31 January 2011

Predictions Plus-Minus Update

Crystal Ball Earth In April 2009, we began keeping track of how accurate all of our predictions have been since January 2008, providing updates for our readers once a quarter ever since.

Today, it's time once again to update our prediction accuracy score, in which we make use the most unforgiving metric ever developed for measuring performance: the plus-minus statistic from hockey and basketball!

Using this system, we gain a point if we're right, lose a point when we're wrong, and score a zero for when the outcome of a prediction either cannot yet be determined or, in the case where we make multiple predictions, when we have contrary results that cancel each other out. Like a game of horseshoes, close doesn't count where near misses are involved!

Ultimately, our plus-minus score will reveal the number of times we scored hits rather than misses in making predictions of the future. If we're no better at predicting the future than a coin toss, our plus-minus score will gravitate toward zero. If we're better at predicting the future than that, our score will rise over time, and if we're really bad, our score will surely fall.

Three months ago, our plus-minus score was +35. Here's how we stand today:

  • Number of Predictions Made Since January 2008: 113
  • Number of Correct Predictions: 72
  • Number of Incorrect Predictions: 34
  • Number of Outcomes Not Yet Determined or No Decisions: 7

Overall, for the predictions where we've been able to establish the outcomes to date, our plus-minus score has risen to +38. Measured as a percentage, our prediction accuracy rate is 67.9%.

The table below updates the status of all the predictions that we've successfully determined the outcomes during the last three months, as well as those for which we are still waiting for the outcome. The blow-by-blow commentary is just a bonus that you'll hopefully find to be entertaining!

