Economic predictions: it is possible to be realistic and unbiased?

From today’s WSJ, Six Housing Forecasters Who Got Things Right in 2012:

[Bill] McBride writes the well-read CalculatedRisk blog, where he kept tabs on the inanities of the housing bubble and later, the bust. After correctly calling the top of sales activity in 2005 and prices in 2006, he proclaimed last February that the “housing bottom is here” in a blog post that laid out all the dirty details. “I’ve tried over the years to call the turns when they arrive. I’m trying to call it when it happens and not wait six months or a year,” said Mr. McBride in an interview last February. “By the time people see they can buy something for less than their rent, they’re going to be buying.” In 2009, he had similarly called out what he saw was a bottom in new home construction.

I’ve written about McBride and Calculated Risk many times — it’s my #1 source for straightup economic news, no chasers, no spin.

Back in 2005 and 2006, McBride was viewed as an extreme pessimist. In 2012, when he called the bottom for housing prices, those who did not know his earlier reputation — and even some who did know it — considered him a starry eyed optimist.

But McBride is neither an optimist or a pessimist. He’s just right. He’s just realistic in his appraisal of meaningful data.

And when he occasionally is slightly off in his predictions and analysis, he’ll say so.

So, clearly, it is possible to be realistic about economic news without bringing some form of over or covert political bias into the picture.

But there are plenty of examples of analysts who fail miserably in that goal, like a piece a few days ago by a couple of economists — clearly ideologues — arguing against the prevailing notion that the American middle class is “stagnant”. Their analysis focused only on necessities that take up a smaller share of middle class Americans’ income, not those expenses that are taking an ever-larger bite, like health care and transportation.

Which brings me to the ongoing deluge of pessimism that crosses my desk about the debt “crisis” (it’s a problem, not a crisis) and about the jobs recovery, which has become quite robust here in Savannah.

I was accused of being a crazy pessimist years ago too when I wrote about the Savannah housing market, but I called the bust pretty well — although I should have been more aggressive much sooner in my City Talk columns. But that pessimism wasn’t bias — it was just a realistic assessment based on objective data.

Now we have some pretty robust data about job gains that should not be ignored. In part, those numbers are due to the fact that housing has pretty well bottomed in all respects — prices, sales, and new construction.

From my column today, Latest data confirms 2012 was good year for Savannah employment, which discussed the rather consistent results of two separate ongoing surveys (one of payroll establishments and one of households):

According to December payroll data released by the Georgia Department of Labor two weeks ago, the Savannah metro area (Chatham, Effingham and Bryan counties) added 5,100 nonfarm payroll jobs in 2012. That’s an increase of 3.4 percent, more than twice as fast as population growth.

Private-sector employment was up 3.8 percent in December compared to a year earlier.

The gains were particularly pronounced in the final months of the year, with December showing an annualized rate of 6 percent job growth.[…]

The number of area residents reporting themselves as being employed increased by 3.9 percent in December compared to a year earlier. That’s even better than the payroll estimates.

And the civilian labor force — the combined number of all those both employed and unemployed — grew by 3.3 percent last year. Again, that’s considerably faster than the rate of population growth.

As I note in the column, January is always a lousy month for employment, so we will see month-over-month job losses when that data is released in a few weeks. The key will be the year-over-year comparison.

At this pace, it’s entirely possible that the Savannah metro area could finally be back to the pre-recession level of employment by early- to mid-2014 — about a year earlier than many of us estimated previously. (Of course, we can have a vigorous debate about the quality of those jobs, but that’s a different issue.)

There was also a Business in Savannah piece on Friday by Adam Van Brimmer about the recent hiring: Job market looks positive for metro Savannah

That’s an upbeat analysis too, but note that the final job growth in 2012 was better than cited there. A lot of numbers are noisy from month to month, but a broad number of measures show Savannah on a nice little run of job creation right now.

So I’m going to keep going where the numbers lead.

And I’ll let my readers know as soon as I see something in the numbers that troubles me.

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