Economists have bought into the transitory soft patch thesis of the Fed, hook line and sinker. Please consider Economists’ Forecast: Here We Grow Again.
Forecasters in the latest Wall Street Journal survey estimated the U.S. economy contracted at a 0.3% pace in the first quarter because of hits from winter weather and the West Coast port slowdown. But the panel, on average, sees annualized economic growth of 2.8% in the second quarter, supported by stronger job gains and wage growth.
The survey of 62 economists, not all of whom answered every question, showed a widespread expectation that consumers would start spending again after several months of avoiding the mall. The May survey was conducted before the Commerce Department reported retail sales were flat in April, but some economists played down the number.
“The April spending numbers will look better once we get information on services,” said Stuart Hoffman of PNC Financial Services. “That’s where consumers are spending their money, and the April increase in restaurant sales points to greater demand for services overall.”
On average, nonfarm payrolls are expected to rise by 223,000 per month for the final three quarters of 2015, better than the 184,000 pace of the first quarter. The unemployment rate is forecast to fall to 5.1% by the end of this year from 5.4% in April.
Gregory Daco of Oxford Economics said the worst of the pain may have already occurred, especially since energy companies reacted quickly to cheap oil by cutting payrolls and capital-spending plans. “While trade and energy will still have an impact, the drag will be less in the second half,” he said.
“Solid job growth and low energy prices could stir spending,” said Michael Moran of Daiwa Capital Markets.
Pathetic Performance
Here is an amusing chart of the Fed’s own pathetic performance (from Honey I Shrunk the Kids).
The date of that post is November 14, 2014. Pay particular attention to that green 2015 line.
Here is the evolution of the Atlanta Fed “GDPNow” first quarter GDP Forecast as of April 2, 2015.
GDPNow Estimate for 1st Quarter – April 2, 2015
