It’s Time For Everyone to Check Up On Their Crystal Balls

Neil Irwin praises Goldman Sachs for a year-end report in which it revisited its forecasts from last January:

In this case, the Goldman team did pretty well. Of 10 predictions, they were correct on seven, accurately forecasting, for example, that the economy would not tip into recession in 2013, that the housing market would continue its recovery, that corporate profit margins would stay fat and that inflation would remain low.

Their most clear-cut mistakes were in expecting capital spending to accelerate (it didn’t, rising only about 2 percent, not the 6 percent Goldman economists forecast) and in expecting the unemployment rate to fall only slightly (it fell much more than they expected, because people left the labor force surprisingly fast).

This is a good practice, but I’d add a couple of comments. First, it’s only a good practice if they commit themselves to doing it every year, not just in years when their track record is good. Second, not all forecasts are created equal. Predicting that the economy wouldn’t fall back into recession, for example, isn’t that impressive. There were certainly people last January who predicted slow growth, but there was virtually nobody who thought we were headed back to recession.

But those quibbles aside, this is a worthwhile thing to do. I might even do it myself except that I don’t think I ever made any numeric forecasts that I could check. But maybe I should re-read my January archives and see.