CBO projection and SPF mean forecast diverge, by nearly a percentage point in 2024.
Figure 1: Ten year Treasury yield (black), projected by CBO (tan), SPF mean (blue), TIPS ten year (red), all in %. NBER peak-to-trough recession dates shaded gray. Source: Treasury via FRED, CBO, Philadelphia Fed, NBER.
CBO’s projection is based on current law, while the various forecasters in the SPF are not similarly constrained. That, I think does not explain the difference.
The implications for interest payments (hence total vs. primary deficit) differ as a consequence.
Figure 2: Federal interest payments in bn.$, SAAR (blue bar, left log scale), and ten year Treasury (black), and CBO projection (red), both in % (right scale). 2024Q1 is for January-February. Source: CBO, Treasury via FRED.
The CBO expects the yield curve to rema ininverted, but by fewer basis points, in 2024, as the Fed lowers the funds rate slightly. That does not suggest recession.
GDP growth for 2024 is put at 1.5%. Full-year GDP growth below 1.6% is usually associated with recession. The unemployment rate is put at 4.2%, which the Sahm rule would say is recessionary. Job growth of 84,000 per month is roughly the long-term sustainable pace absent change in the participation rate – typical just before and after recessions.
The rate forecasts and economic forecasts are inconsistent. I would never have published something like that.
You feel the CBO is in error here?? Sorry, I really am obtuse sometimes but I have to have it made clear to me sometimes (no sarcasm)
Yes. The policy-rate forecast is inconsistent with recession. The rise in the ten-year rate is inconsistent with recession. All the real-economy forecasts ARE consistent with recession.
If the CBO folks aren’t sure whether they expect recession, that’s fine, but reflecting recession in some forecasts – all on the real-economy side – and no recession in others – all financial – is just bad.
It always fascinates me this like 1 in 40 Menzie posts that doesn’t “draw in” comments.
I was trying to remember what Menzie calls it when professional forecasters kind of “go away from, somewhat” models?? He calls it “judgement based”?? The word I like to use is subjective, or here with the Philadelphia forecasters “somewhat subjective”. I have made some semi-good forecasts here, yes??? (hardly using models at all, or tabulating them anyway). I cheat by using models of people I respect and then adjust them by my own subjective thoughts. But I think I got it more right than wrong most the time. (???, feel free to comment on my self-serving comment)
That is to say…. I think the best of forecasts do usually have a ratio of subjective judgement in them (maybe less than half subjective is good). For me the question is, “What is the right ratio of subjective in most economic instances??”
Ah pooh, damn it.
What am I here, chopped liver?? I’m IDF protecting Palestinian women and children in Gaza from Netanyahu staying in power on false pretense.?? What up wit dis?? Where did Uncle Moses lose his hardcopy physical bookmarker?? Tell me Netanyahu’s wife get two couches/sofas for every Palestinian woman or child killed, give me that much to excite the MAGAs please.
Ralph Nader has observed that the death toll being reported out of Gaza is not credible. Too few deaths not directly attributable to combat. He makes a WAG* that the number should be 200,000 instead if 30,000+.
I don’t have much use for the WAG, but his point is solid. Disease, hunger, exposure to the elements and accidents should all be killing people. Wartime routinely kills lots of people because of disruption to normal life. That’s not showing up in reported data.
*WAG is “wild-ass guess”.
Netanyahu is playing BOTH sides of the “Fiddler on the Roof” fiddle. “Boohoo boo hoo boo hoo cry” “We’re Jews” “but we’re too damned dumb to do an accurate death count in Gaza.” the last time you and me, Macroduck, saw a death count this crappy, the tabulator’s name was S. Kopits.