephisto's picture

Taking a whole 1% off your Q3 GDP estimate while leaving Q4 untouched doesnt strike me as a move made by those at the reality party....

Fri, 08/13/2010 - 13:05 | 520182 BlackBeard
BlackBeard's picture

Silly Rabbits are using a normal distribution.

Fri, 08/13/2010 - 10:30 | 519780 Jason T
Jason T's picture

LaRouche says turning point has been reached and we're now at war with the british empire.  http://www.larouchepac.com/node/15480

My thoughts are that this debt based money system is bust.  

 

Fri, 08/13/2010 - 10:31 | 519784 KevinH
KevinH's picture

OT but important: what's up with the EUR/USD pair? Just dropped 50+ pips in 3 min.

Fri, 08/13/2010 - 10:44 | 519817 firstdivision
firstdivision's picture

Euro debt is back in the MSM

Fri, 08/13/2010 - 10:31 | 519786 NOTW777
NOTW777's picture

"previous estimate of 3.3 percent"    LOL

Fri, 08/13/2010 - 10:32 | 519788 old_turk
old_turk's picture

quod erat demonstrandum

:-p

Fri, 08/13/2010 - 10:34 | 519789 Spitzer
Spitzer's picture

They are only considering demand pull inflation. I am going to laugh my ass off when currency inflation hits (dollar/treasury selloff) and a new "Peter Schiff was right" video goes viral.

Fri, 08/13/2010 - 10:35 | 519790 Dismal Scientist
Dismal Scientist's picture

'An economist is a man who knows the price of everything and the value of nothing'

Fri, 08/13/2010 - 15:37 | 520630 Zero Debt
Zero Debt's picture

the forecasters will pull us out of this recession, once and for all

Fri, 08/13/2010 - 10:35 | 519796 JohnnyR2121
JohnnyR2121's picture

 

Discover (R) Small Business Watch (SM)

75% of Owners Think Another Recession Likely Before Full Recovery

 

58 percent of small business owners rated the economy as poor, up from 51 percent in June, while 7 percent rated the economy as excellent or good, down from 12 percent in June.

http://www.rasmussenreports.com/public_content/business/indexes/discover_small_business_watch/discover_r_small_business_watch_sm

Fri, 08/13/2010 - 11:07 | 519872 HelluvaEngineer
HelluvaEngineer's picture

These small business dudes need to chill and take out some loans. 

Fri, 08/13/2010 - 10:36 | 519801 hellboy
hellboy's picture

Can anyone point me in a direction to go if I want to find out how the Spanish banks deal with failed mortgages and how they calculate / mask their NPL numbers?

Ive been trying to find out if rumours such as taking failed mortgages and selling the house to your own bank employees for a profit..

Anyone have something about that?

Thanks!

Fri, 08/13/2010 - 10:37 | 519802 Cookie
Cookie's picture

Some people enjoy Playboy magazine. Others, like Kartik Athreya, prefer bathroom isolation with the above list of "economist Ph.D."

laughing loudly in Thailand :-)

 

Fri, 08/13/2010 - 10:36 | 519805 Cognitive Dissonance
Cognitive Dissonance's picture

Actually based upon the people connected to this survey, the results are even more negative than they appear on the surface. If we look at the results from the point of view of "who benefits" meaning who is so tightly integrated into the consensus reality that any major deviation could threaten life, limb and most importantly pocketbook, then these results are as about as negative as you can get at this point in the collapse.

Time to restock the underground fallout shelter with more canned spam, RC cola (diet of course), playboy mags and bottled water. :>)

Fri, 08/13/2010 - 10:45 | 519827 SwapThis
SwapThis's picture

I'm with  you on that CD, this bunch would call fallout free fertilizer....Mr Sunshine himself the perenial CNBC smokeblower Barbera leads the pack.

Fri, 08/13/2010 - 10:38 | 519806 doomandbloom
doomandbloom's picture

do i hear QE.3?

Fri, 08/13/2010 - 10:46 | 519828 firstdivision
firstdivision's picture

No, Ben is just testing the motor on the ol'whirlybird to prep for the $ signal in the sky.

Fri, 08/13/2010 - 11:06 | 519869 Cognitive Dissonance
Cognitive Dissonance's picture

Thanks to WB7 for the picture, we can see that Ben's helicopter has also been downsized.

Fri, 08/13/2010 - 11:50 | 519989 redarrow
redarrow's picture

The recession has got to him too. No more Ospreys for the man...but a rub a dub...twin cylinder tin can contraption. 

Fri, 08/13/2010 - 12:09 | 520036 strannick
strannick's picture

 

 

i would rather give a teenager tequila and military hardware, than a helicopter and bags of money to a 'PHD Economist from a Respected Institution'

Fri, 08/13/2010 - 12:10 | 520045 LeBalance
LeBalance's picture

nice placement of the strap-on there, CD.

Fri, 08/13/2010 - 17:34 | 520883 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Yes!

