When Mark Zandi speaks, Wall Street and Washington usually listen. During the financial meltdown three years ago, the Moody’s Analytics chief economist was a familiar and sometimes reassuring face on major cable networks and on Capitol Hill. When the government came close to its first default ever last summer, Zandi made the rounds on networks describing the potential consequences of a stalemate between the White House and Congress.
Zandi is part of a new generation of high profile media savvy economic analysts who are helping to shape the national debate on the economy, unemployment, the deficit and international affairs in a crucial election year. Once a relatively staid community of erudite and academic experts, today Zandi and others like Diane Swonk of Mesirow Financial and Paul Ashworth of Capital Economics have become the go to authorities for explaining and simplifying highly technical material to the masses.
What makes them different from well-known academic economists like Joseph Stieglitz, Nouriel Roubini, Kenneth Rogoff and Paul Krugman, to name a few, is that they are dealing with more than economic theory. Zandi, Swonk and Ashworth meet regularly with business clients to hash out data on housing, employment and interest rates and formulate business strategies. In return, their high-level clients frequently offer inside scoops that inform their future forecasts.
“Economists back then when I was in school were pretty green eyeshade in academic institutions,” Zandi said in a recent interview, referring to his time spent studying at the University of Pennsylvania. “I knew I wanted to be an economist from very early on, but I never really thought of it as being in the public eye.”
As the global economic crisis has come to dominate the national debate, their economic jargon translation skills have overtaken economic forecasting prowess as their biggest selling point. “The real value of somebody like Mark [Zandi] is not that he can predict the future accurately, but that he can tell you how the economy is now, what it seems likely to do, and give you a sense of the trajectory and what the likely risks are in a way that’s crystal-clear,” said Darren Gersh, Washington bureau chief for PBS’ Nightly Business Report.
But many times, the experts are wrong.
At the start of 2011, Zandi forecast that the U.S. economy would grow by more than 4 percent by year’s end. In reality, U.S. GDP grew at less than 2 percent last year, partly because of high energy prices resulting from a political crisis in Libya, the Japan earthquake and tsunami, and the debt ceiling fiasco.
Swonk forecast repeatedly during the early and mid-2000’s that the growing housing bubble would burst, and real estate values would start falling. Her prediction came true, but not until 2007 when the subprime mortgage crisis carried the housing market down with it. Ashworth predicted that the U.S. economy would continue to contract through 2009 on the heels of rising consumer debt and constrained bank lending. It turned out the recession officially ended in June 2009, and the economy slowly started its upward crawl.
“The problem is, when you’re using the past 30 years’ data to establish these relationships between everything in the economy, and then you have a once in a generation event like the one we’ve just gone through with the financial crisis, then those models aren’t going to pick that up,” Swonk told The Fiscal Times.