Clairvoyance would be handy for analyzing the state of the economy and projecting its future path, but Tevlin and her staff perform that role for the Federal Reserve System’s Board of Governors, headed by Ben S. Bernanke, without such powers.
“Forecasting the economy is a really challenging job,” said Tevlin, the assistant director at the Division of Research and Statistics for Federal Reserve’s Board of Governors. “You have to see pretty far into the future, which is pretty hard to do. There are unexpected events in the world and the economy and we can’t project those.”
Tevlin and her team research the impact of financial market conditions, fiscal policy initiatives, weather disruptions, global developments and many other factors that might affect job creation, household and business spending, housing markets and inflation.
It is inherently challenging to forecast the ups and downs of a dynamic economy, but it’s been particularly so during the financial crisis, Tevlin said. Not only is there a long lag time between setting policy and realizing results, but there is no way to predict all the occurrences that can affect the U.S. and global economies. The earthquake followed by the tsunami in Japan is just one example.
“You have to be pretty humble and comfortable with the fact that your projections don’t always come through,” Tevlin said.
Tevlin oversees a staff of 21 economists, who are constantly following developments in the U.S. economy in real time. They look at the latest data, monitor the markets, read the academic literature and investigate what influences are moving the economy. They’re constantly improving their methods for understanding the economy in the long run, employing theoretical and empirical models to try to understand financial happenings.
Another job is to provide the members of the Federal Open Market Committee with research and materials for their eight meetings a year, at which the policy-making body reaches decisions on the economy and what actions the Federal Reserve should take.
The information assists the Federal Reserve with its monetary policy goals of promoting maximum employment and stable prices. When reviewing economic forecasts, the Fed uses the tools at its disposal, such as a change in interest rates, to try to make sure that people are employed and prices are steady.
Unlike in other areas of government, no one’s trying to push a political agenda, Tevlin said. Her team’s task is to give the best information possible to policymakers so they can do their job.
“If anyone knows as much about the current situation, why businesses are investing as much as they are or as little, what investments they’re undertaking, what the reasons are, it’s Stacey,” said David E. Lebow, associate director, Division of Research and Statistics and Tevlin’s supervisor. “Our job is prognosis. She’s totally on top of that.”
If it sounds complicated, it is.
Beth Anne Wilson, assistant director in the Division of International Finance, remembers a presentation Tevlin gave to new economists on the forecasting process. It included a schematic.
“The boxes looked like a cobweb of issues showing all the sectors of the economy and how they fit together,” Wilson said. To be all-encompassing, “the screen would have to be the size of the wall,” Wilson said. “It was to get at the idea that it was extremely complicated.”
In college, Tevlin didn’t start out with the idea that she would contribute to decisions that move financial markets. She had planned to be a math major. But an economics course steered her onto a new track.
“Maybe I was hooked then,” she said. She enjoyed the interaction between math and public policy questions, and ended up majoring in economics and getting a Ph.D. She was attracted to the federal government, she said, because of the importance of the work. “The effects of monetary policy have such a broad impact on American society.”
Tevlin has one added element that informs her work, according to Wilson. Tevlin grew up outside Detroit in a world with auto manufacturing as its base. When she returns home these days, she gets an up-close view of how Americans are suffering in the current economy, Wilson said.
“She has a real connection to what’s happening in what some people call ‘real America.’ ”
This article was jointly prepared by the Partnership for Public Service, a group seeking to enhance the performance of the federal government, and washingtonpost.com. Go to http://washingtonpost.com/wp-srv/politics/fedpage/players/ to read about other federal workers who are making a difference.