Economics may be the "dismal science" but economists as a group sure seem to be an optimistic lot. Yes, there are a handful of "doomers" like Nouriel Roubini but most economists did not see the recession coming until it was already 10 months old.
Please consider unemployment forecasts. The Fed forecast unemployment at 8.4% in 2009 and the "adverse forecast" was at 10.3% in 2010.
Hello Ben, in case you did not notice, Jobs Contract 17th Straight Month; Unemployment Rate Soars to 9.4% and Bankruptcy Filings Reach 6,000 A Day.
Adverse Assumptions
Let’s take a look at all the Fed’s adverse assumptions for the recently conducted "stress-free test" as laid out in the Fed’s Stress Test White Paper.
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1 Percent change in annual average.
2 Baseline forecasts for real GDP and the unemployment rate equal the average of projections released by Consensus Forecasts, Blue Chip, and Survey of Professional Forecasters in February.
3 Annual average.
4 Case?Shiller 10?City Composite, percent change, fourth quarter of the previous year to fourth quarter of the year indicated.
Case Shiller Housing Index
Please consider the latest Case Shiller Housing Index.
The S&P/Case-Shiller Home Price Index ? which covers 20 metropolitan areas ? showed a price decline of 18.7% in March, suggesting a greater fall in prices than expected. Analysts were looking for an -18.40% reading, following the -18.67% reading for February. The 10-city measure fell a similar 18.6%.
The numbers were even worse on a quarterly basis. The Q1 report ? which covers all nine U.S. census divisions, rather than just 20 metropolitan areas ? recorded a 19.1% decline compared to the first quarter of 2008, marking the steepest fall ever in the 21-year history of the index.
“All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines,” said David Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Seventeen metro areas recorded a monthly decline in March, with Minneapolis, Detroit and New York posting record monthly declines.”
Note that the baseline scenario for housing for 2009 is -14%. Home prices are already down 19.1% and the adverse scenario will be under
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