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We
laughed out loud in the 1970s when our graduate
school professor suggested that social scientists
could become "as accurate as economists"
in predicting political and policy behavior. The
joke wasn't the still-nascent quantification and
data techniques we were learning, or even the
"Brother, can you paradigm?" puns he
loved. Why emulate mere economists, we chuckled,
when we could aspire to become, say, "as
accurate as weather forecasters."
In the years since, the explosion in information and
communications inspired humorist James Thurber to
remark one day, "There is so much information
about everything that you can't know anything
anymore." That explosion was sparked by
technological advances and new algorithms that
tackle problems with more, better information.
Economists, and weather forecasters for that matter,
have benefited as much as any social scientist in
these years. Data collection techniques are faster
and more accurate. From the NASDAQ to the Weather
Channel, that allows bolder and faster forecasts. It
also makes possible what we all need – the ability
to adjust data.
Richmond
economist Christine Chmura explains how adjusted
data works in her latest quarterly report, Virginia
Economic Trends, and why we need it.
"Forecasting economic growth is a difficult
task," she says in as straightforward a way as
possible. That's why an almost one percent increase
in Virginia employment measured in the 12-month
period ending about a year ago can become an almost
one percent decrease when adjusted data comes in.
And her choice of a dart board for the report cover
confirms what we thought decades ago.
So,
a
little test seems in order: comparing the
predictions that Chmura and two other leading
Virginia
economists made in January 2002 against the current,
adjusted data. Dr. Roy Pearson is an economics
professor at the
College
of
William
& Mary in
Williamsburg
.
Dr. Stephen Fuller is a professor and director of
the Center for Regional Analysis at
George
Mason
University
in
Fairfax
.
The three responded separately to a list of
questions posed by the Northern Virginia Technology
Council, a group of 1,600 technology and supporting
firms, eight months ago. Looking back, how accurate
were they?
Pearson
back then confirmed that 2001 ended with a recession
marked by diminishing economic activity, but he said
"it is not a deep recession." Chmura now
measures
Virginia
in a recovery phase that is not yet robust,
precisely because the recession was not very deep.
Fuller
crowed then about net new jobs created in the
Greater Northern Virginia region. Chmura, on the
other hand, at that time cautioned that "the
numbers for
Northern
Virginia
almost certainly are showing more employment growth
than there really was in the region." Chmura
now reports peak-to-trough Virginia employment in
2001 actually fell by 1.9 percent, much faster than
the national average, but also that the unemployment
rate in Virginia remains significantly lower than
the national average.
Pearson
emphasized then that consumer sentiment and
expectations would be a key factor in the size and
speed of the recovery. Dr. Fuller said there was
danger in developing a "recession
mentality." State government certainly is
proving him right with its bunker frame of mind born
of shell-shocks from a revenue recession. Chmura can
document the weakness and uncertainty by region and
industry sector.
Northern
Virginia
's
economy was not as severely affected as
Roanoke
's
in the last year. That means a services-based
economy shrinks slower than a manufacturing based
one. Interestingly, "the moving average of
building permits in
Roanoke
has now posted two consecutive quarters of
increases." Hampton Roads has been
"buffered by a large military presence,"
but more importantly, at an 8.8 percent growth rate,
was the
Virginia
region with the fastest-growing technology industry over
the last year. Could that be because Hampton Roads
has the "youngest median age of
Virginia
's
metropolitan areas?"
Lynchburg
dropped 26 percent of its technology jobs. Ouch!
The
fastest growth in
Virginia
this year has occurred in the amusement and
recreation services sector. That's understandable.
Who wouldn't want to escape? The slowest-growing
sectors are manufacturing and air travel. Okay, who
wouldn’t want to escape on something other than an
airplane? Manufacturing lost over 13,000 jobs in
Virginia
in the 12 months that ended in June. But
manufacturing wages paid were up 3.9 percent in the
same period. Fewer, more valuable employees…
Sounds as if productivity must be up, too.
"There
are still more risks on the downside than on the
upside," Chmura commented in January, "and
it can take up to two years for employment rates to
return to their pre-recession levels." That
certainly has been proven true.
Not
a bad set of predictions from three
Virginia
economists in total. Fortunately, the adjustment of
data can continue. But the question remains whether
using a prism to separate the glowing light ahead
into spectral parts really is better than a crystal
ball in preparing for the future. The gazer always
starts with "I see," which is part of the
visioning process good leaders have.
Virginia
Secretary of Finance John Bennett, for example, is
as good as any in marshalling data and laying it on
the table. But the late John Kenneth Galbraith also
warned that statistics could be "a technical
disguise of the truth." The General Assembly
money committees certainly are good at absorbing
data. But statesman Henry Clay insisted through the
mid-1800s that "statistics are no substitute
for judgment." It shouldn't take an algorithmic
genius to see a multiplicity of options for
Virginia
government to meet the challenges of revenues and
budgets.
Can
we get a peek at what
Virginia
's
economic future looks like given the data that
Chmura now has before her? Yes we can: She updates
her leading indexes monthly at www.chmuraecon.com.
The
highlights: Total non-agricultural employment down
0.4 percent in 2002, but jumping 2.3 percent in
2003. Hampton Roads,
Roanoke
and
Charlottesville
add net new jobs this year. Wages and salaries grow
by 2 percent this year and 2.6 percent next year.
Roanoke
,
Lynchburg
and
Charlottesville
lead in this category. Retail sales climb 2.5
percent in 2002 and up 7.1 percent in 2003. Hampton
Roads sales boom, but
Lynchburg
lags in this category. And building permits shoot up in
Charlottesville,
Roanoke
and
Richmond,
but not in
Northern
Virginia, Hampton Roads or
Lynchburg
.
Will these thing happen? The answer is a bold
"Maybe." If they don't happen, remember to
adjust your data. You'll be well on your way to
becoming as accurate as a social scientist.
--
Sept. 23, 2002
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