Inside the Crystal Ball: How to Make and Use Forecasts

Chapter 5Can We Believe What Washington, D.C. Tells Us?

I don't make jokes. I just watch the government and report the facts.

—Will Rogers, quoted in Saturday Review, August 25, 1926

Forecasters have no choice but to rely on information from the nation's capital—Washington, DC. There are several reasons for this. Government statistics are the raw material for most forecasting models, and projections and analyses by various government organizations can be key inputs shaping thinking about the future. Also, analyses by Washington, DC–based public policy interest groups and lobbyists are often influential as well. The challenge for forecasters is to assess the credibility of this information. Government statistics are subject to substantial revisions. And very different answers to the same questions come from the government agencies and organized interest groups inside the Beltway. Thus, forecasters are regularly challenged to sift through the welter of statistics and analyses coming out of Washington, DC and determine what information to trust when assembling their forecasts.

Does the U.S. Government “Cook the Books” on Economic Data Reports?

On the morning of October 5, 2012—just a month before the Presidential election—the financial markets and most forecasters were surprised when the Bureau of Labor Statistics (BLS) reported that the civilian unemployment rate in September had dropped by 0.3 percentage points to 7.8 percent. For supporters of President Barack Obama's presidential ...