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Whacky statistics leave economics broken

·1-min read
<p>US President Joe Biden riding steady.</p> (REUTERS)

US President Joe Biden riding steady.

(REUTERS)

Predicting is difficult, the sarcastic saw goes, especially for the future.

Lately, City economists have been burning through even more red ink than usual as they moved to “upgrade” previous forecasts of where we were all going.

(It’s important, at least for the economics profession, that we regard such updates as a sign of their flexibility, not an admission that everything they said before was flat wrong.)

Just now, it is possible to have some sympathy for the dismal science, since some of the numbers are so whacky it’s like the statistics themselves have been smoking something peculiar.

Paul Donovan at UBS comes clean on predictions for today’s US job figures. He says: “Economists believe that US payrolls grew by about a million people. Or maybe around 335 thousand. Or something in between. These might seem like wild guesses, but they are not—these are educated guesses, and economists have the degree certificates to prove it.”

Quite. In fairness, if you suddenly lose 20 million jobs, as the US economy did in early 2020, the margin of error is always going to be higher, even if you haven’t been highly trained to perpetually get it at least slightly wrong.

This is not a normal economic cycle, so normal models do not work. Economics is broken, then.

Roughly, though, what’s the US picture? The UBS man says: “The basic story is of an economy that is recovering well, and which can generally find the workers that it needs.”

What does that mean for us?

I’ll make a prediction. And since I’m not a highly trained economist I have at least a shot at being right. It is this: We’re going to be ok.

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