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Friday, December 31, 2010

2010 predictions scorecard

1. The BLS will report U-3 unemployment to be in excess of 11 percent. The actual number of unemployed workers will be much higher.
U-3 is at 9.8 percent.  There are some minor shenanigans going on at the BLS, of course, as the size of the labor force is shrinking even faster than the number of employed workers, thus keeping the unemployment rate artificially low, but I factored that into my prediction.  INCORRECT.
 
2. The BEA will report real GDP to be less than 12,973 in billions of chained 2005 dollars. A "double-dip recession" will be the official description, but rumors of a "second great depression" will be increasingly heard as the evidence mounts that a single large scale economic event is taking place.
A sluggish recovery is still the story.  There are negative rumors, but of a double-dip recession, not a large-scale depression.  The most recent GDP for Q3 was reported at 13,278.5 and it's highly unlikely that Q4 will be reported any lower.  INCORRECT.

3. The Federal budget deficit for 2010 will exceed the projected $1.17 trillion.
The 2010 deficit is presently being reported at $1.47 trillion.  CORRECT.

4. More than 200 banks will be seized by the FDIC. Their deposits will represent more than two percent of all U.S. bank deposits. 
The FDIC seized 157 banks with deposits representing 1.1 percent of all U.S. bank deposits.  INCORRECT.  

5. Commercial bank loans and leases (TOTLL) will fall below $6.3 trillion.
This one is hard to call since there were some SERIOUS statistical shenanigans, namely, an anomalous and unprecedented $452 billion increase in reported loans in one week at the end of March.  ( The average weekly change is + or - $12 billion.)  If that anomaly is removed from the equation, as I would argue it must be, TOTLL stands at $6.293 as of the December 22nd report.  If you're wondering why I'm inclined to give myself the benefit of the doubt here, keep in mind that TOTLL has historically increased an average of 8.4% per year and would normally have been expected to end 2010 around $7.3 trillion. So, predicting not only a decline, but a sizable one of $350 billion, was a very high risk prediction.  CORRECT.
6. All sectors credit market debt outstanding, which is published in the Fed's quarterly Z1 Flow of Funds Accounts, will fall below $52 trillion. This will mostly be the result of continued deleveraging by the financial sector, and to a lesser extent, the housing sector, which between them will decline by more than $1 trillion.
Z1 was retroactively reported at $51.9 trillion for Q1 and Q2 in the Q3 2010 report.  The financial sector credit dropped $1.2 trillion through Q3 and the housing sector declined $106 billion.  CORRECT.
7. The national median existing-home price will not rise 4% from $172,600 to $179,500 as predicted by NAR's lead economist Lawrence Yun, but will fall below 165k instead.
NAR reported the national median existing home price at $164,600 in February 2010.  In fairness to Mr. Yun, however, it spiked to $183,000 with the end of the homebuyer's tax credit in June before collapsing again.  The final year end report had it at $168,800. So we both got it right, but I was three times closer at the end of the year.  CORRECT.
8.  I also expect an increase in Sitemeter-recorded visits to the blog to increase from 1,942,640 in 2009, (161,887 per month) to 2,250,000, primarily as a result of an increased interest in economic matters.
Sitemeter reported 2,367,971 visitors in 2010, (197,331 per month), a 21.9 percent increase from 2009. CORRECT.

Not particularly impressive, I'm afraid, but still better than the mainstream economic prognosticators.  The Fed's strategy of extend-and-pretend is still in effect and holding.  I don't see it holding up through 2011 for several reasons, but I'll take a look at what the mainstream predictions are before making my own.  I think the key thing to learn from this is that government will go to great extremes in fighting economic contractions and one cannot necessarily extrapolate limits from previous efforts.  I also think it's important to note that although I was incorrect with regards to U-3, GDP, and FDIC seizures, I still had the general direction correct, just not the extent.  Bank seizures didn't decline as expected, they increased, just not as much as I'd anticipated.  Real GDP did grow in chained 2005 dollars, but that was the direct result of the almost unprecedented explosion of government deficit spending and loan incentives rather than private sector growth.  And unemployment didn't fall, it simply didn't rise as much as I'd thought it would.

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