Image Source: Pixabay

Over the past year, I’ve read one pundit after another offer a recession prediction. I’m not impressed.

It’s not that these predictions are necessarily incorrect—a recession might well occur in the near future. It’s that these predictions are useless. What am I supposed to do with the forecast? We already have market forecasts of a wide range of macro indicators.

History suggests that recessions occur every so often and are largely unforecastable. Economists as a group have failed to predict any recent US recession. Last year, lots of economists thought we’d be in a recession by now. Instead, we have the lowest unemployment rate since 1969. (But they also thought we had a “tight money policy” because interest rates were rising. Hmmm . . . please read my new book.)

I’d be much more interested in an unemployment rate forecast. The Fed currently expects the unemployment rate to rise to 4.6% by year end. It would take a recession for that to happen. But a recession could also lead to 7% unemployment, as in the relatively normal 1991 downturn. And yet a 4.6% unemployment rate is much closer to our current situation than it is to 7% unemployment. Simply saying “recession” tells me relatively little about what you expect to happen to the economy. What sort of recession

Don’t get me wrong. I concede that the recession forecasts will eventually match reality. At some point we will have a recession. Until then, I wish pundits would just keep their mouths shut. I can see the fed funds futures market for myself. I don’t need anyone telling me what they think is likely to happen.

More By This Author: