Economists Turn a Blind Eye to Historical Data
AUG 1, 2016 2:22 PM EDT
By Barry Ritholtz
Economists can’t seem to help themselves.
One might think that after they failed to anticipate the greatest financial crisis since the Great Depression, they learned to step back and look at the big picture. Instead, we're seeing the same blind spot: a pre-crisis dependence on the wrong data set of post-World War II recessions, which led to the biggest blunder in economic history.
Many failed to even recognize the crisis for what it was as it was happening. Much of the economic profession was in deep denial until Lehman, AIG and Citi were in free fall -- or worse. I was reminded of this courtesy of a bleak front-page article this weekend in the Wall Street Journal:
Economic growth is now tracking at a 1% rate in 2016 -- the weakest start to a year since 2011 -- when combined with a downwardly revised reading for the first quarter. That makes for an annual average rate of 2.1% growth since the end of the recession, the weakest pace of any expansion since at least 1949.
The piece did note that “The output figures are in some ways discordant with other gauges of the economy. The unemployment rate stands at 4.9% after a streak of strong job gains, wages have begun to pick up, and home sales hit a post-recession high" in June. It also pointed out that consumer spending has been strong as of late.
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http://www.bloomberg.com/view/articles/2016-08-01/economists-turn-a-blind-eye-to-historical-data
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