I’m puzzled by this chart from the Brookings Institution‘s Hamilton Project, which attempts to predict how long it will take the United States to return to pre-recession level employment. The chart plots three scenarios: a pessimistic option, in which employment grows at 208,000 jobs per month, as it did in 2005; an optimistic option, in which employment grows at 472,000 jobs per month, as it did in the best month in the 200s; and a middle option, in which employment grows at 321,000 jobs, as it did in 1994. The takeaway from the graph, presumably, is that it will take a very long time to return to full employment. The problem with the graph, is that its assumptions are entirely arbitrary, to the point that its predictions are largely meaningless.
The function of science, or social science is to use observed data to create theories that make predictions. In this case, Hamilton is observing the period 1990-2008, a period of time that neither included nor followed a large recession, then theorizing that 2012-2025, a period of time that does follow a large recession, will behave like 1990-2008. Hamilton is essentially saying that because job growth never exceeded 472,000 jobs per month when unemployment was low, it cannot possibly exceed 472,000 jobs per month when unemployment is high. It’s just bad science, and it’s exactly the same bad science that failed to predict the recession in the first place. Any scenario planning based on historical data leading up to 2008 would have deemed it impossible that employment would fall by 12 million from 2008 to 2010. Why then, does Hamilton continue to use a forecasting method when that method’s limitations have been so clearly exposed?