This article was published by The McAlvany Intelligence Advisor on Wednesday, June 6, 2018:
Predictions about the future are fraught with danger. Add in predictions about when they will happen and an economic forecaster moves from estimates and guesses to hope and wistfulness.
Take, for example, the latest from an outfit called the National Association for Business Economics, or NABE. It claims to be the largest international association of applied economists, strategists, academics, and policy-makers, and boasts a membership of 3,000 of these seers and forecasters. Their quarterly report is available only to members, which is unfortunate, as one would like to know just how they came up with their latest prediction:
The June 2018 NABE Outlook presents the consensus macroeconomic forecast of a panel of 45 professional forecasters….
The panelists’ views about the onset of the next recession … [show] 82 percent believing it will start after 2019….
Half the panel expects the next recession will occur sometime between the fourth quarter of 2019 and [the first quarter] of 2020.
Not to pick nits, but that is a window of just one instant: the fourth quarter of 2019 ends at midnight on December 31, while the first day of the first quarter begins the instant after, on January 1, 2020.
This writer is not a member of NABE, and so is unable to access the source documents underlying such a forecast. But he is able to make one of his own: the NABE forecast is reliably wrong.
The U.S. economy knows nothing of any of this, as it is happily and busily creating jobs, products, and services and a better standard of living for customers here and around the globe. To wit:
Last month the Department of Labor reported that there were 6.55 million job openings in March, about equal to those unemployed but looking for work. On Tuesday, the DOL revised its numbers for March upwards to 6.63 million while reporting that in April job openings jumped to 6.7 million, a new record. As Steve Goldstein wrote for MarketWatch.com:
As the recession ended, there were about six unemployed people for every job opening. Now, there’s one unemployed person for every opening, a sign of how the dynamics in the job market have changed.
If anything, companies complain about the available pool of talent.
This comes on top of another positive on the economy: the Institute of Supply Management (ISM)’s measure of performance in the service sector of the economy – its largest part – came in at 58.6 for April (anything above 50 shows a growing economy), not only above forecasters’ prediction of 57.6, but up from 56.8 in April. This is the 100th straight month of economic expansion according to the ISM. And further embarrassment for economic forecasters who have consistently underestimated the economy’s performance.
The New York Times’ reporter Nelson Schwartz admitted that “The American economy roared into overdrive last month … underscor[ing] other recent signs of strength, like robust personal income and spending data reported earlier this week,” while Paul Ashworth, chief economist with Capital Economics noted that “the economy and the labor markets appear to be firing on all cylinders, with all sectors showing strength.”
Companies like Union Pacific are now offering “signing bonuses” to new hires coming out of high school, with the company not “even waiting for students to graduate to start the recruiting process.”
Forecasting is indeed a dangerous business, as Nils Bohr, a Nobel laureate in physics, noted: “Prediction is very difficult, especially if it’s about the future.” A better one, as a warning to NABE, might be this one from Evan Esar: “An economist is an expert who will know tomorrow why things he predicted yesterday didn’t happen today.”
MarketWatch.com: Job openings reach new record in April