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Good Jobs Forecast Record from ‘Lonely Bear’

Posted By Barry Ritholtz On May 7, 2004 @ 6:11 am In Finance | Comments Disabled

NYT_home_banner.gif [1]

Kinda odd little story in Thursday’s Business section of the NYT about Richard Yamarone, the chief economist at Argus Research [2]. In terms of his predictions about Job’s growth, Yamarone has consistently been the outlier on the low end of the spectrum.

That Bearish viewpoint has made him the most accurate prognosticating economist in 5 of the past 12 monthly data points. Excepting, of course, the blow out number reported in April (March data). He forecast employment would grow by 44,000 in March. 308,000 new jobs were actually. “I was creamed,” the Times quoting him as saying.

Despite the one month setback, Yamarone is still not all that sanguine about jobs:

“As financial markets anticipate tomorrow’s employment report, Mr. Yamarone insists that a case can still be made that payroll growth will wither from its March bloom. “There’s no real reason for businesses to pick up hiring,” he said. “They are still producing the goods to meet demand with the existing work force. . .”

What’s kinda weird about the tone of the article is that Yamarone has been the most consistently accurate forecaster the past year. Yes, he blew last month, but so did just about everyone else. Only the Perma Bulls got March’s Jobs data right (via the broken watch methodology). But they’ve been so wrong for so long, it hardly seems right to give them credit. Consistently very Bullish calls will eventually be right, but so what? The cheerleaders are pointless in terms of either compiling a track record or making money trading or investing.

Ahhh, but what about today’s data?

“Mr. Yamarone might yet be proved right. His more pessimistic outlook for employment is based on a view of overall economic activity that is less sunny than that of his peers, but so far more accurate. Mr. Yamarone’s forecast that the economy would grow at a 4.3 percent pace in the first quarter of the year was the lowest among Wall Street economists, who mostly expected about 5 percent. It was also closest to the mark: the actual rate reported was 4.1 percent.

Caution about future growth is not totally unwarranted, either. Consumer spending, which remains one of the main pillars of economic recovery, is likely to slow as tax rebates are spent and higher interest rates reduce mortgage refinancing and strain household balance sheets. High energy prices are also likely to dampen growth.

Moreover, Mr. Yamarone notes that there is little anecdotal evidence supporting strong payroll growth. Many companies, as diverse as Sun Microsystems and Winn-Dixie Stores, are still laying off workers. And because there is usually a lag between layoff announcements and job cuts, most of the 120,000 layoffs announced in January were probably put into effect last month.

JOBS.chart
Source Bloomberg News, BLS [3]

In this kind of cutesy story, there’s always a punchline. Here’s the rub:

“But Mr. Yamarone could also be proved wrong. He says that his technique, like that of some other forecasters, involves feeding statistics like weekly unemployment claims into an econometric model, and then fine-tuning the result based on anecdotal information. This month, Mr. Yamarone let the anecdotes persuade him to adjust heavily downward. Left to itself, his model forecast 225,000 new jobs in April.”

That last comment is utterly pointless. Without showing how the prior adjustments impacted the previous data predictions, its simply snide. It would have been fascinating to look “under the hood” of the model’s past predictions and adjustments . . .

Sources:
Lonely Bear Resists ncreasing Optimism on Jobs [4]
Cottage Industry for Economists in Foretelling Data
Eduardo Porter
New York Times, May 6, 2004

http://www.nytimes.com/2004/05/06/business/06jobs.html

Graphic [3]

http://www.nytimes.com/imagepages/2004/05/05/business/06JOBS.chart.jpg.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/05/good-jobs-forecast-record-from-lonely-bear/

URLs in this post:

[1] Image: http://www.nytimes.com

[2] Argus Research: http://www.argusresearch.com/

[3] Bloomberg News, BLS: http://www.nytimes.com/imagepages/2004/05/05/business/06JOBS.chart.jpg.html

[4] Lonely Bear Resists ncreasing Optimism on Jobs: http://www.nytimes.com/2004/05/06/business/06jobs.html?ex=1399176000&en=5b7be7d64a392771&ei=5007&partner=USERLAND

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