from AlterNet's PEEK:
How Many Revised Economic Forecasts Before The Fed Says The "R" Word?
Posted by Daniel DiRito,
The All Spin Zone at 10:39 AM on February 21, 2008.
Economic forecasting isn't an exacting science...yet the American public often knows we're in a recession well before the experts.Economic forecasting isn't an exacting science...yet the American public often knows we're in a recession well before the experts. Politicians, on the other hand, love to hand out meaningless refund checks every time they hear rumblings of the "R" word. Americans should reject this stimulus package and demand sound & sustainable economic policy.
Just how many revised economic forecasts does it take to finally conclude that the U.S. is in a recession? Former Fed Chairman Alan Greenspan likes to up his odds we're heading into a recession by approximately 20 percentage points every quarter. Current Fed Chairman Ben Bernanke seems to prefer a different approach. His modus operandi is to lower GDP a few tenths of a percent with each revised outlook.
As an outside observer, this measured slide towards using the "R" word feels like being in my car at a red stoplight with my favorite backseat driver seated beside me. As we wait for the lights to change (because we know they will), my trusted traffic manager sits there predicting the seconds until the opposing green light will turn yellow...never getting it quite right...but jubilant each time he announces...after the fact...that "The light just turned yellow". This process continues until our red light turns green and we can proceed to the next intersection...to start all over again.
While I realize my analogy isn't an actual equivalent, the frustrations are much the same. Yes, predicting the twists and turns of the economy isn't an exact science...but I do find our willingness to grant these prognosticators a free pass each time they err to be a rather absurd practice. The fact that the nation holds its breath each time a new report is scheduled for release merely supports my contention.
WASHINGTON (AP) -- The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.
Under its new economic forecast, the Fed said that it now believes the gross domestic product will grow between 1.3 percent and 2 percent this year. That's lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 percent and 2.5 percent.
With economic growth slowing, the Fed projected that the national jobless rate will rise to between 5.2 percent to 5.3 percent this year. That is higher than the central bank's old forecast for the rate to climb to as high as 4.9 percent. Last year, the unemployment rate averaged 4.6 percent.
And, with energy prices marching upward, the Fed also raised its projection for inflation. The Fed now expects inflation to be between 2.1 percent and 2.4 percent this year. That's higher than its old forecast for inflation, which was estimated to come in at around 1.8 percent to 2.1 percent.
The Fed said its revised forecasts reflected a number of factors including "a further intensification of the housing market correction, tighter credit conditions .... ongoing turmoil in financial markets and higher oil prices."
In truth, I suspect that the average American has just as good a sense of where the economy is headed as those who get paid to inform us. If the last number in our checkbook is negative, we conclude we have a problem. Why wouldn't the same math hold true for our national economy? ............(more)
The complete piece is at:
http://www.alternet.org/blogs/peek/77435/
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