When Economists get it Right

[Kurt_and_Hunter]

January 16, 2010

...the economists at Goldman Sachs are now predicting 5.8 percent growth in the fourth quarter. But they also say that the headline number will be highly misleading: two-thirds of the growth will be an inventory bounce, with final demand growing only 2 percent. In short, it will be a blip.

http://krugman.blogs.nytimes.com/2010/01/16/blip/



January 29, 2010

As expected, a big GDP number signifying nothing much. It’s an inventory blip: topline growth at 5.7 percent, but only 2.2 of that is final demand.

And I find myself wondering why I even bother reading the actual numbers; the Goldman Sachs prediction was almost exactly right.

http://krugman.blogs.nytimes.com/2010/01/29/the-blip-cometh/

[Renew Deal]

1. Sounds like Obama needs more Goldman employees on his staff

:evilgrin:

[Kurt_and_Hunter]

3. You raise an interesting point

Goldman-Sachs has a long history of collecting brain power and paying handsomely for it. (Not everyone does. Merril Lynch was famous for hiring dumb-asses with firm handshakes.)
At any given point in time at least half the people who actually know what's going on with the economy are working for GS. A lot of wall street firms probably accept Goldman analysis over their own internal work.

So if you want someone with a clue you get Goldman people. Clinton and Obama both figured out that part.

Unfortunately, the Goldman people are, despite being smart as hell about the economy, creatures of wall street... of the assumptions and attitudes of wall street.

So you get people with a deep understanding of the situation but with a set of ingrained goals and priorities that might not be what's best for the nation.

[DrToast]

2. It's pretty easy to get it right when you listen to what others have been saying for months

Goldman Sachs was predicting 2% GDP in Q4 until a few months ago.

If you want to listen to an economist to "got it right" try Joseph LaVorgna at Deutsche Bank or Lakshman Achuthan at ECRI, both have been predicting for almost a year that the recovery was going to be stronger than consensus. This is back when Krugman was screaming about how we're headed for a double dip recession.

"Dude, where's my double dip!" --Paul Krugman

[DrToast]

4. Follow up. Here's where Goldman was on August 5th

Prior to August 5th, Goldman was predicting 1% GDP growth in the second half of 2010. Actual result: 4%

http://www.telegraph.co.uk/finance/financetopics/recession/5978910/US-jobs-data-improves-as-Goldman-ups-GDP-forecast.html

[mkultra]

5. the reversal of trend is more important than the size of the jump

most people expect a initial surge. low and behold, we see it. It just shows that the economy is trending up now instead of down.

[brentspeak]

6. Did you bother to read the links?

"It just shows that the economy is trending up now instead of down."

The point everyone is making is that the latest GDP numbers do not indicate anything conclusive about the economy. Holy sheesh.