Most of the economic news this morning is bad. Unemployment claims are up:
The Labor Department’s report Thursday on weekly unemployment claims showed first-time filings rose to 383,000 for the week ending Saturday. That was an increase of 10,000 from the previous week’s revised figure, a sizable jump after smaller increases in the previous two weeks.
The rise in jobless claims was consistent with a report from Challenger, Gray & Christmas, a private outplacement firm, that showed an acceleration of layoff announcements this month by employers. Challenger said Thursday that businesses in May announced plans to cut 61,886 workers from their payrolls, up 53% seasonally unadjusted from April and 67% higher than May 2011. The May layoffs were reported largely by the computer industry.
and GDP is down:
Adding to the dreary economic news, the government said in a separate report Thursday that U.S. gross domestic product grew at a slower pace in the first quarter than previously thought. Growth in GDP, the total value of goods and services produced in the nation, was revised down to an annualized rate of 1.9% from 2.2% initially estimated a month ago.
As I pointed out yesterday that means that in real terms GDP is actually flat or even declining. The Chicago PMI declined, too:
The pace of business activity in the U.S. Midwest slowed in May as new orders fell to their lowest since September 2009, a report showed on Thursday.
The Institute for Supply Management-Chicago business barometer declined to 52.7 from 56.2 in April, falling short of economists’ forecasts for a modest gain to 56.5.
A reading above 50 indicates expansion in the regional economy. It is one of the last regional factory activity surveys for the month ahead of the national manufacturing report due on Friday, which is expected to show growth in the sector slowed slightly in May.
The forward-looking new orders index fell to 52.9 from 57.4, while the gauge of employment slipped to 57.0 from 58.7.
I think these details mostly substantiate what many of us with ears to the ground already recognize: the economy is stalling. I think that all misses the real story. To me the real story is that all of these indicators did worse than economists expected them to.
Not long ago I stumbled across a study that found that over the last several years economists’ expectations had been wrong systematically on the upside, i.e. they had thought things would improve much more frequently than actually occurred. Being wrong is not unexpected. As Markus M. Ronner put it, prediction is difficult, especially about the future (the wisecrack has been attributed to Yogi Berra and Niels Bohr but the earliest instance of the remark found to date was by the Swiss theologian in 1918).
However, when error is systematically in the same direction there’s more going on. There’s either something wrong with the models that are being used or they’re engaging in wishful thinking. Or maybe they’re cheerleading. It worries me when economics is advocacy.