Here's a link to all the Capital Comments columns.
 

It’s easy to find out what’s going on in the economy now.  You can get gross domestic product (GDP) growth on the Bureau of Economic Analysis website, at www.bea.doc.gov.  Growth above inflation was 4.4% in the first quarter.  You can see the inflation and unemployment rates on the Bureau of Labor Statistics website, at stats.bls.gov (nope, no “www”). Inflation in the twelve months through May was 3.1%, and the unemployment rate in May was 5.6%.

But suppose you don’t want to know what’s happening now, but what’s going to happen for the rest of 2004 or in 2005?  The easy answer is, forget it, nobody knows.  Still, lots of people in business and government need to make educated guesses about the future.  Some of these guesses are published on the world wide web. 

Start with the professors.  There’s a forecasting group at the University of Michigan called RSQE, for “Research Seminar in Quantitative Economics.”  It’s at rsqe.econ.lsa.umich.edu (again no “www” ) They publish a forecast four times a year, most recently in mid-May.  There’s a summary of what they think will happen, and lots of numbers. 

What do they think?  They’ve got GDP growth at 4.6% above inflation for this year, 4.1% for next year.  Inflation is 2.5% in ’04, 2.2% in ’05, and the unemployment rate is 5.6% in ’04 and 5.2% in ’05.  GDP will continue to grow like it’s been growing, inflation will fall with the end of the oil price spike, and the unemployment rate will fall because the growing economy will (finally!) create a lot of jobs.  The 2005 numbers are nearly identical to the numbers in 1997, one of those great years before the recession.

On to the business forecasters.   The Philadelphia Fed does a survey of several dozen business economists four times of year, posted at www.phil.frb.org/econ/spf.  There’s one from the end of May on their site now.  The forecasts come from companies like Merrill Lynch and Verizon and groups like the U.S. Chamber of Commerce and the National Association of Home Builders.

The forecast looks familiar.  GDP growth of 4.6% in 2004 and 3.9% in 2005, inflation of 2.7% this year and 2.2% next year, and unemployment at 5.5% this year and 5.3% in 2005.   Just a little less optimistic than RSQE, but still very similar to the expansion years of the 1990s.

Finally, government. To project the effect of new tax and spending laws on the Federal budget, the Congressional Budget Office needs a forecast of the economy.  It’s only updated twice a year, so if you go to the CBO website (www.cbo.gov), you’ll see a forecast from January.  They thought then that GDP would grow 4.8% this year and 4.2% next year, that inflation would be 1.6% this year and 1.7% next year, and that the unemployment rate would be 5.8% this year and 5.3% next year.  They were more optimistic about inflation in January, before the oil price hikes. 

What’s different about the CBO is that they project all these numbers through the year 2014.  Nobody else has the nerve to try that.  Of course, there are no statements like, “in January 2009 a recession will begin and it will last until March 2010.”  Instead, they predict the average growth, inflation and unemployment figures for the long run.  For 2006 to 2009, they think GDP will grow 2.8% above inflation, they think the inflation rate will be 2.2%, and they think the unemployment rate will be 5.1%.  After we fully recover from the recession, GDP will settle into more moderate growth, the inflation rate won’t change much, and the unemployment rate will fall some more from where it stands now.

These long run numbers can come in handy.  For example, if I’m trying to figure out how my savings will hold up for retirement twenty years from now, I’ll need an inflation number.  The CBO guesses that 2.2% is about right. 

So, there you have it.  Three respectable economic forecasts, free for you and me on the worldwide web.  Such a deal!