CBO Projection Defers the Downturn

CBO’s Budget and Economic Outlook Update is just released:

Figure 1: GDP (bold black), CBO July projection (orange), CBO February projection (blue), WSJ July mean forecast (red), CBO July estimate of potential (gray), all in bn Ch2012$ SAAR. Source: BEA 2023q1 3rd release, CBO, WSJ July survey and authors calculations.

Update. 2:30 PM Pacific:

GDP advance release puts the forecast in perspective.

Figure 2: GDP (bold black), CBO July projection (orange), CBO February projection (blue), WSJ July mean forecast (red), CBO July estimate of potential (gray), all in bn Ch2012$ SAAR. Source: BEA 2023q2 advance release, CBO, WSJ July survey and authors calculations.

Jim will be providing his thoughts on the advance release later today.



43 thoughts on “CBO Projection Defers the Downturn

      1. baffling

        thanks. the difference is trivial. so anybody who argues the economy is doing poorly should be taking up the issue of a potential gpd that is too low, because we are basically at potential.

    1. pgl

      FRED tells us that real GDP/potential real GDP = 99.33%.

      A gap = 0.67% is not exactly 1982 but we still at not quite at full employment.

  1. Willie

    I sure don’t see evidence of a looming slowdown around here. Seattle is finally waking back up from the pandemic, construction is going full bore everywhere, and, with the exception of a persistent vagrant population, it seems far more energetic than it has since 2020. The persistent vagrant population has been with us for more than ten years, so I don’t see that as much of a marker anyway. The population exploded when the opiate wave hit and has abated a little, so far as I can see. High housing costs don’t help at all, and Seattle doesn’t have any slums any more, meaning the people who would have lived in a low rent, slum district, now are living in what amount to mobile slums that consist of tents and decrepit RVs.

    The only fly in the ointment here is inflation, and that’s not as noticeable as it was six months ago. Fuel prices are high here as they always have been relative to the rest of the country. Food prices are up, but not rising near like they were. Housing prices continue to climb, and that’s a problem. There’s not much anybody can do about it because construction and development are hard pressed to keep up with population growth. Developers don’t build anything affordable by anybody who can’t come up with a whole lot of money anyway, so they typically don’t do much to solve the housing problems or lower housing prices. If anything, development pressure just raises housing prices in most areas.

    It appears that we have sweated out the wacky left that we had in City Council recently. They have been the flip side of the insanity of the national right. The current mayor is addressing Seattle’s issues in a way that’s not as likely to drive out businesses while at the same time, people are returning to downtown. Those two factors will reinforce each other, based on my observations, meaning that life will return to places that were badly damaged by the pandemic.

    What this all means is that I see no recession coming, not here and not in my cloudy plastic crystal ball. I don’t see a downturn coming in the next few years. Take all that for what it’s worth.

    As always, I’m curious to know what observations others from other parts of the country have.

    1. pgl

      Well in Brooklyn – rents are sky high but yea, that’s New York. We are paying a lot less for eggs and chicken as we were a year ago but I guess the price of Pepsi is up but I don’t drink soda.

  2. pgl

    We may not be in a recession but your graph shows how we have fallen below full employment. I continue to say the FED needs to back off on his high interest rates.

  3. pgl


    Real gross domestic product (GDP) increased at an annual rate of 2.4 percent in the second quarter of 2023 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent.

    The increase in real GDP reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, private inventory investment, and federal government spending that were partly offset by decreases in exports and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased

  4. David O'Rear

    The US economy grew 2.6% (year-on-year) in the second quarter, the fastest pace since the start of 2022. The QQ annualized 2.4% pace was above Q-1’s 2% level.

    Inflation, as measured by the consumer price index, was 4.1% (+3.7% as per the PCE deflator) and unemployment 3.5%. That dropped the “misery index” (inflation plus unemployment) to 7.6%, the lowest since before the pandemic.

    While private consumption (+2.3%) – the overwhelmingly largest share of the economy (68.2%) – struggled to reach Q-1’s 2.4% pace, the decline in capital investment slowed, from -8.1% in January-March to -3.1% in April-June.

    A modest (+1.5%) rise in the export of goods and services, combined with a steeper decline in its import counterpart (-4.8%) held domestic demand flat after two quarters of decline.

    And, the Fed raised interest rates, to 5.5%, for the 11th time.

    1. pgl

      Nice summary except this does not sound right:

      ‘A modest (+1.5%) rise in the export of goods and services’

      See table per my link.

      1. David O'Rear

        As per your link (table 6), year-on-year, goods up 0.63%, services up 3.20%, combined up 1.49% in Q2.

    2. pgl

      Kevin Drum reported on this briefly. Most of his readers are smart so this comment was a surprise:

      ‘If you compare it against nominal GDP, you can see that growth is slowing gradually. Nonetheless, nominal GDP growth in Q2-2023 was still higher than more than half of Trump’s presidency.’

