Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Optimistic Unemployment and Housing Market Forecasts Looking Silly

Economics / Recession 2008 - 2010 Jun 07, 2009 - 02:40 PM GMT

By: Mike_Shedlock

Economics

Best Financial Markets Analysis ArticleEconomics may be the "dismal science" but economists as a group sure seem to be an optimistic lot. Yes, there are a handful of "doomers" like Nouriel Roubini but most economists did not see the recession coming until it was already 10 months old.

Please consider unemployment forecasts. The Fed forecast unemployment at 8.4% in 2009 and the "adverse forecast" was at 10.3% in 2010.


Hello Ben, in case you did not notice, Jobs Contract 17th Straight Month; Unemployment Rate Soars to 9.4% and Bankruptcy Filings Reach 6,000 A Day.

Adverse Assumptions

Let's take a look at all the Fed's adverse assumptions for the recently conducted "stress-free test" as laid out in the Fed's Stress Test White Paper.


1 Percent change in annual average.
2 Baseline forecasts for real GDP and the unemployment rate equal the average of projections released by Consensus Forecasts, Blue Chip, and Survey of Professional Forecasters in February.
3 Annual average.
4 Case‐Shiller 10‐City Composite, percent change, fourth quarter of the previous year to fourth quarter of the year indicated.

Case Shiller Housing Index

Please consider the latest Case Shiller Housing Index.

The S&P/Case-Shiller Home Price Index ― which covers 20 metropolitan areas ― showed a price decline of 18.7% in March, suggesting a greater fall in prices than expected. Analysts were looking for an -18.40% reading, following the -18.67% reading for February. The 10-city measure fell a similar 18.6%.

The numbers were even worse on a quarterly basis. The Q1 report ― which covers all nine U.S. census divisions, rather than just 20 metropolitan areas ― recorded a 19.1% decline compared to the first quarter of 2008, marking the steepest fall ever in the 21-year history of the index.

“All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines,” said David Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Seventeen metro areas recorded a monthly decline in March, with Minneapolis, Detroit and New York posting record monthly declines.”

Note that the baseline scenario for housing for 2009 is -14%. Home prices are already down 19.1% and the adverse scenario will be under attack next month.

Unemployment Projections



The consensus forecast of unemployment for 2009 was 8.4%. The Blue Chip Forecast, a survey of America's leading business economists that costs $875 annually. Blue Chip had the unemployment rate at 8.3% for 2009 and 8.7% for 2010.

Check out this footnote in the WhitePaper.

The “more adverse” scenario was constructed from the historical track record of private forecasters as well as their current assessments of uncertainty. In particular, based on the historical accuracy of Blue Chip forecasts made since the late 1970s, the likelihood that the average unemployment rate in 2010 could be at least as high as in the alternative more adverse scenario is roughly 10 percent.

As noted, the Fed had a mere 10% chance the unemployment numbers get as high as the adverse scenario. The adverse scenario for 2009 has already been exceeded unless you think unemployment has peaked and is going lower over the next several months.

Meanwhile the Survey of Professional Forecasters pegged the unemployment rate at 8.4% for 2009 and 8.8% for 2010 (now revised much higher as is always the case).

Across the board, the Fed's adverse scenarios were a cakewalk, especially the unemployment forecasts.

Flashback February 11, 2008

White House: Unemployment to stay near 5%

The Bush administration's top economists see annual unemployment remaining just below 5% through 2013, meaning an extended period when the jobless rate would top the full-year average in six of the last 10 years.

The annual outlook of the president's Council of Economic Advisors, released Monday, also projects that the economy will keep growing this year and avoid a recession. In fact, real gross domestic product is forecast to rise by a healthy 2.7% when comparing the fourth quarter of this year to a year earlier.

But the report projects the full-year unemployment rate will rise to 4.9% in 2007, up from 4.6% each of the last two years. And it expects the unemployment rate will stay at the 4.9% rate in 2009 before starting to retreating slightly to 4.8% in each of the following four years.

Are economists paid to say what people want to hear? If not, can someone please tell me why economists are perennially such an optimistic lot, seldom collectively in the ballpark and constantly revising forecasts lower?

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in