TRUMP ECONOMY IS HUMMING: Despite the Covid-19 lockdown, the
American economy is beating all kinds of expectations.
83% of companies in the S&P 500 beat expectations for earnings in the second quarter of the year, the first time that’s happened in more than a decade.
That’s been a common refrain over the past several months, as the economic recovery from the COVID-19 shutdowns has repeatedly outperformed what the “experts” expected. Here’s a sampling of headlines:
- “US economy added 1.8m jobs in July, beating expectations”
- “Jobs Numbers in July Beat Expectations for Third Straight Month”
- “Corporate Earnings Beat Analysts’ Expectations”
- “US consumer sentiment hit a 6-month high in September, beating economist forecasts”
- “U.S. new home sales beat expectations in July”
In some cases, the difference between what economists were predicting at the start of the pandemic and what’s actually occurred is stark.
Take the forecasts for unemployment.
In March, economists at the Federal Reserve Bank of St. Louis projected the unemployment rate would top 32%.
That same month, Goldman Sachs said the unemployment rate will peak at around 15% later in the year.
A May survey of economists by FiveThirtyEight.com found that the median forecast for the May unemployment rate was 20%.
What actually happened?
The unemployment rate peaked in April at 14.7%, then
dropped to 13.3% in May.
The experts were just as wrong about the speed of the jobs recovery.
In FiveThirtyEight’s May survey, the median forecast was an unemployment rate of 12% in December.
In June, S&P Global said that it expected the unemployment rate would be 8.9% by the end of the year.
That same month, the Federal Reserve forecast an unemployment rate of 9.3% by 2020’s end.
In July, the Congressional Budget Office projected that unemployment would be above 10% in the final three months of the year.
What actually happened?
The unemployment rate fell to 10.2% in June, and then down to 8.4% in August, with four months left to go in the year.
We were also treated to a series of articles in July about how the recovery was supposedly “stalling out.”
CNN reported – in a story headlined “The economy is in deep trouble again” – that “a growing sense that the recovery is losing steam as coronavirus infections surge in California, Texas, Florida and other Sun Belt states.”
Around the same time, CBS News ran a story with the headline “U.S. economy stalls as the coronavirus continues to surge.” The story quoted Gregory Daco, chief U.S. economist at Oxford Economics, saying “The foundations to this recovery are cracking under the weight of a mismanaged health crisis.”
Reuters joined in with a story titled: “U.S. weekly jobless claims unexpectedly rise; labor market recovery stalling”
Bloomberg warned that “U.S. Economic Recovery Is Stalling and It May Get Even Worse.”
Yet shortly after all those dire predictions, the Atlanta Fed’s
GDPNow estimate for the third quarter
steadily rose from just over 10% to more than 30%.
In other words, as the actual economic data started coming in for Q3, they didn’t show an economy stalling, but one doing better than initially expected.
With less than 10 days to go, the current GDPNow estimate for Q3 is an eye-popping 32%.
Yet, we continue to see headlines warning about a stalling economy.
The unemployment figures for September will be out until the first week of October. The government’s official estimate of growth in the third quarter will be out Oct. 29.