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Thursday, March 28, 2024

Déjà Vu Weather? No, It’s a Recession!

Courtesy of Mish.

New Seasonal Pattern?

Yesterday Fed Governor Stanley Fischer proclaimed U.S. Economy Should Rebound After ‘Poor’ First Quarter.

“There’s definitely a rebound on the way already, and we’ll see at what speed it proceeds,” Mr. Fischer said during an interview on CNBC. “The first quarter was poor. That seems to be a new seasonal pattern. It’s been that way for about four of the last five years.

Richmond Fed President Jeffrey Lacker said Wednesday that he thinks a “strong case” can be made to raise rates at the Fed’s June policy meeting, and suggested the economy’s recent performance may have been weighed down by temporary factors.

U.S. wage growth has been stagnant for years, but many economists expect pay raises will accelerate as the labor market continues to tighten. “There are more signs every day, and lots of papers come through my computer explaining that this is the turning point, right now,” Mr. Fischer said. “But they’ve been coming for a while.”

Déjà Vu All Over Again

The Atlanta Fed Macro Blog investigates Fisher’s claim in Déjà Vu All Over Again.

Output in the first quarter has grown at a paltry 0.6 percent during the past five years, compared to a 2.9 percent average during the remaining three quarters of the year.

What’s causing this pattern? Well, it could be we just get really unlucky at the same time every year. Or, it could be a more technical problem with seasonal adjustment after the Great Recession (this paper by Jonathan Wright covers the topic using payroll data). It also seems likely that we can just blame the weather (see this Wall Street Journal blog post).

Whatever the reason for the first-quarter weakness, it appears to be happening again. Our current quarterly tracking estimate—GDPNow—has first-quarter growth hovering just above zero. As for the rest of the year, we’ll have to wait and see. We of course hope it follows the postrecession pattern.

Pattern Real or Imaginary?

Is there really a pattern?

I see two weak Q1s, one weak Q3, and one weak Q4.

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