The macroeconomic forecasting business has become quite unhinged in the current situation, with existing models seeming to have their wheels coming off as old relationships simply do not hold and reported data seems unreliable and going in all sorts of directions. We have already seen this happen regarding forecasts that were made for the May employment numbers, with most forecasters projecting employment declines that would have been more than 10%, some of them by a lot more than that, although none more than 20%. But in the end employment was estimated to have grown by over 2%, a situation of the forecasters simply being wildly wrong.
As it is, with the month of June now over and thus the second quarter over, it looks increasingly to me like most of the forecasters have not learned their lessons from that May employment fiasco. I suspect that in many organizations they find it hard to revise their models, especially on short notice, even when it is clear their models are not working. We see a lot of the forecasters making predictions of a large second quarter decline in GDP, but more numbers have come out for May, and most of them have been positive, some of them very positive, and if June continues to be positive, even if at a lesser rate than May given renewed shutdowns occurring due to the uptick in Covid-19 infections as June proceeded, this may further make some of these strongly negative forecasts even further off.
So what are some of these forecasts and what do the latest reported numbers look like? First, we must note the first quarter outcome. It seems that GDP declined by -4.8% or 5.0% for the first quarter at an annualized rate. All of the decline occurred in March, more than offsetting modest growth in both January and February.