Deutsche Bank-US Economic Perspectives A practitioners guide to forecast...-110735932

10 October 2024Deutsche BankResearch North America United States Economics US Economic Perspectives Date A practitioner's guide to forecasting in unprecedented timesExecutive Summary:This report presents an analytical review of one of the most challenging and intense – indeed frightening – five-year episodes in US economic history: the Covid 19 pandemic and its aftermath. Our review is written through the lens of practitioners who served on the front lines of macroeconomic forecasting, striving daily to make sense of what was happening in order to form a view for our clients of what would come next over the months and even years ahead. The challenges were great because the initial shock and subsequent responses of policy makers, households, workers, firms, and markets were all largely unprecedented.Our analysis draws on and is documented by a significant sample of the literally hundreds of analytical and forecasting documents published by our US and global economics research teams at Deutsche Bank over the period from early 2020 through the summer of 2024. This evidence is augmented by the record of consensus and Fed forecasts over the same period, as well as the substantial academic research on this period. And while our focus is on the US experience, we also consider parallels and differences with the European experience at key junctures.The analysis runs through the following seven key phases of this period of history:Phase I: The initial pandemic shock in early 2020. We begin with the terrifying realization that the shock was not just another case of bird flu, but rather a full-blown global pandemic that had the clear potential to plunge the global economy into the abyss. The uniqueness of this shock meant that we had to discard our usual forecasting tools and design new approaches to forecast and monitor the resulting decline in economic activity across households and firms.Phase II: The massive monetary and fiscal policy responses to the shock that occurred in two stages: first, almost immediately in the wake of the pandemic’s spread to the US and second less than a year later in another two huge doses of fiscal stimulus. These responses righted the ship and set the stage for a wild ride of economic developments to come.Phase III: The surprisingly strong recovery and rapid tightening of the labor market that followed the initial plunge. We trace through the various supply and demand factors that led to this tightening and that in turn would contribute centrally to the Peter Hooper, Ph.D.Vice-Chair of Research+1-212-250-7352Matthew Luzzetti, Ph.D.Chief US Economist+1-212-250-6161Deutsche Bank Securities Inc.IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.Distributed on: 10/10/2024 19:41:06 GMT7T2se3r0Ot6kwoPa10 October 2024US Economic PerspectivesPage 2Deutsche Bank Securities