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On Wednesday, the National Association for Business Economists, or NABE, released the results of its latest survey of professional economists. The economists now predict our recession will end in the second half of this year, when GDP growth will clock in at 1.2%. That's still skimpy, but it's night-and-day compared to our current mess.

"Recession End In Sight, Economists Say," declared CBS.

"Economists: Recession to End in 2009," says CNN.

We're saved! Yippee!                  
Good news, right? Sure. Between the looming death of General Motors (NYSE: GM  ) and the capital brouhaha of Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) , any positive report by a group of well-educated and fancy-titled economists is bound to be clung to. People are tired. They're broke. They're scared. They want good news.

Unfortunately, what you won't find in NABE's forecasts is the only thing that really matters: the accuracy of its past predictions. Anyone can throw out forecasts. What matters is whether those forecasts are even remotely correct.

And from this point of view, NABE's record is pretty bleak. Over the past year and half, nearly every macroeconomic prediction it's made has been not only off track, but drastically so. With the awesome power of hindsight, here are some recent NABE predictions compared to what really happened.

May 2008:

  • NABE Prediction: "This is a very shallow downturn. In fact, only slightly more than half of our [NABE] members believe it will ultimately be declared a recession. And, of those, the majority believes it will be over either this quarter or the next [one]."
    Reality: The economy was already six months into a recession -- by some measures, what would become the worst one in 70 years.                                                       
  • NABE Prediction: (from Bloomberg) "The worst of the U.S. credit crunch and housing slump is about over, and growth will pick up to 2.1 percent in the second half, according to the poll of 52 [NABE] professional forecasters ... More than 60 percent of the economists surveyed predicted that businesses and consumers will find it easier to borrow in the final six months of the year."
    Reality: The real credit crunch hadn't even started. By the end of 2008, it was nearly impossible for anyone to borrow.
  • NABE Prediction: (per the survey committee chair) "We are most of the way through the downturn, or the worst of it. Recovery forces are in place and conditions should improve over the next year and a half."
    Reality: The worst part of the downturn hadn't even begun. The biggest "recovery forces," massive liquidity measures and bailouts, weren't even dreamed of yet.

November 2008:                                                    

  • NABE Prediction: "Following a small contraction in the third quarter of this year, the NABE forecasters expect real GDP to decline at a 2.6% rate in the fourth quarter."
    Reality: Real GDP contracted at 6.3% -- almost two-and-a-half times more than NABE's forecast.
  • NABE Prediction: "The unemployment rate is expected to rise to 7.5% by the end of [2009]."
    Reality: Six months later, unemployment is already 8.9%. Seemingly resilient companies like Microsoft (Nasdaq: MSFT  ) , Pfizer (NYSE: PFE  ) , and Google (NYSE: GOOG  ) are cutting workers.
  • NABE Prediction: "The [budget deficit] is now expected to hit $765 billion during fiscal year 2009."
    Reality: According to the Congressional Budget Office, 2009 will produce a $1.7 trillion deficit.

Feb. 2008:

  • NABE Prediction: (from Market News International) "The consensus of macroeconomic forecasts made by a panel of 49 professional forecasters [NABE], projects the yield on 10-year Treasury notes to end 2008 at 4.10%."
    Reality: 10-year Treasuries ended 2008 at just over 2% -- the lowest yield ever.
  • NABE Prediction: "The 2009 outlook, shown for the first time, calls for real GDP to grow 2.9% over the course of the year."
    Reality: Real GDP fell 6.1% in Q1 2009, making the possibility of annualized 2.9% growth a miracle on steroids, laced with caffeine.

Fair is fair
Now, I know what you're thinking: "NABE's predictions were thrown off course because of Wall Street's sudden meltdown -- something that no one could have seen coming."

True. But that's the point I'm trying to make. The forces that shape macroeconomic movements are almost exclusively unpredictable. Economies are an incredibly complex web of human psychology, consumer confidence, political squabbles, accounting rules, the flow of information, the supply of natural resources, and countless other factors. No matter how many Ivy League degrees one possesses, the amalgamation of these factors isn't something that can be predicted with precision. And since economists' work doesn't produce anything tangible, it's far too easy for us to ignore their track record. If they were doctors, engineers, or pilots, their abysmal track record would leave most of them either dead or in jail.

Now, there are indeed signs that the economic free-fall is abating. But that hardly means anyone knows precisely when the recession will end. As NABE's predictions show, there were "green shoots" of hope in May 2008 as well. But those signs of hope were almost immediately buried. Such hindsight observations should remind you how imperfect economic forecasting is, and convince you to take any confident forecast with a grain of salt.

