But Fed forecasts are as wrong as everyone else's!

The employment report is great news, right? Not according to many prominent commentators. Here's Paul Krugman:

Good news is bad news

Today’s unemployment report was good news. But in a real sense good news is bad news, because this month’s not-too-bad number deflates the sense of urgency.

The fact remains that realistic projections show unemployment staying disastrously high for many years. The chart above is from the minutes of the Fed’s Open Market Committee. Unemployment above 8 percent in the fourth quarter of 2011; above 7 percent in the fourth quarter of 2012.

That's fallacy #2 in my taxonomy (see post below). The Fed's forecasts are liable to be as wrong as everyone else's. Let's examine, for example, the Fed's forecasts from October 2007, two months before the start of the recession.



GDP growth of 1.8-2.5% in 2008 and 2.3-2.7% in 2009; unemployment averaging 4.8-4.9 percent in both years. Um, how did that work out? And should I bring up the Fed's embarrassing forecasts in October 2008 - after the collapse of Lehman Brothers, when the bottom was falling completely out of the economy? Here's what the Fed's consensus forecasts were for 2009:

GDP: -0.2-1.1%
Unemployment: 7.1-7.6%

Oog!