As a futurist, part of what I do is to present the future to audiences and readers around the world. Presenting a vision of the future, making predictions and developing forecasts is what a futurist does.
Regular readers of this column know that since last September I have presented you with a number of economic forecasts and predictions. There has been a constant flood of economic information and revised predictions in the media. Economic forecasters seem to be rushing to revise their forecasts of just a few months ago to try to stay ahead of the tsunami of bad economic news. In this environment I thought I should take a look back to see how accurate my forecasts to you have been.
I take great pride in my ability to make correct forecasts and predictions for you my readers, to the audiences I address and to the clients I advise. In this case the correctness of my predictions are, unfortunately, extremely accurate.
Last fall, in a column titled “The Collapse of the Third Economic Wave” I forecast that the 40 year ever upward growth of consumer spending as a percentage of the GNP would fall. There is no question this has occurred and there is absolutely no suggestion this will change course for at least the next two years if not for longer.
In October I predicted that “Thrift will replace extravagance” and that “Thrift will become the new cool”. Any question here? Just ask all the bankers who have taken business junkets in the past few months. Listen to all the people who, with pride, talk about driving cars that have over 100,000 miles on the odometer. Hormel is now running three shifts seven days a week in the factory that makes Spam
In early January I predicted that employment in the U.S. would: “show a topping out at around 9-11% sometime during the second half of the year.” At the time even the Fed was suggesting an 8% top. Well it seems that I will be correct in my prediction. By the end of the first quarter of 2009 we should be close to 8%, the top of what most forecasters has suggested for the 2009 high. The unemployment numbers will not slow for the next few months.
In November, standing alone, I predicted that there would be 6-9 months of deflation. This one was hard for many people to even wrap their minds around as we have all been conditioned to constant inflation albeit at varying single digit levels. Well, as I look at the numbers and at what I see as I travel North America, nothing is more expensive than it was a year ago. Part of this reality is the collapse of the third wave mentioned above. Consumers are just not spending as the household savings rate has, in the last six months, climbed from a negative .5% to a positive 3.5%. In a holiday season where 50-70% off was the norm, few consumers buy products that are not on sale, putting additional pressure on prices. This deflation could well continue for the remainder of the year.
In January I predicted: “Retailing is in a free fall. There will be numerous bankruptcies in the U.S. and around the world in the first quarter. Lead by the apparel sector, many chains will either declare bankruptcy or will close numerous stores”. This one was easy to predict amidst the retail desperation of the holiday season and has of course been proven true.
As for the real estate sector I forecast: “We have been living through the collapse in residential real estate for the past two years. Now we will live through a huge downturn in retail and commercial real estate. Shopping malls will be shuttered as vacancy rates soar and significant commercial properties will go into default, starting first with properties purchased with a lot of leverage during the past three years. Loans will be called. This will be a cleansing process of the removing excess leverage in these sectors. Some cities will obviously fair better than others.” This of course is starting to unfold. The second quarter of 2009 will be a time of deepening trouble in these two major sectors as the media will move its negative lens of the world to empty shopping centers and office buildings largely vacant. Every major metropolitan area will experience this.
In January I predicted that: “for most of 2009 oil will trade between $50-70 a barrel” While this could still prove to be true, I think, fortunately for all of us, that this may have been an incorrect prediction. Glad to have been wrong on this given the correctness of all the other predictions. I now think that taking all the trading days of 2009 into account the vast majority of them will have oil trading between $35 – 55 a barrel.
It is important for a futurist to be correct more times than not in forecasts and predictions. Unfortunately we have entered a very painful economic time, so the accuracy of these forecasts represents a truly painful reality. I stand before you, painfully correct.