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Challenges in Nowcasting GDP Growth
Real gross domestic product (GDP) declined at an annualized rate of 4.8 percent in the first quarter, according to the first estimate from the U.S. Bureau of Economic Analysis (BEA), 3.8 percentage points more than the decline anticipated by the Atlanta Fed's final GDPNow model projection. Why was the error, which was easily the model's largest on record for final GDPNow forecasts, so big? Chart 1 looks at GDPNow's forecast errors since the model went live in mid-2014 and breaks them down into forecast errors for the various subcomponents' contributions to GDP growth.
The Impact of the Additional Appropriations on Federal Spending in the Fourth District
Headlines regularly report large changes in federal spending. But despite recent additional appropriations, it appears that the federal funds flowing into the Fourth District in 2023 have returned to their prepandemic levels relative to the District’s gross domestic product.
Journal Article
Lingering Residual Seasonality in GDP Growth
Measuring economic growth is complicated by seasonality, the regular fluctuation in economic activity that depends on the season of the year. The Bureau of Economic Analysis uses statistical techniques to remove seasonality from its estimates of GDP, and, in 2015, it took steps to improve the seasonal adjustment of data back to 2012. I show that residual seasonality in GDP growth remains even after these adjustments, has been a longer-term phenomenon, and is particularly noticeable in the 1990s. The size of this residual seasonality is economically meaningful and has the ability to change the ...
Working Paper
Forecasting GDP Growth with NIPA Aggregates
Beyond GDP, which is measured using expenditure data, the U.S. national income and product accounts (NIPAs) provide an income-based measure of the economy (gross domestic income, or GDI), a measure that averages GDP and GDI, and various aggregates that include combinations of GDP components. This paper compiles real-time data on a variety of NIPA aggregates and uses these in simple time-series models to construct out-of-sample forecasts for GDP growth. Over short forecast horizons, NIPA aggregates?particularly consumption and GDP less inventories and trade?together with these simple ...
Journal Article
The Fog of Numbers
In times of economic turbulence, revisions to GDP data can be sizable, which makes conducting economic policy in real time during a crisis more difficult. A simple model based on Okun’s law can help refine the advance data release of real GDP growth to provide an improved reading of economic activity in real time. Applying this to data from the Great Recession explains some of the massive GDP revisions at that time. This could provide a guide for possible revisions to GDP releases during the current coronavirus crisis.
Journal Article
Does Working from Home Boost Productivity Growth?
An enduring consequence of the COVID-19 pandemic is a notable shift toward remote and hybrid work. This has raised questions regarding whether the shift had a significant effect on the growth rate of U.S. productivity. Analyzing the relationship between GDP per hour growth and the ability to telework across industries shows that industries that are more adaptable to remote work did not experience a bigger decline or boost in productivity growth since 2020 than less adaptable industries. Thus, teleworking most likely has neither substantially held back nor boosted productivity growth.
Journal Article
The Long-Run Fiscal Outlook in the United States
The federal debt as a share of U.S. GDP is nearing its historical high from World War II. This ratio fell sharply over the three decades after World War II due to a primary surplus, rapid economic growth, and low interest rates. Projections for the coming three decades point to a persistent primary deficit without major reforms to mandatory spending programs or higher taxes. Thus, the rates of interest and economic growth will be crucial for determining the long-run debt-to-GDP ratio’s evolution.
Working Paper
Measurement Error in Macroeconomic Data and Economics Research: Data Revisions, Gross Domestic Product, and Gross Domestic Income
We analyze the effect of measurement error in macroeconomic data on economics research using two features of the estimates of latent US output produced by the Bureau of Economic Analysis (BEA). First, we use the fact that the BEA publishes two theoretically identical estimates of latent US output that only differ due to measurement error: the more well-known gross domestic product (GDP), which the BEA constructs using expenditure data, and gross domestic income (GDI), which the BEA constructs using income data. Second, we use BEA revisions to previously published releases of GDP and GDI. ...
Working Paper
Eliciting GDP Forecasts from the FOMC’s Minutes Around the Financial Crisis
Stekler and Symington (2016) construct indexes that quantify the Federal Open Market Committee's views about the U.S. economy, as expressed in the minutes of the FOMC's meetings. These indexes provide insights on the FOMC's deliberations, especially at the onset of the Great Recession. The current paper complements Stekler and Symington's analysis by showing that their indexes reveal relatively minor bias in the FOMC's views when the indexes are reinterpreted as forecasts. Additionally, these indexes provide a proximate mechanism for inferring the Fed staff's Greenbook forecasts of the U.S. ...
Newsletter
The Effect of Weather on First-Quarter GDP
In a pattern similar to that of the previous year, the U.S. economy appeared to slow down this past winter. The Bureau of Economic Analysis currently estimates that gross domestic product (GDP) grew at 0.6% (at an annualized rate) in the first quarter of 2015. And as in the previous year, harsh winter weather has been cited by some observers as being responsible for the slowdown. However, there is substantial disagreement on the impact of weather on economic activity.