Overview of The messy, tricky, hairy task of economic forecasting
This Marketplace Morning Report episode (host David Brancaccio) examines why people and institutions keep using economic forecasts despite frequent misses. The show covers three short segments: market and labor commentary with portfolio manager Susan Schmidt; a report on Boeing’s improving deliveries and production constraints; and a deeper look with senior economics contributor Chris Farrell about the limits and useful roles of forecasting — including research on forecasting accuracy and the value of scenario/range-based forecasts.
Key takeaways
- Forecasts are often inaccurate (especially recession and year‑ahead market predictions), but they remain useful as planning tools when treated properly.
- Big, headline layoffs (Amazon, UPS) get attention but don’t necessarily reflect aggregate employment trends driven by smaller businesses; the unemployment rate has been fairly steady.
- Investor optimism about AI is supporting tech stock strength, but high valuations rely on uncertain productivity gains.
- Boeing’s commercial recovery is boosting revenue and deliveries, but FAA production caps (currently ~42 737 MAXs/month) limit how fast Boeing can ramp output.
- Good forecasters present ranges/scenarios, acknowledging uncertainty; businesses and households should use forecasts as one input and plan for multiple outcomes.
Topics discussed
Federal Reserve, labor, and markets (interview with Susan Schmidt)
- Fed expected to hold interest rates steady; watching jobs, inflation, growth.
- Headlines highlight large corporate layoffs (Amazon ~16,000; UPS ~30,000), but most U.S. employment is at smaller firms, and the official unemployment rate has been stable.
- Markets have been taking tech layoffs and AI developments in stride; investor optimism about AI-driven productivity is supporting valuations, though that may be optimistic.
Boeing update (report by Daniel Ackerman)
- Boeing reported $24 billion revenue last quarter (up ~57% year-over-year).
- Recovery driven by more 737 MAX deliveries; 600 airplanes delivered last year (most since 2018).
- FAA imposed production caps after past safety issues; Boeing seeks approval to raise from current cap (~42 MAXs/month) to address backlog as airlines replace older fleets.
The case for forecasting (segment with Chris Farrell)
- Forecasts frequently miss: IMF study and other research show poor performance predicting recessions; S&P 500 price-targets by analysts averaged accuracy ~47% in one study.
- Reasons forecasts fail: messy and revised data, limited visibility into many economic activities, and genuine uncertainty and outlier events.
- Value: forecasts (especially range/scenario forecasts) help planning and hedging. Michael McCracken (St. Louis Fed) argues forecasts provide actionable guidance if used as one input among many.
Notable quotes / insights
- Lao Tzu quoted: “Those who have knowledge don't predict, those who predict don't have knowledge.” (used to frame the tension around forecasting)
- Michael McCracken (St. Louis Fed): Good forecasters offer a range of outcomes — useful for planning and hedging.
- Chris Farrell: Forecasts are imperfect but important — treat them as inputs, not gospel; plan for multiple scenarios.
Actionable recommendations (for businesses, investors, households)
- Use scenario planning: prepare for upside, baseline, and downside cases rather than relying on a single point forecast.
- Treat forecasts as one input: combine them with real‑time data, risk assessments, and contingency plans.
- Hedge where possible: diversify investments, keep liquidity, and design flexible hiring/cost plans if running a business.
- Watch underlying data, not just headlines: big-company layoffs are important but don’t always change aggregate employment trends immediately.
- For investors in sectors with hype (e.g., AI): question how much real, measurable productivity gains justify valuations.
Key data & figures referenced
- Amazon layoffs: ~16,000 corporate jobs (headline figure)
- UPS layoffs: ~30,000 (headline figure)
- Boeing revenue (last quarter reported): $24 billion (≈ +57% year-over-year)
- Boeing deliveries last year: ~600 airplanes (most since 2018)
- Current FAA production cap referenced: ~42 737 MAX jets/month
- Study finding analyst S&P 500 price‑target accuracy: ~47% (worse than coin flip in that study)
Bottom line
Forecasts frequently miss, but they’re not useless. The episode argues for using forecasts as structured inputs — preferably in ranges and scenarios — to inform planning and risk management rather than as definitive predictions.