Why are the Fed’s beloved models failing in forecast?

High summer, now. A few schools re-opening, but many important people still on vacation, including all of Continental Europe by long tradition. But stuff is still happening, and a few really big things that should be happening are not, with pressure building behind their dams. Happening: new data. Optimism soared last week on good news for jobs in July. Ground that bird. Worker productivity has fallen in three straight quarters, and July retail sales stalled flat. Small business statistically unchanged in the last year, off the recovery peak in 2014. We can put lipstick on productivity because the measurement is unclear today. Productivity used to reflect capital investment, and we all know that non-inflationary GDP growth is the sum of population growth plus productivity. But today, in a post-industrial information economy heavily linked to the outside world, who knows? Retail sales on the other hand -- where the U.S. consumer has been the key economic prop -- falterin...