The WSJ reported that “Economists continue to pare their forecasts for hiring and economic growth as high oil prices and other uncertainties sap confidence among businesses.” 55 surveyed economists expect the economy to “add 182,000 jobs a month for the next 12 months. That’s down from an average forecast of 194,000 jobs a month in the August survey and from 207,000 in May.” The dismal scientists also lowered GDP forecasts: 3.6% in Q3, and 4.0% in Q4. (In the Q2, GDP grew at 2.8%)
Why the continued hiring pessimism? (Especially considering that economists have been so long for so wrong).
“Economists pointed to an array of factors when asked to diagnose the swings in hiring. A rise in crude-oil prices, which approached $50 a barrel in futures trading in New York last month, likely played a part, as did what economists say is sagging business confidence. The two factors are intertwined; high oil prices come at a time when companies are still smarting from the 2001 recession. Although the economy has been expanding for more than two years, executives remain hesitant to take on the cost of new employees. . .
That is very consistent with my expectations of a post-bubble environment. The stimulus has faded, growth is anemic, and demand remains tepid. This is as it should be after a period of massive over-investment.
Of course, the dismal scientists haven’t figured that out yet:
“Meanwhile, nearly one-fifth of economists blame the swings in employment statistics at least in part on problems with Labor Department data. For one thing, employment numbers can be susceptible to seasonal factors. Further, the two main components of the monthly employment report — the establishment survey and the household survey — have drawn complaints from critics for often painting contradictory pictures of the labor market.”
The establishment survey’s tabulation of payroll growth at large companies is considered a more reliable indicator by most economists and Federal Reserve Chairman Alan Greenspan. But the household survey also has partisans, who argue that its numbers are better at catching workers who fall out of the establishment survey when they start their own businesses or work as private contractors.”
Among other findings in the survey:
Regardless of whether President Bush or John Kerry wins the election, the economists believe taxes will be the policy issue with the biggest impact on the economy and financial markets in coming years. But they believe Social Security reform would be a more influential issue under President Bush than it would be if Mr. Kerry won the election. And they feel health care would have a bigger impact under Mr. Kerry than Mr. Bush.
Economists nudged their forecasts for inflation next year lower. While their average forecast for the November 2004 consumer-price index remained unchanged at 3.0%, the average for May 2005 was cut 0.1 point to 2.3%. The most recent government report on inflation, for July, showed consumer prices up 3.0% over the prior 12 months.
Fascinating stuff from the WSJ.
WSJ surveys 50 economists throughout the year. Broad surveys on 10 major economic indicators are conducted semiannually, at midyear and at year-end. Between each semiannual survey, four monthly updates are conducted for the most closely watched forecasts. This is the monthly update for September.
Forecasts Get Another Shave
Economists Trim Their Expectations For Jobs and Growth, Survey Finds
By TIM ANNETT
WALL STREET JOURNAL ONLINE, September 9, 2004