Skip to main content
Smarter than the Average Bears?

I’ve had the impression for some time that academic economists have become more pessimistic about the economy than commercial ones, and therefore are perhaps more likely to support a larger stimulus package. The Wall Street Journal‘s monthly economic forecasting survey may provide some evidence of this.

The Journal surveys 55 economists each month. I divided these economists into five groups; the number of economists in each category is in parenthesis:

1. Commercial or investment banks (16);
2. Investment firms, such as hedge funds (9);
3. Commercial sector, not qualifying under one of the previous two categories, such as large corporations or industry groups (9);
4. Economic consulting firms (14);
5. Academic or nonprofit institutions (6).

One economist, James F. Smith, had credentials listed under both the academic and investment categories and therefore was excluded. (He also might be excluded as a wacko, having predicted GDP growth to recover to 2.6 percent this quarter).

As you can see, the Journal’s survey is not particularly well balanced. Academic economists seem to be underrepresented, as perhaps are economists in the commercial (but nonfinancial) sector. Nevertheless, let’s take a look at the average quarter-by-quarter GDP estimates for the five groups listed above:

From among these groups, one stands out as bearish and another as bullish. The bullish forecasts belong to the investment firms — whom, it might be noted, could have some institutional incentives to encourage investors that the water is warm enough to dip their toes back into again. This group forecasts GDP growth to recover to 2.72 percent by the fourth quarter of this year. The most bearish economists, meanwhile, are indeed the academic and nonprofit economists, who see GDP increasing to only 1.25 percent by the fourth quarter. The other three groups line up somewhere in the middle, although the banks seem to envision a deeper bottom than the others do.

For the record, here are how the economists were classified:

Banks (16)
Wells Fargo & Co.
Morgan Stanley
BNP Paribas
Societe Generale
Barclays Capital
Goldman Sachs & Co.
The Private Bank
PNC Financial Services Group
Deutsche Bank Securities Inc.
Comerica Bank
JP Morgan Chase & Co.
Bank of America
Nomura Securities International Inc.
Wachovia Corp.
Credit Suisse
National Bank of Kuwait

Commercial (9)
Mortgage Bankers Association
National City Corporation
Fannie Mae
FedEx Corp.
Swiss Re
Eaton Corp.
International Council of Shopping Centers
Perna Associates
National Association of Realtors

Consultancies (14)
Capital Economics
Global Insight
Wrightson ICAP
MFR, Inc.
Moody’s Investors Service
Encima Global LLC
MacroEcon Global Advisors
Macroeconomic Advisers
RDQ Economics
High Frequency Economics
Decision Economics Inc.
Economic Analysis
Standard and Poor’s

Investment Firms (9)
Combinatorics Capital
Wayne Hummer Investments LLC
The Northern Trust
Ameriprise Financial
RBS Greenwich Capital
Mesirow Financial
First Trust Advisors, L.P.

Nonprofit / Academic (6)
RSQE, U. of Michigan
Vanderbilt University
UCLA Anderson Forecast
Economic and Revenue Forecast Council
California State University
The Conference Board

Nate Silver is the founder and editor in chief of FiveThirtyEight.