The public thinks what economists do is forecast. It's not. I'll confess, I know nothing about forecasting.
Intrade tells us to expect unemployment over 9% by years end (earlier, if memory serves, they had it at 9.25%...)
Via Greg Mankiw, Ray Fair , an Macroeconomist at Yale, predicts unemployment will top out at 8.8%. The only problem is that he started with a baseline of 6.9% in quarter 4 of 2008 and has 7.8% at the end of quarter 1 in 2009. That's already a pretty big gap with reality, enough of a gap that I'm be tempted to throw the rest of his results in the trash. Assuming he's off on today's numbers by .5%, and that his errors don't increase, unemployment should top out at 9.3%. (Though given that his current error is so large, it doesn't inspire confidence.)
Meanwhile, the CBO predicts Dec. 2009 inflation at 9.0, and 8.5 as a low estimate with the Obama stimulus, and 7.7 as the "high estimate".
The trouble is, there's nothing stimulating the economy at the moment. The stock market is in free-fall. 600,000 jobs lost last month, and another million expected to be lost in the next few months means that consumer spending is continuing to fall. This, in turn, should mean more job losses. Best case scenario, the unemployment rate is at 8.1% six weeks from now (will probably be more like 8.3%). In the past few recessions, of course, the end of the recession comes well before employment starts to recover. So I don't get why anyone thinks we'll have such a strong recovery by the end of this year that the unemployment rate could fall. Again, best-case-scenario looks like we're in a position at the end of the year in which employment is month-on-month flat, but GDP has started to increase and confidence is restored. But that means the unemployment rate won't be any better than 8.1%, and that's if everything goes unbelievably well. 9% unemployment at year end seems to me to be overly optimistic, given the stimulus, and given that GDP starts to recover.
I'm curious, what do other people think?
Schedule for Week of January 26, 2020
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