Last Friday’s ugly jobs print, missing expectations by almost 50%, really highlights why the field of economic study is dismissed by scientists as being a science at all. It’s considered a soft science, which is like giving the fat kid a participation ribbon and pat on the head at the end of track and field day. You’re either prego or you’re not. You’re either a scientist or you’re not. And why are economists not considered scientists (remember I’m a trained economist)? Well it’s because economists don’t like to stick to the results.
Mark Zandi, Moody’s Chief Economist on Friday claimed the numbers were not to believed. Many other ‘prominent’ economists said similar things or that it must just be an anomaly, a one off not to be considered as meaningful. Having worked for investment banks for 15 years let explain what it means to be a Chief Economist for a bank. Chief economist is a term used synonymously with Head Market Cheerleader. That sounds like an exaggeration but it truly is not. These guys are paid to get as many public media exposures as they can muster and then feed the people the sugar. Namely, through wind, rain, snow, or all time high overvaluations convince retail investors to keep that money flowing to institutional money managers.
Now these guys are not evil they are simply paid to do a job and that is to keep you feeling good about the state of the economy so you continue to borrow and leave your money in the market. Your money makes the world go round. Whether it’s a small irrelevant investment bank like Jefferies or a large agency bank of the Fed like JPM they all need your money for them to make money.
Science is rigid in nature as it deals with the facts whatever they may be. Scientists have theories and then test those theories using accepted processes. When the test results come back they accept them, they don’t deny them if they don’t support their theory. And this is why economics is a soft science and economists are not scientists. Their level of hubris is such that they are convinced their theories are right no matter the facts. So the next time you see a Chief Economist on TV picture him or her in a little cheerleading outfit because the bullshit flowing from their mouths is as ludicrous as that image itself.