Marketplace Morning Report: "The messy, tricky, hairy task of economic forecasting"
Date: January 28, 2026
Host: David Brancaccio
Guests: Susan Schmidt (Portfolio Manager, Exchange Capital Resources), Chris Farrell (Senior Economics Contributor)
Episode Overview
This episode dives into the inherent challenges and paradoxes of economic forecasting, especially in light of recent headlines about layoffs and anticipation around announcements from the Federal Reserve. Host David Brancaccio explores why, despite frequent inaccuracies, economic forecasts remain a vital tool for everyone from central bankers to households. The discussion features insights from portfolio manager Susan Schmidt on the current labor market and the tech sector’s AI boom, as well as from Chris Farrell on the value and pitfalls of forecasts.
Key Discussion Points and Insights
The State of Economic Forecasts and the Fed’s Role
- [00:16–00:43] David Brancaccio previews the day’s big news: a Federal Reserve meeting expected to keep interest rates unchanged, with attention paid to the Fed's views on jobs, prices, and growth.
“Why do we embrace economic forecasts when they're so often wrong?”
—David Brancaccio ([00:16])
Labor Market: Headlines vs. Reality
- [00:43–01:22] Recent major layoffs (Amazon: 16,000, UPS: 30,000) generate alarming headlines, but Susan Schmidt emphasizes these large companies do not represent the whole picture.
- U.S. employment is mostly driven by smaller businesses.
- National unemployment rate remains steady despite headline layoffs.
- The Federal Reserve assesses such broad data, not just high-profile layoffs, when setting policy.
“Remember that employment in the U.S.—the majority of it happens at businesses that are smaller than Amazon or UPS... overall, the unemployment rate has been holding steady.”
—Susan Schmidt ([01:01])
Stocks and the Ongoing Tech/AI Boom
- [01:22–01:54] Brancaccio asks Schmidt about market reactions to big tech earnings and AI’s effect on valuations.
- Investors are optimistic about AI-driven productivity.
- Concerns about whether high valuations are sustainable, but no sign yet of an imminent "bubble burst".
“At the moment, I think investors are positive on the outlook.”
—Susan Schmidt ([01:31])
“It’s certainly not the same bubble that we saw in the tech crash in the turn of the century. But... expectations are always perhaps more optimistic than what can be delivered. Wait and see.”
—Susan Schmidt ([01:54])
Humility and Humor in Economic Prognostication
- [02:14–02:26] Lighthearted banter about the "turn of the century" reminds listeners how long these cycles and conversations have been repeating—and how humbling forecasting can be.
“The turn of the century, them were days. 1899. You and me, Susan, we sound ancient.”
—David Brancaccio ([02:14])
Are Forecasts Worth the Trouble?
- [03:59–04:38] Brancaccio cites Lao Tzu: “Those who have knowledge don’t predict. Those who predict don’t have knowledge.”
- Despite poor accuracy, financial services and institutions are steeped in forecasting.
- Chris Farrell introduces research showing just how off forecasts can be, especially around big events like recessions.
Research on Forecasting Accuracy
- [04:38–05:36] Chris Farrell points to studies on forecasting:
- IMF study: average forecasts badly missed the approach of recession, usually projecting continued growth up to the downturn.
- Study of S&P 500 predictions: year-ahead “guru” predictions are accurate only 47% of the time—worse than a coin flip.
“The track record gets famously poor... what is rare is accurate forecasting of the turn to recession.”
—Chris Farrell ([04:50])
“Their accuracy rate on average was roughly 47%, which statistically is worse than a coin flip.”
—Chris Farrell ([05:13])
“When an analyst gets something right, they brag... when they get it wrong, guess who doesn’t return the phone calls and own up.”
—David Brancaccio ([05:36])
Uncertainty, Data Problems, and the Value of Ranges
- [05:54–06:21] Farrell notes that data is often messy and subject to revision, and many events are fundamentally unpredictable.
- Modern forecasts present a range of outcomes, not certainties.
- Michael McCracken (Federal Reserve Bank of St. Louis) argues that forecasting is valuable for planning, not prediction.
“You can't get rid of the uncertainty when guesstimating the future. I mean, major shifts... often reflect the impact of outlier events.”
—Chris Farrell ([05:54])
“Forecasts aren't perfect because life is uncertain. But... the activity offers insights for planning ahead.”
—Chris Farrell, summarizing McCracken ([06:21])
Using Forecasts Wisely
- [06:58–07:21] Brancaccio shares an anecdote: the "choose your own adventure" nature of some forecasts conveys a practical truth. Companies must plan for positive, flat, and negative scenarios alike.
“One of our forecasts is that the economy gets better. Another one... it’s flat. And another one is that it gets worse. And so like that seems ridiculous at first, but... you got to plan for all three.”
—David Brancaccio ([06:58])
“In the end you do, because you make your bets. But then you also hedge in case that bet goes wrong.”
—Chris Farrell ([07:21])
Notable Quotes & Memorable Moments
-
On the limits of forecasting:
“Those who have knowledge don’t predict. Those who predict don’t have knowledge.”
—Lao Tzu, quoted by David Brancaccio ([03:59]) -
On using forecasts as planning tools:
“Treat them as one input into a broader planning exercise.”
—Chris Farrell ([06:21]) -
On humility in economics:
“The track record gets famously poor… accurate forecasting of the turn to recession [is] rare.”
—Chris Farrell ([04:50])
Useful Timestamps
- 00:16 — Setting up the day’s Fed meeting and the state of economic forecasting
- 01:01 — Schmidt puts large layoff headlines in context
- 01:31 — AI and tech stocks optimism
- 03:59 — Lao Tzu’s warning about forecasters
- 04:38 — IMF & S&P 500 forecast accuracy studies
- 05:54 — The messy, uncertain nature of economic data
- 06:21 — Value of forecasting as a planning tool, per Michael McCracken/Fed
- 06:58 — Brancaccio’s forecast anecdote: planning for every scenario
- 07:21 — Hedging bets in planning
- 07:33 — Close of the core discussion
Summary:
The episode underscores that while economic forecasts are persistently flawed—often spectacularly so—they remain indispensable as tools for planning and stimulating necessary debate. Forecasts offer ranges, not answers, and should always be treated as just one input among many. As the guests remind us, everyone from major financial players to ordinary citizens relies on forecasts, not for certainty, but for guidance when making their own bets on an uncertain future.