Why do economists keep getting it wrong?
For months, the job market’s strength has been exceeding economists’ predictions. It happened again today: the Labor Department’s weekly report on first-time jobless claims came in at just 348,000 — the lowest level in four years.
Most economists had predicted about 355,000 people had applied for unemployment benefits in the week ended March 17. So why do they keep missing the mark?
In an interview with NPR, Treasury’s chief economist Janice Eberly said most private economic forecasts are based, naturally enough, on hard data. But the “soft” data – polls of how business owners and consumers are feeling – suggest confidence is improving, though from a low level.
“The survey data have strengthened since last summer,” she said. And in turn, “confidence can have a positive effect.” So in other words, employers just might be feeling good enough about the future to add workers and consumers to spend money – beyond what economists might expect to see, based solely on the current hard numbers about income and debt.
So maybe Fernando Lamas was wrong. It really is better to feel good than (for hard data) to look good.