Ian Shepherdson knew he was sticking his neck out. But recently he went public with a startling forecast: the next government labor market report would show that the U.S. economy had created 850,000 jobs in December.
Less than 24 hours later, it became clear that Shepherdson, the chief economist and founder of Pantheon Macroeconomics, had missed the mark and missed badly. Employers in the last month of the year actually had hired just 199,000 workers, less than one-fourth the number he predicted, according to the government’s closely watched monthly tally.
For Shepherdson — and many others on Wall Street — the jobs forecast was both an unmitigated flop and an illustration of how difficult the pandemic makes it for even the most astute observers to assess the $23 trillion economy.
“Everybody wants to be pursuing precision,” he said in an interview. “But even before COVID, it was like hitting a moving target from a moving vehicle. Now, we’ve got a blindfold on as well.”
The pandemic is making a tough job even tougher. As the virus waxed and waned, it delivered some of the wildest ups and downs in U.S. labor market history. The COVID recession and recovery also erased economic relationships, emptying downtown office districts, sending workers to toil in their living rooms and leaving economists fumbling.
That’s resulted in an economy perched uncomfortably between the world of early 2020 and whatever reality will emerge once the pandemic is a memory. Meanwhile, familiar relationships between key economic variables have gone haywire.
Though wages are growing faster than at any point in the decade before the pandemic, for example, the number of Americans lured back into the labor market has been disappointing. Two years after COVID-19 first hit the U.S., the labor force participation rate remains near its lowest mark since the 1970s, when women began entering the workforce in significant numbers.
Yet a different measure, which tracks the number of…