      Well – nominal GDP growth does include the rise in the price level, which means there has been a mind meld of Bruce Hall and JohnH infecting Kevin’s blog.

  5. Moses Herzog

    Paging “New Deal Democrat”. Paging “New Deal Democrat”. Medical colleague claims your diagnosis of “blood in patient’s stool” was actually just some cranberries.

  6. Moses Herzog

    It appears people don’t like being force fed by corporate America what their personal views are or “should be”. News at 11.

    FYI to corporate America. If you want to play “holier than thou” in a cynical manner to increase sales with younger consumers, that’s fine. Just be prepared for the possible consequences. People like beer because of…… uhm……. it’s beer. They don’t need any other dumb ass reasons.

    You could have saved yourselves (and the few who didn’t already know) from offering up the proof you don’t gave a damn about ANY minority group that doesn’t help you increase sales numbers of your “product X”. At this point you should be losing sales on both sides, because it’s obvious you care for neither side. Again, most, with a functioning brain, knew that anyway.

    1. baffling

      gonna disagree with you here. this was an example of cancel culture. conservatives and rednecks continue to attack minority groups because they are small enough to be unable to fight back. and they count on the fact that a majority of folks may disagree with their attacks, but will not fight back because it is not a priority issue. there is nothing civil about intentionally tanking the bud light business because you disagree with their support of the lgbt community. you may be within your legal rights, but morally it is abysmal behavior. I am with Charles Barkley and garth brooks on this one.

    1. Moses Herzog

      And we have some people who don’t think Professor Chinn and Professor Hamilton attract some highly astute and professionally well-regarded eyeballs to the blog. I wanna say this is the 4th or 5th well-known person (that I have seen, there are probably more) drop a comment in the comments section (aside from guest posters). Then there are the assumed silent readers of the blog, and that probably raises the count of highly acclaimed readers quite high. Nobody needs me to carry their water pail for them, I just felt it should be noted since Menzie takes a lot of cheap shots.

  7. Macroduck

    We’ve dodged the UPS strike (probably), but a government shutdown is possible in Q4. Between the two, the shutdown is probably the smaller threat. The people making the threat probaby want any chance of recession they can get.

  8. Macroduck

    As has been noted widely, Biden doesn’t get credit for good economic performance (brace yourselves for “explanations” of how the economy is actually bad). Politico reports that only 38% of the public approve of Biden’s handling of the economy:


    Slowing inflation and improving consumer confidence haven’t made much of a dent in Biden’s overall approval rating:


    The fact is, pretty much nobody in public life is all that popular. Unless that changes, unpopularity will be the context for elections. I’m curious to see what that does to turn-out. Seems like there have been examples of high turn-out in opposition to candidates and referenda, but not so much for individual candidates, since 2020.

    1. Moses Herzog

      So, do you think Australia women actually won this game but then the referees were annualizing the scores?? It’s those pesky non-Australian education systems. Of course the Australian education system is similar to UK’s and those bastards in “The Economist” also publish annualized data. Oh wait, Not Trampis doesn’t read The Economist magazine. Why did I think that meant anything, when Not Trampis doesn’t read The Economist??

      Much of the teaching at Australian universities is done by trainee academics and PhD students, with no formal teaching backgrounds and little training, says Bunney. There is no publicly available data on class sizes or staff-student ratio.
      He says course coordinators in his own department struggled to find staff willing to work the ad hoc casual hours required of tutors, and course materials were often cobbled together during semester. “You’re in fight-or-flight mode – not ‘Let’s do the best job we can’ but ‘How can we get through this next 12 weeks without everything falling off the rails?’”

      The Guardian article goes on:
      Over the past three decades, universities have increasingly embraced the ethos of corporate management, says Professor Emerita Raewyn Connell, a sociologist and former chair at the University of Sydney.

      It started with “casualisation and outsourcing”, she says. “[And] it opened these gaps we’re suffering from now … with a shift towards profit-making.”

      Connell says the corporatised approach has resulted in a growing distrust between university management and staff. “There’s a really remarkable gap between vice-chancellors and the rank-and-file bulk of the workforce.”

      The current university model, which relies on an insecure workforce with high workloads, urgently needs to change, she says.

      “Most academics love their jobs but they’re under an awful lot of pressure.

      “The public sector isn’t a quasi private business. We need to think boldly beyond the parameters of higher education funding we’ve had for the last three decades.”

      I wonder if America, unlike Australia, keeps a public record of classroom student-teacher ratios in higher education?? Oh wait…… they do:

      Welp, the good news is Australians don’t annualize economic data, so, I’m satisfied Australia’s higher education is kicking ass on Berkeley and Harvard. ‘Nuf said.

