By Neil Irwin
Washington Post Staff Writer
Monday, February 12, 2007

Believe your banker. Listen to the junior associate at your law firm. And read your newspaper with a skeptical eye.

These seem to be some lessons of the 2006 Local Economy Challenge. Meet the person who most accurately predicted how the Washington region would fare last year: Kathleen Walsh Carr, the president of Cardinal Bank Washington. And the least accurate? We'll get to that in a minute.

Carr correctly guessed that the value of goods and services produced in the Washington area would rise by 4 percent. She reckoned that the region would add 70,000 jobs; the number was 67,600. She figured that local stocks would rise 10 percent; they rose 9.3 percent.

Those were among the nine economic indicators that she predicted, on average, better than any other participant. "I am just stunned that I won," said Carr. "I wasn't throwing darts at a board, but almost."

Actually, she was being modest. Carr has spent 33 years as a banker, all in her native Washington. She said she based her predictions mostly on conversations with friends and clients, from whom she detected a general feeling of confidence. "It wasn't scientific so much as it was information gleaned from other people," she said. It didn't hurt that, as a member of the board of directors of the Federal Reserve Bank of Richmond, she routinely reviews its extensive economic research.

Carr wasn't the only winner. Last winter, we issued an open invitation to readers of washingtonpost.com to enter their own forecasts for the local economy. The winner of the People's Challenge was Katherine Bierlein, a 27-year-old associate at law firm Hogan & Hartson. Among other accurate predictions, Bierlein forecast that passenger traffic would slow at local airports and that housing prices would edge down.

Bierlein, a graduate of the University of Chicago who studied law at the University of Pennsylvania, said that to generate her predictions, she looked around.

"I work on F Street, and I look out the window and see construction every day --" she said, and then corrected herself. "Well, I don't have a window, but when I look out other people's windows, I see all the construction going on and things seem to be going pretty well."

Note to Hogan & Hartson: Get this woman a window.

Most of the competitors in our two challenges were men. So how did two women beat the odds?

"This is just reaffirmation of the fact that women are brighter and more intuitive than men," Carr said. "When you analyze a beehive, there's one queen, 20,000 drones and 70,000 workers. And it's not an accident."

At the other end of the results spectrum was Washington Post business columnist Steven Pearlstein. In his 2006 forecast, he presented a view of rapidly slowing growth. The local economy held up just fine, and Pearlstein ended in last place on our list. He correctly forecast that the housing market would slump. (His prediction of the median home price was almost dead-on.) But he wrongly expected that the slump and a slowdown in government spending would spread through the broader economy.

"I was a little bit premature and intentionally provocative," he said. But he is largely sticking to his guns and had the most pessimistic predictions of our 24 panelists for 2007. "When government contracting slows, it's going to be more painful than people think."

That's not to say he was completely unfazed by the loss. "All the big pieces are in place for the kind of painful adjustment that I anticipate. It just didn't happen last year, and I can't be sure it will happen this year."