It’s an old adage, that “an economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”
But perhaps that doesn’t give them enough credit.
In late 2013, Capital Business asked a number of local economy watchers and business leaders to predict how the region’s economy would fare in 2014. We solicited their forecasts for job growth, house prices, the stock market, and the year-end unemployment rates for Maryland, Virginia and the District.
Some predictions, naturally, missed the mark. James Bohnaker’s didn’t.
Bohnaker, who at the time worked as an economist at Moody’s Analytics in Washington, proved to have the most clairvoyance out of all the experts, only barely missing the mark on every one of the regional economic measures. He predicted, for instance, that the Washington area would add 50,000 jobs last year, closer than any other forecast to data that came out this week, showing that the region added 46,300 jobs between January 2013 and January 2014.
Close on his heels was Gregory Leisch, chief executive at Delta Associates, a real estate analysis firm, who estimated the region would add 42,000 jobs. Our panel’s predictions ranged from a low of 17,500 to a high of 58,500.
“I would love to say I was fully confident about that prediction, but there’s always a little luck involved,” Bohnaker, now an economist at CBRE Group, a real estate investment firm, said in an interview. He noted that, had political crises such as the near-miss debt ceiling breach come to fruition, “those who predicted job growth of 20,000 could have very well been overshooting it.”
As it were, the D.C. area economy bounced back slightly from a tough year in 2013, but it continued to struggle to keep pace with the rest of the country.
“When you compare it to most of the other big metro areas, particularly those in Texas and California and New York, it doesn’t look so great,” Bohnaker said. Indeed, the New York City, Los Angeles, Dallas and Houston metropolitan areas all experienced job growth well into the six-figures last year.
It could have been worse, though. The Washington region has gotten a much-needed lift from the resilient tourism and hospitality sectors, Bohnaker said, which has continued to add jobs throughout the downturn.
“A lot of people are still visiting both domestically and internationally, both for business and for pleasure,” he added. “The downside of that is that people in those industries aren’t paid as well, so you’re left with a greater share of people working in low-wage jobs.”
Bohnaker’s predictions for unemployment levels in our local jurisdictions weren’t far off the mark, either, but they didn’t have quite the accuracy of James C. Dinegar’s forecasts. Dinegar, chief executive at the Greater Washington Board of Trade, overestimated Maryland’s end-of-year jobless rate (which landed at 5.6 percent) by four-tenths of a point and the District’s (which ended the year at 7.7 percent) by only one tenth of a point.
Virginia? Nailed it. Dinegar correctly predicted the Commonwealth’s unemployment rate would finish the year at 4.9 percent.
Collectively, then, Dinegar missed the unemployment marks by 0.5 points. Others who were dialed in include Stephen Fuller, director at the Center for Regional Analysis at George Mason University (over by 1.1 points for all three jurisdictions), Bohnaker (over by 1.2 points) and DeRionne P. Pollard, president of Montgomery College (over by 1.4 points). Interestingly, not one member of our panel predicted a lower unemployment level that what actually happened in any of the three jurisdictions.
(Fuller, it’s worth noting, also came remarkably close on the one non-local measure we asked about. He predicted the S&P 500 would close the year at 2,055. It finished at 2058.9, missing by less than four points. By comparison, the average gap for the rest of our panelists was more than 200 points)
Moving forward, even as employers start looking to bring on more workers, Dinegar says the local labor market will face new challenges, particularly as companies search for qualified candidates to fill their openings.
“I think we’re going to see employers start to struggle with recruitment and retainment – challenges we haven’t seen in many years,” Dinegar said. “We’re going to see candidates turning down offers, because they’re getting better ones elsewhere, and that’s something employers will have to figure out.”
Our team also asked for home price estimates, and Bohnaker, along with Goodwill of Greater Washington Chief Executive Catherine Meloy, seem to have the clearest vision on that front. Bohnaker prognosticated that the area’s year-end median home price would be around $405,000. Meloy thought it would close the year around $410,000.
It landed almost smack dab in the middle, at $408,000.
“I have to laugh,” Meloy said when asked about the accuracy of her prediction. “It’s just dumb luck, to tell the truth.”
However, it doesn’t take a crystal ball, or even any insider knowledge, to understand why prices have been on the rise, she said.
“There’s so much demand right now, and we’re seeing people sell their houses in three days, five days, seven days,” Meloy said. “Houses just aren’t staying on the market very long, and as a result, home prices are going to go up. It doesn’t take a housing genius to figure that one out.”
That isn’t likely to change any time soon. With more outsiders moving to the Washington area, and research suggesting that baby boomers are migrating back into the city, she expects home prices to continue rising gradually, reaching a median of $425,000 by the end of 2015.
More broadly, how will the Washington area economy fare in 2015?
“I think it’s going to be a strong year,” Meloy said. “We weren’t hit quite as hard by the weather as up north, and I think that will allow for a decent – not great, but decent – first quarter. After that, I think there’s reason to believe we will see a good year.”
“I expected better out of 2014,” Dinegar added. “I think 2015 will be the year 2014 was supposed to be.”
Bohnaker was slightly more cautious. He predicted the D.C. area would add roughly 66,000 jobs this year, calling for “a slight improvement in the local economy – but not a huge improvement.”