This morning (at NewsBusters; at BizzyBlog), I noted that Friday afternoon's coverage of the government's jobs report at the Associated Press by economics writers Christopher Rugaber and Josh Boak carried predictions of "nearly 3 percent" economic growth this year. Those predictions ignore how difficult achieving that will be after the first quarter's miserable 0.1 percent annualized result and "most economists'" estimates that the second quarter will come in at 3.5 percent. Those two results require average annualized growth of 3.9 percent during the third and fourth quarters — something the economy hasn't seen in ten years. Additionally, it appears that if the Federal Reserve under Janet Yellen sees that kind of growth, it will put on the brakes by raising interest rates in the name of heading off inflation.
Since they were entertaining predictions about future developments, it's more than a little odd that the AP pair chose to ignore many analysts' predictions that the first quarter's GDP result will move into contraction when it gets revised in future months — especially since those downward revisions, supposedly reflecting deferred growth, partially justify their 3.5 percent second-quarter prediction. It sure looks like Rugaber and Boak were selective in deciding what they would report.
When I wrote this morning's post, I linked in passing to a Washington Post blog report published Thursday afternoon — a full day before the AP report — which predicted a first-quarter revision into contraction. A full read of that item indicates that two firms, Macroeconomic Advisers and Barclays, are now predicting a move into negative territory (bolds are mine throughout this post):
Why the first-quarter GDP may get even uglier
Yesterday we learned that the US. economy came to a standstill during the first quarter. Now some analysts are saying it actually shrank.
... Today the Census Bureau released new data on construction spending that were weaker than not only the consensus forecast but also the government’s estimates in its calculations of the nation’s gross domestic product. Ben Herzon of Macroeconomic Advisers said core construction -- which doesn’t include residential improvements and federal spending -- was soft in March, while the numbers for the first two months of the year were revised lower.
According to Macroeconomic Advisers’ analysis, that means instead of the 0.2 percent boost in private nonresidential construction spending assumed in the GDP calculation, there was likely a 5.7 percent decline. Ouch.
In addition, new data show retail sales were also slightly softer than expected, translating into a 2.9 percent increase in consumer spending instead of a 3 percent rise, Herzon said.
Do the math, and you’ve got an economy that contracted by 0.1 percent in the first quarter -- and that might be the optimistic case. Barclays economist Cooper Howes said his calculations show a 0.2 percent decline. In either case, it would represent the worst performance for the recovery in three years.
There are other downward revisionists besides the two identified, according to a Thursday item (again a day before AP's report) at ForexLive:
Soft construction spending data pushes US GDP estimates into negative territory
Today’s soft construction spending caused another rethink. Spending rose just 0.2% in March and February spending was revised to -0.2% from +0.1%.
Now, Deutsche Bank estimates that Q1 GDP contracted 0.4%, Barclays lowered its estimate to -0.2% and Goldman Sachs cut its tracking estimate to -0.1%.
Much of the weakness will be reversed in the second quarter and expect to see the Q2 consensus rise from the current 3.0% consensus.
That's four firms which have gone gloomy — and it's that gloominess which somehow seems to make them optimistic about the economy achieving the 3.5 percent result in the second quarter which the AP pair carried as their prediction.
Based on that background, it appears that Rugaber and Boak decided to report the 3.5 percent second-quarter prediction without reporting the downward revisions to the first quarter which the economists predict will help cause it.
There are a couple of other adjectives I could use to describe what's in the AP report. But at a minimum, Chris and Josh, it's pretty obvious that your reporting on GDP was selective, and made things appear better than the crystal-ball community believes they are.
The AP could solve this problem by simply reporting facts and leaving the analysis to others, but, alas, they see analysis, no matter how pathetic, as part of their mission. The news-consuming public is not better off for it.
Cross-posted at BizzyBlog.com.
