The Performance of the BBER Forecast: Economic Shocks Challenge Forecast.

• Author: Bridge, Brandon
• Position: THE YEAR IN REVIEW

The year 2020 has been a particularly challenging year for economic forecasts. Forced business closures and massive unemployment around the country were generally not anticipated by forecasters prior to February 2020, and they were certainly not anticipated by the BBER forecast.

This is evident in Figure 1, which shows that the difference between actual and projected inflation adjusted nonfarm earnings is the highest it has been since 2002. The BBER forecast for 2020 was a growth rate of 2.3%. While data is not yet complete for 2020, it appears that growth will come in around -2.1 % percent. This results in a difference between predicted and actual growth of 4.4%. Also, though the data is sure to be revised in coming years, the growth rate for 2020 is estimated to be worse than the Great Recession of 2008-09.

The accuracy of the BBER forecast over the years continues to adjust with recurring revisions of historical data on economic growth. The most recent revision to 2016 and 2019 data reduced the accuracy of the BBER prediction by 0.1 percentage points in both years. The data revision for 2016 shows growth coming in 0.1% lower than previously calculated, while 2019 grew at 0.1% higher than previously calculated.

Forecasted growth since 2002 has missed the mark by an average of 1.63 percentage points per year. This is higher than the 1.47 percentage point average deviation that was reported last year. Due in small part to the data revisions, this is primarily a reflection of the large disparity between the currently predicted and previously projected totals for 2020, which...