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:
Wells Fargo & Co.
Goldman Sachs & Co.
The Private Bank
PNC Financial Services Group
Deutsche Bank Securities Inc.
JP Morgan Chase & Co.
Bank of America
Nomura Securities International Inc.
National Bank of Kuwait
Mortgage Bankers Association
National City Corporation
International Council of Shopping Centers
National Association of Realtors
Moody’s Investors Service
Encima Global LLC
MacroEcon Global Advisors
High Frequency Economics
Decision Economics Inc.
Standard and Poor’s
Investment Firms (9)
Wayne Hummer Investments LLC
The Northern Trust
RBS Greenwich Capital
First Trust Advisors, L.P.
Nonprofit / Academic (6)
RSQE, U. of Michigan
UCLA Anderson Forecast
Economic and Revenue Forecast Council
California State University
The Conference Board