Forecasting’s ‘Secret Sauce’
GSU’s expert economic analyst reveals the tricks of his trade.
Often I am asked to talk about the subject of forecasting, what I do, and what’s the “secret sauce” used in making my economic forecasts.
Before going into that I think it might be worthwhile to tell you about Georgia State University’s Economic Forecasting Center. As part of the J. Mack Robinson College of Business, our center is one of only two of its kind in the nation — and the only in the Southeast — that compiles quarterly national and regional forecasts. The business community, elected officials and the media come to the center for reliable and independent opinions on both national and local economic issues.
As director of the center, I have just begun my second decade. We just held the 42nd conference under my direction, and I am happy to report that the conference remains very well-received. We average between 250-300 attendees ranging from executives and entrepreneurs to GSU faculty, staff and students who consider this an educational opportunity. One reason for this success is that we have been able to attract marquee speakers, including CEOs from AirTran, Federal Reserve Bank of Atlanta and Zoo Atlanta and CFOs from Porsche, the Atlanta Falcons and others. We also invite renowned experts from prestigious universities such as the University of Michigan and UCLA, as well as our in-house faculty.
Now to that infamous secret sauce…. First, you need to have an education that provides you with good technical skills and a solid research base you can call upon throughout the course of your career. Also vitally important is the ability to communicate. This means you must be able to write well, have an engaging style and speak effectively before groups and on a one-to-one basis. On any given day you could be talking with the media, speaking to a group of community leaders or soliciting sponsors — all involving communication, but all requiring very distinct communications skills. Another characteristic of a good forecaster is being well-versed on the economic and political news of the day. Your background and years of study will help you know what to look for, but you must be tenacious and continually find the story behind the headlines. Furthermore, the forecaster must look to supplement the predictive power of economic modeling by meeting and discussing data with people in the “trenches” — everyone from business leaders to homeowners, to bankers, to the man on the street.
This is how you obtain that “gut feel,” aka, the secret sauce for predicting where the economy is headed.
Consequently, forecasting is a lifelong learning process. The more you do it, the more you understand and the better you become — hopefully. Keeping a good sense of humor is vital, especially in times like this when the economic news is less than cheery. As one forecaster said about today’s economy, “The future isn’t always what it used to be.”
Dhawan is Director of the Economic Forecasting Center and Clinical Full Professor at GSU’s J. Mack Robinson College of Business.