Political Calculations' Predictions Plus-Minus Score Update, 31 January 2011
Date Prediction Outcome +/- Score
21 December 2009 Using incomplete data for the month of December 2009, economy would dip in the second quarter of 2010, with a slow recovery afterward. We anticipate that meaningful growth in the number of jobs would likely begin with the third and fourth quarters of 2010. We anticipate that the NBER will declare the recession they found to have begun in December 2007 to have ended in the third quarter of 2009, but we make a case for 2010Q2 as a more realistic alternate. Too soon to tell. It will be a while before we get a full confirmation for these predictions. On the potential plus side for us, different branches of the Federal Reserve have used their own models for predicting what the NBER will do to find that July 2009 is the month they will most likely declare to be the ending date for the recession. Update: We were a bit off in calling July 2009 as the end of the recession, since the NBER declared June 2009 as the bottom, but we nailed 2010Q2 as being exceptionally slow, making this batch of predictions a split decision so far. We're still waiting to see if meaningful growth in the number of jobs happens through the fourth quarter, but so far, we're on track with that last part of the prediction as the number of people counted has having jobs has risen since July 2010. Update: There was no meaningful improvement in the number of employed Americans after March 2010. That final part of our prediction now counts as a miss. -1
30 July 2010 When we updated our forecast for where the finalized GDP for 2010Q2, we snuck in a prediction for 2010Q3 in our chart. Although we expect our greatest accuracy when we used the newest, finalized GDP data for the preceding quarter, we're testing out how well projecting the next quarter's GDP based on the advance release data works out! We'll see if we're anywhere close in October 2010, and won't know for sure until December 2010. We'll also offer a more routine prediction when the 2010Q2 data is finalized in September 2010. Update: The clock is still ticking with the advance release GDP data coming out on Friday, 29 October 2010. Update: Our forecast was for GDP to be $13,317.7 billion - the advance release data put GDP at $13,260.7 billion, an error of 0.4%, which falls within our typical 2% target range for scoring a correct prediction for GDP. +1
25 August 2010 Can we predict what average health insurance premiums will turn out to have been in 2010? If single coverage falls between $5,098 and $5,265 and family coverage falls between $14,166 and $14,452, then yes, we can! We won't know until next year when the Kaiser Family Foundation releases its 2010 Annual Survey of Employer Health Benefits. Update: It turns out we should only have waited a month! The KFF's 2010 Annual Survey of Employer Health Benefits was released in September 2010, putting the average health insurance premiums for single coverage at $5,049 (a miss, even if just $49 below our target range) and for family coverage at $14,038 (a more substantial miss), as it appears the recession took a bigger bite out of the growth rate of health insurance premiums than we anticipated. -2
28 September 2010 We create a tool that predicts that the average cost of tuition and required fees at a four-year institution of higher learning (aka "college") will rise to $14,541 in 2009, $15,394 in 2010, $15,869 in 2011, $15,538 in 2012 and $16,212 in 2013. We modify these predictions for 2009, 2010 and 2011, taking the "under" for each of these years. We would anticipate being within 2% of the values for 2012 and 2013. These predictions will take some time to play out. The confirmation will be provided by the annual Digest of Education Statistics produced by the U.S. Education Department. +0
5 October 2010 Using the finalized GDP data for the second quarter of 2010, we project GDP for the third quarter of 2010 will be within 2% of $13,284.3 billion chained 2005 U.S. dollars, giving nearly 70% odds that real GDP will actually be between $13,115 and $13,424. This is our "official" prediction for where real GDP will be in 2010-Q3, which we'll "officially" find out on 22 December 2010. Our first indication of how close we are will come as early as Friday, 29 October 2010 when the advance estimate of GDP is released by the BEA. Update: Officially, the third GDP estimate for the third quarter of 2010 came in at $13,278.5 billion, 0.44% away from the center of our target range! +1
8 October 2010 Applying our tool that relates the rate of economic growth to the rate of unemployment in the U.S., we project that real GDP will be about $13,272.3 billion for 2010-Q3. Assuming that figure is correct (or nearly so), we use that result with our "official" method to project that the GDP growth rate for 2010-Q4 will fall from about 2.4% in the third quarter to 2.0%. To be determined. It's pretty interesting to have an entirely different method of projecting future GDP give such close results to our "official" approach, where we've consistently been within 2% of our target value. Update: Officially, the final GDP estimate for the third quarter of 2010 came in at $13,278.5 billion, 0.05% away from what we forecast here using unemployment data - we may be onto something here! Unfortunately for us, the advance estimate of GDP for the fourth quarter of 2010 came in at 3.6%, which hopefully means the economy is turning the corner in a more positive direction. Altogether, we net a zero on this combination of predictions. +0
25 October 2010 A week before the month to which it will apply even arrives, we forecast that the average of daily closing stock prices in November 2010 will be in a range between 1182 and 1218. With October 2010 very much on track to hit our target range for that month, this change would mark an upward move in stock prices. We went back over the data for the S&P 500 since January 1871 and found that on a month-to-monthy basis, "up" has happened some 56.1% of the time. Of course, that figure also means there's a 43.9% chance stocks will fall, so there's plenty of opportunity to be wrong. Right now, we're at the cusp for what direction the market will have moved a month from now, so here's hoping for a not-so-noisy month!... Update: The average daily closing value of the S&P 500 in November 2010 was 1198.89 - score! +1
1 November 2010 Using tax receipt data, we anticipate that U.S. household median income fell in 2010. We estimate it fell to a level around $47,211 from $49,777 in 2009. We won't officially know until the U.S. Census releases the data for 2010 in September 2011, but we should have an early indication in March 2011 when it releases its Current Population Survey income data. +0
2 November 2010 We forecast that the number of new jobless claims for the week of 30 October 2010 will be between 411,000 and 508,000. The actual number of initial unemployment insurance claim filings was finalized at 459,000! +1
4 January 2011 We recount the story of the most challenging prediction we've ever made (for where the S&P would be in December 2010), before cryptically hinting that the S&P 500 would go somewhere between 1268 and 1313, "in the absence of an excessive amount of noise or a change of fundamental outlook." We pull off the impossible for December 2011, having predicted that the average of the S&P 500's daily closing value would fall between 1225 and 1257 "next" at Barry Ritholtz' site in early November 2011 (it averaged 1241.53 in December 2011.) As for the 1268-1313 range, there's no question that we'll hit this value for January 2011, with the S&P 500 having averaged 1282.43 through 28 January 2011. +2
21 January 2011 After seeing the price-dividend growth rate ratio spike in December 2010, we anticipate that we'll see a trough in stock prices by the end of February 2011. While the 1.8% dip in stock prices on Friday, 28 January 2011 suggests a correction may be in the offing, we won't know if the S&P 500 will have passed through a trough in February 2011 until March 2011. +0

We're coming up on the end of this project, which we'll terminate with our two-year predictions plus-minus score accounting anniversary in April 2011. As part of the grand finale, we'll unveil just how we rank among the community of financial and economic analysts and gurus!

Previously on Political Calculations

The following links will take you to our previous prediction outcome reports, which we've presented below in the order they've appeared here approximately every three months beginning with April 2009. You can get the most recent status updates by clicking the "track record" tag at the bottom of the post.

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