Fri, 08/13/2010 - 10:47 | 519831 mudduck
mudduck's picture

Fresh candidates for 'upper class twit of the year'? http://www.youtube.com/watch?v=TSqkdcT25ss

Fri, 08/13/2010 - 11:19 | 519900 CulturalEngineer
CulturalEngineer's picture

A general thought on economics as a science sparked by this piece on the Naked Capitalism blog (and seems applicable to the list of whizbang economists referenced here).

What Kind of Science Should Economics Be When It Grows Up?

http://www.nakedcapitalism.com/2010/08/what-kind-of-science-should-econo...

My thoughts on this:

An economist's assertion that he's a 'scientist' is akin to the similar claims once made by alchemists and astrologers...

They use lots of charts and formulas and made great successes out of themselves by understanding that their most important task was pleasing their patrons.

This doesn't mean that there aren't things in economics to be studied... nor that there aren't fundamentals upon which to base opinions and proposals... [like the ignored effects of altruism's boundaries in scaled human decision networks and the misplaced faith that exchange tokens (currencies and their proxies) can sufficiently represent social energy*]

*Social energy is the net sum of individual and collective decisions within a social body. A decision is an idea + an action.

Credit Creation and the Building of Sustainable Economic Ecologies

http://culturalengineer.blogspot.com/2010/02/credit-creation-and-buildin...

Decision Technologies: Currencies and the Social Contract

http://culturalengineer.blogspot.com/2010/07/decision-technologies-curre...

Ayn Rand & Alan Greenspan: The Altruism Fly in the Objectivist Ointment

http://culturalengineer.blogspot.com/2009/10/ayn-rand-alan-greenspan-alt...

Building a sustainable global social metabolism ... for a species now with a biomass hundreds of times larger than any previous land animal...

Requires DIFFERENT models and assumptions than those which demand continuously increasing consumption and intense resource and energy utilization.

Moreover the global specialization through 'free trade' model inhibits the sort of resiliency offered by multiple 'metablolisms' each with autonomous survivability.

Hence, in evolutionary terms... the model for the global organism should more closely resemble the early move from unicellular life to multi-cellular organisms.

There is an intermediate stage of 'partially' inter-dependent cellular collections similar to a sponge. (where each cell can, if necessary function independently).

This suggest the need for additional mechanisms for 'currency creation' and banking in general which is the underlying 'scheme' behind the Individually-controlled/Commons-dedicated Account concept, btw.

I could be wrong. I'm no scientist. But some fresh thinking, one would hope, could have some value. It's time to try some things...

Complaining is cheap and requires little sacrifice. Building solutions requires much more. I speak from my own experience.

What is perhaps most frightening is how ideologies in both politics and economics (which are essentially claims to certitude) are giving rational analysis a bad name.

What's left is then superstition and appeals to mysticism. This often leads to demagoguery.

Rational skepticism seeks solutions with an understanding that none is certain... and none may even be possible... but we keep trying nonetheless.

 

Fri, 08/13/2010 - 11:37 | 519953 win
win's picture

I reviewed the list of PhDs and noted a glaring omission, my favorite of course is:

Madam Za-ha-rina palm reader, psychic guide, and lap dance. Every prediction guaranteed or your next lap dance is free. At the very least, you can be assured that every customer is a satisfied customer.

Like palm reading, psychic channeling, and lap dancing, economics is a study of human behavior designed to make you feel good about doing something really stupid.

Fri, 08/13/2010 - 12:18 | 520063 LeBalance
LeBalance's picture

Who the !!!! let these geese stop drinking the fluoride, eating Prozac, and watching Mandy after 4,000 mg of Viagra?  Whoever in the Planetary Admin let this slip is in for it!

Unless....

Its the witching hour.

Could the unicorn begin its transmutation into one of the 4 Horsemen, the second one actually, that triggers WWIII.

Groovy.

Fri, 08/13/2010 - 12:27 | 520094 Quinvarius
Quinvarius's picture

I like how no matter what, the common theme is there is no inflation.  LOL.  They really really want us to believe that.

Fri, 08/13/2010 - 12:27 | 520095 Mad Mad Woman
Mad Mad Woman's picture

I'd like to know how these "forecasters" figure a real GDP growing at an annual rate of 2.3% for this quarter.  No way!  I know, they'll revise it downward at some point.

Fri, 08/13/2010 - 12:49 | 520151 traderjoe
traderjoe's picture

I've never understood a slow growth 'recovery'. The fractional reserve system requires significant growth in order to roll and replace debts. If this growth is not met, deflationary defaults ensue. 

It's binary - you go up enough (more than 2%) or you fall back. Nothing to suggest the former. Defaults here we come!

Fri, 08/13/2010 - 12:58 | 520165 Lionhead
Lionhead's picture

Thank you for publishing the names of these forecasters shining a light on the collusion between the public & private sectors. More needs to be done to expose who works, contracts for, or consults with the FED.

Fri, 08/13/2010 - 14:45 | 520475 lolmaster
lolmaster's picture

I don't think anyone can be considered a "professional" forecaster if there's nothing riding on their forecast. At best they (economists) are childish amateurs

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