Looking at a Big “L”
How fast can economists downshift expectations? Well, in just a few weeks, we’ve gone from this:
[Edinaldo Tebaldi, assistant professor of economics at Bryant University] and Edward Mazze, distinguished university professor of business administration at the University of Rhode Island, will give a somewhat gloomier forecast for the state at a conference next month in Boston organized by the New England Economic Partnership. They predict the jobless rate to rise to at least 13.5 percent and hover there next year. By 2011, it will fall, but only to around 12 percent, their preliminary calculations show.
To this:
The state will shed an estimated 9,000 more jobs in the coming year, and unemployment rates will keep creeping up, hitting a high of 14.1 percent in the second quarter of 2010. Housing prices, meanwhile, will struggle in the short term before beginning a slow climb, starting in 2011, a report from the New England Economic Partnership, a nonpartisan forecasting group, predicts.
Of course, by way of assessing credibility, here’s what the same crack squad was saying a year ago:
The latest jobs report is grim even in light of the economic forecast released yesterday by the nonprofit New England Economic Partnership. The NEEP economists predicted that during the next two years, Rhode Island would lose nearly 15,000 more jobs and unemployment would hit 10 percent, probably by the end of next year.
Mazze says we’re looking at a U-shaped recovery. Face reality, Rhode Island: Until you radically change the way this state operates (and who operates it), we’re looking at an indefinite L.
Exactly what transformative events are these esteemed economists basing their assumptions upon to state that the unemployment level in RI will fall by 2011?
I think that even you are optimistic, Justin. Unless this state’s operations and operators radically change, I don’t see a leveling off of the economic free fall that an L shaped “recovery” would indicate. Without wholesale change, what could possibly keep us on our steady course of barely treading water? Unless more folks really wake up, I fear Rhode Island’s trajectory is an ever tightening spiral down, down, down.
I think were looking at the southeast line of the “K”. I can’t think of any other letters to describe where we’re heading if nothing changes.
Maybe we should just start calling it an asterisk, as in:
*Rhode Island, the former New England state absorbed by Connecticut and Massachusetts in 2011 after being run into the ground by stupid idiots.
The difficulty with these forecasts is that they can only consider large trends. This is not without some type of accuracy. Where they fail is that they cannot quantify innovation, opportunism or just plain “guts”.
Every crisis creates opportunity that was not foreseeen. For instance the “Depression” gave a real spark to Hollywood which was able to deliver very cheap entertainment. I can’t say that “talkies” sprang from the Depression, but they arrived at the right time. In the midst of the Depression “Monopoly” made a fortune for Parker Bros.
While I think that RI has “embedded” problems, wages are now lower than they have been in a long time. I doubt that housing has reached a bottom. This will have appeal to someone and it may be just the factor to make them push ahead.
I agree with this post.
>>”Exactly what transformative events are these esteemed economists basing their assumptions upon to state that the unemployment level in RI will fall by 2011?”
With each passing week more people recognize that the Democrat leopards who control this state are not going to change their spots, and so decide to leave and relocate in a state with a future.
Of those, the ones who can’t find employment in RI and seek greener pastures elsewhere will not be counted as “unemployed” in RI, and so a falling unemployment rate (since they’ll be replaced by a welfare recipient / illegal with anchor babies who aren’t seeking work, the overall RI population will remain relatively stable so the unemployment rate will appear to drop).
Three things I learned from my economics minor and independent study of economics:
1. Economics is very good at modeling the past and suggesting general principles and policies for improvement. It is terrible at predicting the future and such predictions, while getting good media attention for obvious reasons, are wrong often enough that they are only slightly more accurate than chance.
2. Most people misunderstand Keynesian economics by believing government spending during recessions to necessarily be a good thing.
3. Keynesian economics, as applied in practice, amounts to a tool for the government and wealthy corporations to brainwash the general population with and grow their own power and influence at the expense of the middle class during recessions, then refusing to scale public spending back down during the booms as would rationally be required by the theory.
Beware of any economist who would tell you differently.
Dan writes:
1. Economics is very good at modeling the past and suggesting general principles and policies for improvement. It is terrible at predicting the future and such predictions, while getting good media attention for obvious reasons, are wrong often enough that they are only slightly more accurate than chance.
Without doubt “Generals are always preparing to fight the last war”. As financial services ads end “Past performance is no guarante of future performance”. Remember the instance of about 20 years ago when a group of economists three darts at the Wall Street Journal? Those choices outperformed 90% of the mutual funds.
2. Most people misunderstand Keynesian economics by believing government spending during recessions to necessarily be a good thing.
“In the long run, we are all dead” -Maynard Keynes
I am not sure that is even applicable to the present situation, although it is being used as a “cover”. About 10% of “stimulus” money is going into bricks and mortar. The rest is being used to support failing governmental units and agencies. See today’s Boston Globe (I normally use it to wrap dead fish)
http://www.boston.com/business/articles/2009/11/11/stimulus_fund_job_benefits_exaggerated_review_finds/