Risks Cloud a Sunny Forecast; Job Picture Looking Up, Dollar Down
The U.S. job market should improve steadily this year, while consumer inflation eases and oil prices decline -- all good news, that is, if nothing goes wrong with the sunny economic forecasts released in recent weeks by many private and government economists.</br></br>The economy should continue to expand at a pace that is "not too hot . . . not too cold . . . just right," Macroeconomic Advisers LLC, the St. Louis-based forecasting firm, wrote in a recent report to clients, lifting a line from the Goldilocks tale.</br></br>"Lest we be too complacent about the future, we need only remember that the story ended with Goldilocks running screaming from the three bears' house," the firm said, citing several risks to its projections.</br></br>Even forecasts produced by the most advanced econometric models are essentially well-educated guesses about what is most likely to happen, based on past experience. And as such, they are subject to errors and surprises.</br></br>A year ago, many forecasters, including those at the Fed, overestimated how fast the economy would grow in 2004, in large part because they could not foresee the terrorist events, hurricanes and political turmoil that would send benchmark oil prices shooting to above $55 a barrel in October from around $35 in January. White House economists were among several who were over-optimistic about job growth, underestimating businesses' lingering caution and ability to squeeze more efficiencies out of their existing workforces.