By Dr. George Calhoun
Executive Director of the Hanlon Financial Systems Research Center at Stevens Institute of Technology
Executive Summary
- April 5, 2025: “Global brokerages raise recession odds; JP Morgan sees 60% chance” – Reuters (April 5, 2025)
- July 21, 2025: “JP Morgan Chase said the bank’s economists are no longer expecting a recession.” – The Wall Street Journal
It turns out that professional economists’ forecasts are useless – as forecasts. They do not provide accurate predictions about the future direction of the economy. They are too volatile to function as reliable economic or financial signals for businesses or investors. And while by definition a forecast should serve as a leading indicator, today’s prominent forecasts appear – perversely – to be lagging indicators that only belatedly catch up with events. They are especially poor at predicting the crucial turning points in the business cycle, such as the onset of a Recession.
This is not a new diagnosis. There is today a hapless nihilism among policy-makers who have been burned too often by forecasts that didn’t pan out.
“The failure of economists to forecast recessions is virtually unblemished.” – Asst Director of the International Monetary Fund
“I don’t think anyone knows whether we’re going to have a recession or not… It’s just not knowable.” – Jerome Powell
These flaws were clearly exposed by the whiplash in expert sentiment set off by the “tariff shock” this spring. A burst of negative forecasts in April and May produced a sudden wave of economic defeatism that surged through the markets and the business community, and alarmed the public.
Those forecasts turned out to be completely off-base. It was misinformation, or “fake news” in today’s jargon. Even the most prestigious forecasting sources were implicated. Examples discussed in this column include the long-running surveys of professional economists by The Wall Street Journal and by the Philadelphia Federal Reserve, as well as models used by the New York Federal Reserve and several major financial firms – all of which exhibit these shortcomings.
Those false warnings from the spring have now been rescinded. But the credibility of the “experts” has been compromised, again. It is time for a thorough reassessment of the value of traditional macroeconomic forecasts to serve as anything more than grist for what turn out to be essentially meaningless media headlines.
The Ebb and Flow of Recession Fears
It’s summertime, and apparently also the season for revising, retracting or reversing all the economic forecasts published last spring – particularly as to the question of whether the U.S. is headed towards a Recession. In April, almost every forecast called for one, and soon. Now the backtracking has begun (e.g, JP Morgan, shown above).
It is the second abrupt shift in professional opinion this year. The “expert consensus” in the U.S. has lurched from complacency to panic and back again in 180 days.