February 24, 2004

Forecast Errors

Dan Froomkin writes:

washingtonpost.com – White House Briefing: Dana Milbank writes in The Washington Post that the Bush administration forecast that the economy would add 2.6 million jobs this year, while "derided as wildly optimistic, was one of the more modest predictions the administration has made about the economy over the past three years. ". . . "Figures released by the White House show that its overestimate of job creation in 2003 was the largest forecast error made in at least 15 years, and its 2002 underestimate of the deficit was the largest in at least 21 years."

I think this year's job growth forecast--4.4 million between October 2003 and December 2004--may well beat out the 2003 projection for worst forecast. We are already 740,000 behind the forecast's pace, and the forecast was only finalized 2 1/2 months ago.

Posted by DeLong at February 24, 2004 07:54 AM | TrackBack | | Other weblogs commenting on this post

I have a question to people who deal with this type of forecasts: what is the typical uncertainty of the numbers that are presented? I mean, once I'm told that 2.6M jobs will be created, it tells me very little. I want to know the associated uncertainty: is it 2.6+-0.3 or 2.6 +- 5.

If it's the latter, then the numbers observed are actually consistent with original prediction.

Posted by: PG on February 24, 2004 08:20 AM


Bush (GHW). Reagan.

Posted by: Michael Robinson on February 24, 2004 08:40 AM


2.6M +/- 2M

Posted by: Stirling Newberry on February 24, 2004 08:45 AM


How does Froomkin manage to report from the future?

"Bush Lets Fly
Wednesday, Feb 25, 2004; 12:00 AM"

Posted by: Jon H on February 24, 2004 08:52 AM


It could still come true - if Iraq keeps going so poorly, Congress could be forced to insitute a draft and put 2.6 million people in the armed forces.

Posted by: Zach on February 24, 2004 08:59 AM


Consumer confidence drops more than expected.

Posted by: Stirling Newberry on February 24, 2004 10:07 AM


You're doing a pretty good job, here. By the time you're done, no matter what the job growth is by next fall, you can paint it as a failure.

As for consumer confidence, considering the 24/7 hammering the media is doing trying to make the economy look like a disaster, are you really surprised?

Posted by: tbrosz on February 24, 2004 10:53 AM


OT, but hilarious. (via Eschaton)


Posted by: Tim H. on February 24, 2004 10:58 AM


"As for consumer confidence, considering the 24/7 hammering the media is doing trying to make the economy look like a disaster, are you really surprised?"

Once again, failures blame their failure on the press.

Posted by: Stirling Newberry on February 24, 2004 11:01 AM


I hate to beat a dead horse, but I just read
V.P. defense of her article on jobs.

She had several comments including the quote,
"that for some unknown reason, even some employees
that should be picked up on the payroll aren't, at
surprisingly high rates that no one can explain".

She does not take comments, but I know of no evidence that there is any validity to this
statement. Does anyone have any evidence to
support this statement?

If the error is at surprisingly high rates it implies she has an estimate of the correct rate of
error, right? So why doesn't she tell us the correct rate?

Posted by: spencer on February 24, 2004 11:03 AM


Stan Collender has a good take on the implications of the loss of credibility and why Mankiw will probably still be around in Nov 2004. "The Gang That Couldn't Count Straight"


Posted by: bakho on February 24, 2004 11:19 AM


Dingell replies to Mankiw:


Mankiw has about spent his credibility.

Posted by: Stirling Newberry on February 24, 2004 11:22 AM


I was going to post about the Dingell letter, but others have beaten me to it.

Read it. No, stop what you're doing now and click the link. Is it snarky? Sure. Does it advance the discussion about jobs? No. Is it a mature response to the clowning that's been going on in the Bush administration? Not even close.

It's just the best laugh that I've had in weeks.

...Mayor McCheese *heh heh*

Posted by: Sharon on February 24, 2004 11:41 AM


Regarding tbrosz's post (10:53 am), I think he/she ought to be in the Bush administration. You've merely used Bush's own economic projections to show that job growth is likely to fall far short of those projections and also highlight Bush's poor record on the economy. Yet, somehow, it's all your fault! That kind of accoutability (or lack thereof) is a trademark of this administration.

Posted by: Michael on February 24, 2004 11:54 AM



The payroll survey samples 400,000 business establishments. This represents an average of 40 million jobs each month; in September 2003, 40.5 million jobs were sampled (Getz 2003). In contrast, the household survey samples only 60,000 households, representing fewer than 70,000 workers. In September 2003, employment estimates were based on a sample of 67,804 workers. Thus, the payroll survey sample covers 600 times as many workers as the household survey.

The payroll survey employment estimates are benchmarked to the unemployment insurance tax records. This yearly process anchors the payroll employment numbers to the comprehensive count of all nonfarm payroll employment. The household survey, on the other hand, is benchmarked only once a decade to the decennial census, resulting in a less precise employment measurement than the payroll survey.

Large revisions and misreporting are also less likely for the payroll than for the household employment numbers. In recent years, the household survey has undergone far more extensive revisions than the payroll survey, particularly with respect to population estimates. In January 2003, an additional 576,000 jobs were added.

Posted by: anne on February 24, 2004 11:55 AM


So what you are saying is that the Bush jobs program is to have a revision to the house hold survey every couple of months?

Posted by: Stirling Newberry on February 24, 2004 12:06 PM


Hubbard presumably has contributed to this, as well. He was on Nightly Business Report last nite minimizing contribution of tax cuts to deficits, had effrontery to suggest that future SS benefits cutbacks be confined to wealthy people, as though such cutbacks are a done deal. Doesn't Hubbard's record have to be examined, as well?

Posted by: Bob H on February 24, 2004 12:31 PM


Michael beat me to the appropriate response to tbrosz, so i'll just add: exactly wherein lies this talking down, tbrosz?

You mean the factual reporting of how few jobs have been created? Is that what you call talking down?

Consumers likely feel less confidence primarily because they keep hearing from bush about the new jobs and the optimism and the growth, and they see nothing like that.

Posted by: howard on February 24, 2004 01:04 PM


"considering the 24/7 hammering the media is doing trying to make the economy look like a disaster, are you really surprised?"

Oh no, it's the liberal media again! They just hate the idea of employed Americans! They hate America!

Posted by: ogmb on February 24, 2004 01:08 PM


If only Bush-surporters had the support of the liberal media...

"The president then turned to Section 14-D of the official budget document, where the federal government's total expenditures, the GNP, and the difference between the two were listed. Using a black Sharpie, the president crossed out the third figure, eliminating it entirely. Bush then held up the newly marked-up page and said, "My fellow Americans, I have solved the federal budget crisis." The budget is expected to pass through the GOP-controlled Congress with little or no opposition."

The Onion, 25 FEBRUARY 2004, VOLUME 40 ISSUE 08

Posted by: Jean-Philippe Stijns on February 24, 2004 01:41 PM


Warning - there might be two posts on this - something strange happened.

Spencer, there was a short exchange on, IIRC, Daniel Drezner's site. When somebody pointed out that Brad thought that Virginia was in error, and mentioned how, Viriginia decided that she didn't want to get into a discussion of this. Considering that she thought enough of her words to put them into print, I think that she was hoping to fool those who didn't think about it.

Once a real economist was involved, she was off.

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