Tag Archive for predictions

Long Slow Recovery vs. Double Dip Recession

Interesting NYT Economix piece from Casey Mulligan on if we’re seeing long slow recovery out of the 08-09 recession or the beginning of a double dip recession. One thing he does is predict that national employment and work hours will be “a couple of percentage points higher at the end of 2010 than they are now.”

I think he’s kind of crazy, but I wanted to put it on the record so that we can look back at it at the end of the year.

First of all, the guidelines: Mulligan says that national employment will be “a couple of percentage points” higher. I’m going to assume that this means employment-population ratio as defined by the BLS which, as of this writing, is 58.7%. It is up .5% from its nadir at 58.2% last December. Let’s say that “a couple percentage points” means an increase of 1.0% in the employment-population ratio. This gives him quite the benefit of the doubt, I think.

Based on my very rough calculations, that would mean we’re looking at an increase of about 3.06 million jobs in the next couple of months, averaging 437,000 job increase per month. Keep in mind, this still puts us way below the height of the employment-population ratio of 64.7% in 2000 and nearly a full percentage below the employment ratio in place a year and a half ago.

No. Freaking. Way. Not happening. Honestly, I would be surprised if we saw another .5% increase (which is what we’ve seen in the last 6 months). I’ll stake my claim there, even though I have a feeling that we might not even make that number… I see this recovery being even flatter than that.

In any case, here’s a view of the predictions. We’ll revisit in a half a year. Or possibly in October or November when if it looks like one of us is on track.

Employment-Population Ratio 2006 – Present

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My Dance Of Humility Before Robert Stacy McCain

Back at the beginning of September, Robert Stacy McCain stated that:

The FHA is on the hook for lots of “underwater” loans, taken out by low-income homeowners who got special low down-payment deals and — in case you didn’t notice — unemployment hit a 26-year high in August, with no prospect the 9.7% jobless rate will go down any time this year.

At the time, I wrote a post stating:

If unemployment dips below 9.7% by the end of the year, I will make a point that your enormous confidence in the suckiness of the economy was misplaced.

If it does not, I will write a humble post begging your forgiveness. I’m curious to see how this goes.

Therefore, I take note that Stacy McCain predicted the trajectory of the economy more accurately than I would have. I humbly beg his forgiveness.

I would like to take a moment, though, and explain why I wrote that post in the first place.

I am fascinated by neurology… particularly how the brain forms memories and how those memories interact with reality. The evidence that pretty much everyone has false memories (where we can vividly remember things that didn’t happen) is overwhelming. What I’ve found in the last 10 years of following politics is that this area is particularly vulnerable to people saying things about the past that they totally believe are true but are, in fact, based on a narrative that was established after the fact.

People look back in hindsight and say “Well, of course John Kerry was a terrible candidate.” But they’re only saying that because he lost. If he had won, the narrative would have been established that he was the right guy at the right time who ran a campaign of brilliance with these subtle nuances that connected with the people. We have this certain sense of fate through which we look as if the world we live in was one of inevitability and we realign our perspectives and (frighteningly) our memories to align with reality as it turned out.

That’s why I love the internet and blogs in general. I love to take the feeling understanding of a certain time and place and write it in stone. Looking back at September now, it seems obvious that we weren’t out of the woods at the time. But it didn’t seem obvious to me or to a large chunk of those writing about the economy.

That the unemployment situation was still on the downturn seemed obvious to Stacy McCain and at the time I was struck by how different our expectations were. Some people will look back at his post and say “Well, of course the unemployment rate wasn’t going to decrease. Everyone knew that.” This post is to point out that not everyone knew that and that it wasn’t an obvious thing. We shouldn’t discount those who are right about something because the narrative has made their very gutsy prediction seem obvious.

It’s worth keeping record of our reactions at the time and comparing them to how the world turned out. It’s worth pointing out when someone is able to make an accurate prediction. And Stacy McCain had me on this one.