By Arnold Kling
I argue that criticizing the Administration’s employment forecasts is hypocritical.
suppose you were to do a blindfold test. Give an economist the actual output growth of 7.8 percent over three years (roughly 2.5 percent per year) and ask the economist to “predict” the breakdown between growth in employment and growth in output per person. Almost any economist would have said something like “Well, the output growth sounds pretty close to trend. So, assuming that trend productivity growth is about 1.5 to 2 percent per year, I figure 5 or 6 percent total productivity growth and 2 or 3 percent total employment growth.”
No economist in his or her right mind would have predicted that we would have gotten 7.8 percent growth in output with 11.3 percent growth in productivity and a loss of 3.1 percent in employment. That is completely outside the experience of history.
For Discussion. If you were told that productivity is likely to grow at 3 or 4 percent per year for the next few years, what policy implications would this have?