What will the U.S. economy look like a year from now? Will the unemployment rate still hover close to 10%? What will be the Dow Jones Industrial Average? What about GDP? When will things get better?
The famous economist John Kenneth Galbraith once said that “the only function of economic forecasting is to make astrology look respectable.” There is no doubt that economic forecasting is a difficult endeavor. But on October 21, 2010, the Missouri Council on Economic Education hosted an economic forecasting forum in Clayton, Missouri where we asked experts to predict the future.
At this forum, economic experts provided their overview of the U.S. economy and made projections for the next year. These experts included:
- Emmett Wright, CFA, Chief Investment Officer, Northwestern Mutual Management Company
- Alan Beaulieu, President, Institute for Trend Research
- Alison Lynn Reaser, Ph.D., Chief Economist, Point Loma Nazarene University, Fermanian Business & Economic Institute (formerly the Chief Economist for Bank of America).
There was a consensus among these leading economic experts that:
- The U.S. economy is in the midst of a slow recovery.
- It will take several years before the economy returns to its pre-2008 level.
- The future economic cycle will not be as manic as it has been recently.
- The growing U.S. debt is unsustainable and will require significant policy changes very soon.
The following table summarizes their projections of key economic indicators, as of October 2011:
|Expert Projections||Percent Change in Gross Domestic Product (GDP)||Percent Change Growth in Consumer Price Index (CPI)||Dow Jones Industrial Average||U.S. Unemployment Rate||Price of Crude Oil|
These projections paint a cautious picture of what the future holds for the U.S. economy. To put these numbers in context, the average annual growth in real GDP was approximately 3.31 percent from 1947 to 2010, with great variation from year to year. The Dow Jones Industrial Average is now hovering at around 11,000, and the U.S. unemployment rate was 9.5% as of September, 2010 (Bureau of Labor Statistics). So over the next year, the experts expect the U.S. economy to grow, but slowly.
All three experts expressed great concern about the growth of the U.S. budget deficit. This concern is based on the growing structural budget deficit that the U.S. incurs each year—Alan Beaulieu projects that the U.S. will run a $1 Trillion deficit each year for the next twenty years (absent major policy changes).
Tips for Using Economic Data in the Classroom
Numbers such as these, particularly figures that include the word “Trillion,” are hard to conceptualize. It is therefore difficult to engage students in a discussion that focuses on macroeconomic statistics. To help teachers do just that, the Council for Economic Education provides useful classroom lessons that incorporate macroeconomic data. These lessons can be found at the EconEdLink website: http://www.econedlink.org/economic-resources/focus-on-economic-data.php.
Each quarter, when economic data such as GDP, CPI, and Unemployment figures are released by the government, new lessons are available that challenge students to get to the bottom of what these numbers mean. By using these GDP lessons, educators can teach students to:
- Determine the current, recent and historical growth of U.S. real gross domestic product.
- Assess the relationship of real GDP data, the indexes of economic indicators, and business cycles.
- Speculate about the nature and impact of current economic conditions on consumers and producers, and implications for the future.
Teachers are encouraged to review economic data with students, showing them the source of this data and how it can be practically interpreted. These lessons provide excellent opportunities for analytical thinking. For example, students can be asked: “What recent data published by the Bureau of Economic Analysis supports the National Bureau of Economic Research decision that the U.S. recession ended in July, 2009?”
**To view the presenter PowerPoint slides in their entirety, please visit MCEE’s website at http://cas.umkc.edu/mcee/EconomicOutlook.html).