I have here a transcript from a week or so ago of Kevin Hassett on Fox Business telling transparent lies. Seriously: why does he bother? What does he gain? Is it really the case that AEI will have him back after things like this? WILL banks like JPM Chase will pay him to speak to conferences?
If so, they have really really really really bad judgment:
7:38:49 BARTIROMO: The Atlanta Federal Reserve on Friday issued its GDP forecast for the first quarter, it’s three-tenths of a percent. What was your reaction to this? I know that this changes a lot, by the way...
7:38:59 HASSETT: Sure it does, yeah...
7:39:00 BARTIROMO: You’ll probably revise it umpteen times, but 0.3%, obviously not great for the first quarter...
7:39:05 HASSETT: Right, well there are two things going on. The first is that we started the quarter out with a 300,000 jobs number, north of 300,000. And most of the time when you do that, you end up with a 3% quarter. And so we’re gonna get jobs again this week, and if we get another really big number, and I think we’ll have a lot of confidence that something as low as three-tenths isn’t gonna happen. But there is this weird pattern in the data all the way back to 2010, that the first quarter tends to be about 1% below the average for the year. So if we think as we do at the White House that we’re gonna have about a 3% year, then right now, if you wanted me to put a number on the table, I’d say it’s probably gonna be about a 2% first quarter.
7:39:38 BARTIROMO: Okay, so is that largely because of the shutdown, or what happened in the first quarter...
7:39:41 HASSETT: No, it’s because of the seasonality thing, they don’t seasonally adjust the data correctly in Q1, it’s a weird technical thing. And you know, we could go to the blackboard, I know you’d love it, but your viewers would probably never get me invited back again...
These are lies.
The BEA's seasonal-adjustment process of trying to produce, in the graph at the top, a smooth seasonally-adjusted growth blue line from the jagged raw seasonally-unadjusted red line. There my have been a tendency for the process to generate a first-quarter estimate that undershot what was going to happen the rest of the year. But that was corrected. Only one of the past four years has a substantial undershoot.
And with respect to: "We started the quarter out with a 300,000 jobs number, north of 300,000. And most of the time when you do that, you end up with a 3% quarter. And so we’re gonna get jobs again this week, and if we get another really big number, and I think we’ll have a lot of confidence that something as low as three-tenths isn’t gonna happen..." That is now completely inoperative, no? We were not going to get another really big number—odds are that a really big number is followed by a small one—and we have not: we got +20,000.
We are thus highly, highly unlikely to get a 3% number. I don't think we will see a number as low as 0.3%—I am at 0.7% right now for what will be announced, and 1.0% after all the revisions are done. But we might. But 0.3% is what the numbers that have come in so far that feed into the first quarter growth number say, and about 2/3 of the numbers that feed the estimate have come in.
Moreover, the monthly employment growth numbers have very little to do with the quarterly economic growth numbers. The difference between them—measured productivity growth—fluctuates a lot at monthly and quarterly time scales. Thus you do not want to be in the business of guessing what a GDP growth report will be based on monthly job market reports.
And you really really really do not want to be making any inferences at all from the seasonally-adjusted January employment growth number. why not? Because the seasonally-unadjusted raw numbers are so large and negative. Thus the smoothed seasonally-adjusted January jobs number is a statistical guess about how many of those laid off after Christmas are just businesses stepping down from the Christmas rush and how many represent a trend that will persist throughout the year. The resulting seasonally-adjusted January jobs estimate is a small difference between two much larger numbers, and hence has a lot of error noise in it. Look at the two series in the graph below:
So: More lies. Kevin does not think that any jobs number tells us much about the next GDP report, and he knows as well as I do that a 300,000 January job number tells him next to nothing about the Q1 GDP report.
So why does he do this? Seriously, what's in it for him?
I find myself thinking of those economists who signed the letter in support of Kevin Hassett as CEA Chair: Alan J. Auerbach, Martin N. Baily, Dean Baker, Robert J. Barro, Ben S. Bernanke, Jared Bernstein, Alan S. Blinder, Michael J. Boskin, Arthur C. Brooks, John H. Cochrane, Karen Dynan, Janice Eberly, Douglas W. Elmendorf, Martin S. Feldstein, Jason Furman, William G. Gale, Ted Gayer, Austan D. Goolsbee, Alan Greenspan, Robert E. Hall, Douglas J. Holtz-Eakin, R. Glenn Hubbard, Randall S. Kroszner, Alan B. Krueger, Edward P. Lazear, Lawrence Lindsey, N. Gregory Mankiw, Donald B. Marron, Peter R. Orszag, Adam S. Posen, James Michael Poterba, Christina D. Romer, Harvey S. Rosen, Cecilia Elena Rouse, Jay C. Shambaugh, Robert J. Shapiro, Betsey Stevenson, James H. Stock, Michael R. Strain, Phillip Swagel, John B. Taylor, Laura D. Tyson, Justin Wolfers, and Mark M. Zandi. Really: what were they thinking?
#orangehairedbaboons #economicsgonewrong #highlighted