Economists blame a run of overly optimistic labor forecasts, including Friday's high-side miss by more than 100,000 on February jobs, in part on their enthusiasm as the US economy grows at the fastest pace in almost two decades.
"It's hope springs eternal, with everyone waking up and thinking this is the day" the labor market turns around, said Joshua Shapiro, chief US economist at New York-based MFR Inc.
PHOTO: EPA
Shapiro was one of the 65 economists in a Bloomberg News survey that led to a median forecast of 130,000 new jobs for February -- more than six times the 21,000 that the Labor Department actually reported. Forecasts overshot results, before revisions, by an average of 104,000 over the past four months.
Friday's predictions ranged from 45,000 to a high of 210,000.
"It may also be a matter of trying to force the issue by emphasizing the positive indicators," said Shapiro, whose own forecast for 100,000 job in February was below the survey's median. "It can be hard not to make spot forecasts based on your medium-term outlook." Gross domestic product will expand 4.6 percent this year, the most since 7.2 percent in 1984, according to the median forecast of 61 economists in a Bloomberg News survey taken Jan 30 to Feb. 6.
Economists including Joseph LaVorgna at Deutsche Bank Securities Inc raised estimates this week after filings for unemployment insurance fell and the Institute for Supply Management's manufacturing survey showed that more companies plan to hire. After Friday's disappointing jobs numbers, US Treasury notes had their biggest gain in two months, pushing down yields, and the dollar dropped against the euro.
The misses also show that it's difficult to make forecasts amid historic gains in productivity and unusual hesitancy among executives to hire, another economist said.
"Businesses are just a lot more cautious than they were in the past," said Sherry Cooper, chief economist at BMO Nesbitt Burns in Toronto, who had forecast a gain of 125,000. "The hiring intentions in the factory survey should be more legitimate, but we haven't sent the follow-through."
For all of last year, productivity rose 4.4 percent following a 5 percent gain in 2002, the Labor Department said in Washington. The increases in the last two years are the first to exceed 4 percent back-to-back since record-keeping began in 1947.
Productivity has outpaced economic growth for the last three years, also the longest stretch ever.
"When it comes to forecasting the monthly payrolls number, it is better to look to what employers have done, rather than what they say they intend to do," said Richard Yamarone, chief economist at Argus Research Corp. in New York, whose forecast of 45,000 jobs was the lowest in the Bloomberg survey.
The highest forecast in the survey was 210,000 by Brian Wesbury at Griffin, Kubik, Stephens & Thompson in Chicago. In an interview Thursday, Wesbury said the ISM manufacturing report weighed "front and center" in making his forecast.
Anecdotal evidence from quarterly earnings conference calls at 207 companies suggests hiring will remain weak in the first half of this year, Yamarone said.
A survey published Wednesday by the Business Council, a 150-member association of company leaders, found that while the percentage of chief executives who planned to hire rose, 45 percent said they would hold payrolls steady and 22 percent still projected declines.
Other economists, including Ian Shepherdson at High Frequency Economics Ltd. in Valhalla, New York, said they expect jobs gains to accelerate in the coming months as productivity growth slows.
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