Here?s another thing the pandemic has screwed up: economic forecasts

Employers in the last month of the year actually had hired just 199,000 workers, less than one-fourth the number he predicted, according to the government’s closely-watched monthly tally.For Shepherdson — and many others on Wall Street — the jobs forecast was both an unmitigated flop and an illustration of how difficult the pandemic makes it for even the most astute observers to assess the $23 trillion economy.“Everybody wants to be pursuing precision,” he said Monday in an interview. In laymen’s language, they analyze how companies and workers have behaved in the past under various economic conditions to predict how they will behave in the future.Ideally, economists make predictions by comparing current conditions to a previous period when the underlying structure of the economy was similar, said economist Michael Strain of the American Enterprise Institute.But there is no precedent for determining what happens when a globalized economy operates amid a lethal respiratory virus that has killed more than 5 million people worldwide.The government dramatically underestimated jobs growth this summer“The problem is what possible period do we have when the economy is close to what it is today?” said Strain, a former Federal Reserve system economist. But the firm has been producing its monthly reports only since the start of the pandemic while traditional government labor market data extends to the late 1940s.Relying on a shorter data series inevitably means a fatter margin of error, Shepherdson said.“Until we’ve got five years of this HomeBase data, we won’t really know how useful it is,” he said, adding that he may begin emphasizing the wide range of possible outcomes when he issues future payroll estimates.Forecasters today face a double-barreled challenge: uncertainty over both where the U.S. is in the business cycle and what the post-pandemic economy will look like, according to Erica Groshen, senior economic adviser to Cornell University’s industrial and labor relations school.The adjustments that government economists use to compensate for routine seasonal fluctuations, including retailers’ big holiday season hiring and firing cycle, also are misfiring amid the pandemic.