For related Foolishness:

Fool contributor Morgan Housel doesn't own shares of any of the companies mentioned in this article. Google is a Motley Fool Rule Breakers selection. Microsoft and Pfizer are Motley Fool Inside Value recommendations. The Fool owns shares of Pfizer, and has a disclosure policy.

Read/Post Comments (8) | Recommend This Article (29)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 28, 2009, at 3:57 PM, ShannonPhD wrote:

    I think the best, most accurate predictor of a recovery is the growing shrillness and desperation evident in the bears and short sellers. The more articles like this one where bears seek anything to cling to to try and undermine a recovery and save their short positions, the more likely recovery has already taken hold. On a shrill desperation scale, I'd only put this column as a 7 out of 10, but the smell of desperation amongst short bears is growing daily.

  • Report this Comment On May 28, 2009, at 10:12 PM, TheRealBCF wrote:

    From my vantage point, I am seeing a slight pickup in business, and there is a level of optimism I haven't seen in about 2 years (I'm in construction). However, in July of last year it appeared the recession was ending, and then things started to tank suddenly in August and they died by September.

    Positive signs? Home sales are up a tiny bit (they have stopped plummeting, which is good. Credit seems to be loosening a bit. My business is increasing and projects which sat on hold for months now are happening. My phone is ringing all day where two months ago it never rang.

    Negative signs? There is a huge inventory of unsold homes and foreclosures. House prices have dropped so far it will take a long time for them to come up enough to make home building profitable. There is a lot of overbuilding in commercial projects that has added to an inventory of vacant shopping centers and other buildings. Unemploymnet is high, and people are overleveraged. This will all take some time to work through.

    However, I am cautiously hopeful that the worst is behind us.

  • Report this Comment On May 28, 2009, at 10:38 PM, Matt8265 wrote:

    These are the same people that 98% of, missed this downturn right?

  • Report this Comment On May 28, 2009, at 11:26 PM, Ibeatmykids wrote:

    From the look of everything I am actually feeling quite comfortable in my opinioin. I want GM to just go ahead and file for bankruptcy to just go ahead and get it over with. That way we can start making progress. I am beginning to have a whole lot of contempt for that "company". But all in all I think there is hope where as a few months ago I seriously questioned whether America could make a come back.

  • Report this Comment On May 28, 2009, at 11:32 PM, efire wrote:

    This depression is nowhere near through, and honestly with the current economic decisions the country is making, it's only going to get worse.

    Economies tend to go up the freer you are to "do stuff", such as entrepreneurial endeavors, running businesses, and investing. Our government (in a frighteningly socialist way) is heading in the exact opposite direction. And quite frankly, that scares me.

  • Report this Comment On May 29, 2009, at 5:02 AM, minduza wrote:

    Wow, I would say they aren’t predicting, their job is to cheer regular people and to form opinions. After that kind of reports you hear your friends quoting and saying that everything is over :)))

  • Report this Comment On May 29, 2009, at 6:46 AM, devilinside wrote:

    The recession will be over when it's over. If you think that we are out of the woods yet, your only kidding yourself. Things are going to get worse before they get better.

    Case in point. US dficit the highest ever recorded and still getting worse. Jobs still being lost, many more forclosures to come in the next 6 months.

    Taxes will rise suppressing the economy and jobs further and inflation to follow in the double digits.

    If you can ignore all of that, then I guess you could say the recovery is on it's way.

    Oh and lets not forget the geopolitical situation, Iran, North Korea, Pakistan and Afganistan.

    This Gov't is going to spend us right into hell.

  • Report this Comment On May 29, 2009, at 11:24 AM, MyDonkey wrote:

    For another example of a group of "experts" who got it wrong, check out the graph and comments on the great depression here:

    "NABE's predictions were thrown off course because of Wall Street's sudden meltdown -- something that no one could have seen coming."

    Not true. Numerous people saw it coming, and told us so: people such as Jim Rogers, John Paulson, Meredith Whitney, Nassim Nicholas Taleb, Nouriel Roubini, and Ron Paul, among others. In particular, Peter Schiff predicted and explained exactly what was going to happen, and he was right.

    "Economies are an incredibly complex web..."

    The basics are not complex at all. You don't need a PhD in economics to understand that an economy based on consumption and debt is not sustainable.

    The folks who say the worst is yet to come are not "fear-mongering"; they're just being realistic. And 84 percent of Fools in this poll agree with them:

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