Why Experts Keep Getting the Economy So Wrong

Derek Thompson (0:05)

In 1966, the economist Paul Samuelson said that the stock market predicted nine out of the last five recessions.

It's kind of a weird joke. He's saying that every single time the stock market goes down, people freak out, predict a recession, and about half the time they're wrong. Sixty years later, I think if we were going to update that sentiment for a modern audience, we have to say that economic commentators have predicted something like 100 out of the last two recessions. I mean, think about all of the times you have heard that this economy is doomed just in this decade alone, removing the first few months of COVID, of course, when the government basically put the whole economy in a cryo chamber to stop the spread. In 2021, inflation started to surge out of control. No recession. Then the Federal Reserve responded by raising interest rates faster than any time in modern history. Still, no recession. Then, the Russia-Ukraine war pushed up commodities prices. But no recession. Then, Donald Trump becomes president, announces some totally audacious unprecedented tariff regime on Liberation Day 2025 No recession. Then, AI takes off. Still, no recession. Then the war in Iran raises gas prices, and the deficit is rising alongside data center debt, and the bond market's a mess. And still, according to the most up-to-date estimates of economic growth, things are just kind of chugging along. Consider, for example, GDP growth. Last quarter, real GDP growth was 2%. The last quarter of Biden's presidency, it was 2%. Its average in the entire decade of the 2010s, just 2%. Or take unemployment. In the last month before COVID, during Trump's first term, the unemployment rate was just about 4%. Its average under Joe Biden, just about 4%. And today, after the tariffs and the wars and the AI and the gas prices, 4.1%.

I think this is very strange. I mean, think about all the economic news of the last few years. Think about all the op-eds you've read, all the videos you watched, all the podcasts you listen to, maybe including guests on this show, that continually predicted imminent doom. The AI bubble is going to pop. No, it actually won't pop, because AI is going to grow and take all the jobs. No, tariffs will crash the economy. No, the Iran war will crash the economy. No, the deficit will crash the economy. It's non-stop. How many shows do you listen to that actually go back and count the recessions we predicted that never happened? How many shows go back and ask, why are we getting the economy wrong and wrong and wrong again? What are the experts missing that they always seem so certain that everything is just about to go to hell? Meanwhile, national economic reality, as it actually exists, is so eerily stable. Two percent GDP growth, four percent unemployment, it's practically frozen in place, sealed in amber.

I don't know. I don't know why the economy is so resilient to these predictions of doom. But I'm hoping today's guest does. Jason Furman is an economist who often does the heavy lifting of answering my most unwieldy economic questions. Today's unwieldy question is, why do economic experts keep getting the future wrong? Why is economic commentary so pessimistic? What does it say about the US economy that reality keeps defying the doomsday forecasts?

I'm Derek Thompson, and this is Plain English.

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Annual driving history reruns do not apply in New York City. Jason Furman, welcome back to the podcast.