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Money pros dinged in financial crisis

Forecasters drill deeper into the economy
Forecasters drill deeper into the economy © Zadorozhnyi Viktor/Shutterstock.com

In the past five years, more business leaders have developed a greater understanding of the impact that the economic environment has on business performance, says Steve Cochrane, managing director of Moody's Analytics in Westchester, Pa. That means economists and their forecasts are in greater demand than they were before 2008.

"Our forecasting is now much more focused on creating a range of alternative economic outcomes," Cochrane says. "There is a need to create meaningful alternative scenarios for the outlook and to quantify the probabilities of those scenarios."

For instance, before the financial crisis, Moody's produced a baseline forecast each month for the U.S. economy, along with one upside and one downside scenario to provide context. Today, the firm produces six alternatives each month, for the United States, for each of the states and for each of the major U.S. metropolitan areas, as well as for the other countries it forecasts.

The depth of the financial crisis along with the changing regulatory environment of the banking system's nontraditional governmental policies have all led economists to stretch the boundaries of their typical forecasts.

"We have had to come to understand how unconventional monetary policy has and will continue to affect the economy," Cochrane says. "We need to better understand the shifting linkages between the U.S. economy and other regions of the world."

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