      1. baffling

        the growth of the adjunct model in American universities is appalling. it overloads those faculty. and the result is first and second year college students who are underserved in the academic setting. community colleges struggle with a similar issue. only their student population is weaker still, so the result is even poorer outcomes for the students. very unfortunate trend we are in at American universities.

        1. Moses Herzog

          I made a much better comment on Not Trampis’s “evil foreigners don’t do it like Aussies do” fetish in another thread, but apparently perpetual corncob up his ass out in San Diego thinks I’ve peed on his mattress (made off-color remarks) in his house (blog) too many times. Indeed, I wouldn’t even care, if I hadn’t seen worse by others in his threads.

    2. pgl

      Australia may be the host but their team is not one of the dominant ones. USA needs to at least tie Portugal to advance. I’m assuming the Dutch beats Vietnam. If team USA wants first place in their division, they need to beat Portugal.

    3. pgl

      Fox Sports reports that 6.4 million people watched the USA-Netherlands game. Not bad for a divisional match at the Women’s World Cup. Now if Team USA can get into the knock out rounds!

      1. Moses Herzog

        Depends on if they want to give Rapinoe minutes when she is now very slow out on the field (“pitch”, whatever). She’s a detriment to her team at this point. Everyone gets old. Deal with it (as in, quit hand-holding people past their prime).

        1. Baffling

          She is there to provide leadership, which she does. It will become more important in the knockout rounds. There will be injuries and they will need to overcome the adversity. They were actually pretty light on veterans this time. And with saurbrunn out, there was a hole to fill. This team is very skilled but quite green. Womens world cup is my fav in soccer!

          1. Moses Herzog

            WNBA has more pure athleticism, if we are sticking purely to the women’s version of sports. I might add, in the WNBA they don’t generally allow turnovers by bashing someone’s calf, knees, elbow, lower back, etc.

  9. pgl

    Senator Sanders had a great idea but got shot down:


    The Senate overwhelmingly voted down Sen. Bernie Sanders’s (I-VT) National Defense Authorization Act amendment to slash the nation’s military budget by 10% on Thursday.

    Members voted 88 to 11 against the motion, which would cut down the Pentagon’s annual budget “excluding accounts and funds relating to military personnel, the Defense Health Program, and assistance to Ukraine,” according to text of the amendment. The measure would also penalize the Pentagon if it were to fail another audit and highlight fraud by defense contractors. Sanders has long criticized federal defense spending levels as bloated and urged significant cuts.

    Sanders got the support of only 11 Senators? Pathetic. Even more pathetic – little Jonny boy could not be bothered to give an ounce of support to what only a handful of Senators bothered to vote for.

      1. baffling

        how is the senate affected by a loss of McConnell, who very well suffered a stroke on live tv?

        1. Macroduck

          Yeah, I thought TIA, right off the bat. If so, then he keeps going, but with aspirin on his pocket.

          I also thought “heat” but that’s probably just me projecting…

          1. Moses Herzog

            Try to keep it half-simple for us small state college guys who don’t read the paper as much as we should, ok??

            I agree this is what happened with McConnell. When I was a kid they called it a “mild stroke”.
            (And they still had glass bottle soda pop vending machines, and when you said “soda pop” young people didn’t assume you meant soda water. The soda pop bottle made a noticeable clang when it came out at the bottom)

            Now I’m going to quote Phil Mushnick:
            “Life used to be easier, less complicated. For nearly 60 years I showered using a bar of soap. Unless friends and family have talked behind my dirty back, soap worked. Keep it coming.

            Now? My wife has eliminated bars of soap. I’ve a choice among tubes and sprays of ‘body wash’ and ‘scrubbing foams.’ Shall I go with ‘Lilac Morning’ today or ‘Cherry Harvest Mist’??

            Yup, I have transformed from anti-social maladjusted teen to~~~disillusioned middle aged guy to~~~proverbial grumpy old man. The day I dreaded has now occurred. Oh wait…….. Everyone who reads this blog knew that already.

            For the record, I use the orange flavored generic brand baby aspirins. That last sentence was specifically for my Econbrowser fanclub.

    1. Anonymous

      maybe Jim Cramer (cnbc guy) was right, no one will buy up oil until down to $65 per barrel, wti…..

      then they might fill strat pet reserves.


  10. Moses Herzog

    ATTENTION, ATTENTION: Amy Crews Cutts quoted in today’s WSJ. Amy Crews Cutts quoted in today’s WSJ.


    That is all. Back to your stations.

  11. Moses Herzog

    I have other shocking (and possibly disturbing??) news for the blog. The family name of donald trump’s spokesman responding to the latest Justice Dept indictments against trump???

    Wait for it……. wait for it…… wait for it…….


    Beautiful Irish name.

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