Predictions: Jobs!

Episode Summary

Executive Summary: Planet Money’s prediction game revisits economists’ forecasts for inflation, jobs, and home prices, then pits the most accurate forecaster against a new challenger for 2023. Sung Won Son beats Diane Swonk overall by nailing inflation and especially jobs, while both economists see easing inflation, a still-tight labor market, and no clear recession—just slower, uneven growth.

Main Topics: Forecast review: who was right on 2022? (Priority: 5/5): The episode rechecks last year’s predictions for inflation, housing, and jobs, comparing Diane Swonk’s and Sung Won Son’s calls against actual outcomes. Inflation cooled but remained elevated (Priority: 5/5): Sung’s higher inflation forecast proved closer to reality than Diane’s low estimate, because inflation stayed high after supply shocks, war in Ukraine, and later Fed tightening. Housing prices slowed more than expected (Priority: 4/5): Both forecasters expected continued growth, but actual home-price gains were much smaller than either predicted, showing a sharp cooling from the pandemic boom. Jobs market stayed exceptionally strong (Priority: 5/5): Sung’s prediction of very rapid job growth was nearly exact, reflecting post-pandemic labor recovery and persistent labor shortages. 2023 outlook: disinflation, tight labor, soft landing hopes (Priority: 4/5): For the new round, both economists expect inflation to fall, jobs to remain relatively strong, home prices to flatten or rise only slightly, and a recession to be unlikely but still a risk. Economic forecasting as humility and precision (Priority: 3/5): The episode emphasizes the difficulty of forecasting in a volatile post-pandemic economy and the idea that even top economists are often only right by small margins.

Key Arguments: Sung Won Son’s 2022 inflation forecast was closer because inflation stayed high at 6.5% rather than falling near Diane Swonk’s 2.3% estimate. Diane Swonk’s housing forecast was closer because home prices rose 5.8%, below Sung’s much higher 12% call. Sung Won Son was essentially exact on job growth, predicting about 350,000 jobs per month versus the actual 352,000. Both economists argue inflation should ease in 2023 as supply chains normalize and energy/food prices cool, though labor costs may keep it above pre-pandemic levels. Both see the labor market remaining tight because of retirements, lower immigration, and not enough new workers. Housing is expected to flatten or rise only modestly because mortgage rates are high, demand is cooling, and recession fears weigh on buyers. Neither forecaster expects a clear, broad recession in 2023, though Joe Brusuelas sees meaningful downside risk from credit tightening and banking stress while Sung describes a 'rolling recession' across sectors.

Data Points: 2022 CPI inflation: 6.5% - Actual inflation rate for the year; used to judge forecasts Diane Swonk 2022 inflation forecast: 2.3% - Her prediction for annual CPI increase Sung Won Son 2022 inflation forecast: 5.5% - His prediction for annual CPI increase 2022 home price increase (Case-Shiller): 5.8% - Actual annual change in the national home price index Sung Won Son 2022 housing forecast: 12% - His prediction for annual home price growth Diane Swonk 2022 housing forecast: 8% - Her prediction for annual home price growth 2022 job growth: 352,000 jobs per month - Actual average monthly job creation Diane Swonk 2022 jobs forecast: 200,000 jobs per month - Her prediction for average monthly job creation Sung Won Son 2022 jobs forecast: 350,000 jobs per month - His prediction for average monthly job creation Diane Swonk 2023 inflation forecast: 3% - Forecast for end-of-year inflation Sung Won Son 2023 inflation forecast: 4% - Forecast for end-of-year inflation Sung Won Son 2023 jobs forecast: 150,000 jobs per month - Forecast for monthly job growth through year-end Joe Brusuelas 2023 jobs forecast: 125,000 jobs per month - Forecast for monthly job growth through year-end Joe Brusuelas 2023 home price forecast: 1.5% increase - Forecast for annual home price growth Sung Won Son 2023 home price forecast: 0% - Forecast for no annual increase in home prices Joe Brusuelas recession probability: 75% - Firm-level 12-month recession risk call U.S. jobs needed to keep pace with population growth: 70,000 to 100,000 per month - Baseline labor force replacement estimate Historical average monthly job growth: 125,000 - Referenced norm for comparison Earlier 2022 jobs created after pandemic recovery: 4.8 million - Total jobs created despite technical recession fears Two negative quarters in 2022: 2 - Mentioned as a technical recession signal that did not become a formal recession

Pivotal Quotes: "It is so hard to do any predicting in this economy." — Diane Swonk: Her reflection after losing the 2022 round and discussing forecast uncertainty "The reason why it remains at a high level is the labor cost." — Sung Won Son: His explanation for why inflation may stay elevated in 2023 "I've been predicting what we call a rolling economic recession, where each sector takes turns going into a recession, but not together." — Sung Won Son: His view of the 2023 outlook, contrasting sector-specific weakness with the absence of a broad downturn

Implications: Listeners should expect slower but still resilient growth: inflation should ease, hiring remains strong, and housing cools rather than crashes. The bigger takeaway is that post-pandemic economics remain unusually hard to forecast, with small differences in assumptions producing big prediction errors.