Just as the forecast correctly called the current national recession, it has been consistently recognized as one of the most accurate economic predictors in the nation. The forecast will celebrate its 50th anniversary during its year-end conference on Wednesday, Dec. 5, at The Anderson School at UCLA (visit www.uclaforecast.com for details).
The forecast began humbly enough. "I taught a course called 'Business Forecasting,' and it seemed reasonable to me that we should actually have a forecast," Robert Williams recalls. Williams signed on as director; he and other faculty members of the business school began the forecast as a voluntary - i.e., unpaid — operation.
Williams created early forecasts by polling participating faculty about their estimates of the coming year. He then compiled and averaged the results, creating essentially a consensus-based forecast. It was a simple — if time-consuming — operation, one that Williams would do for much of his 30 years as the program's director. That is, until something more efficient came along: the computer.
Williams recruited Larry Kimbell, who had a strong background in economics and an inclination toward new technologies, in 1973. At the time, the forecast was just beginning to move to an econometric system online (the forecasters had been using computers on campus, but ones not connected to databases). "I instituted the change to the online systems," says Kimbell, who worked on the forecast for many years before becoming its director. This meant a change to detailed tables and econometrically generated forecasts, and the group embraced such progress. Without online computers, Kimbell says, "There's no way we could generate the kinds of details and the high level of details with such consistency."
Such consistency in forecasting helped bring honors and recognition to UCLA and to the forecasting team. Larry Kimbell, for example, captured the Sterling Prize, awarded to the most accurate forecast over a three-year period, in 1988.
The UCLA forecasters correctly predicted a sharp recession in 1982 at a time when other economists were expecting a good year. "Most were optimistic about 1982, since we were coming out of the recession of 1980," says Williams. "But we didn't see it that way."
The Anderson Forecast for California has been the most widely followed in the state. UCLA economists predicted both the seriousness of the early-1990s downturn, and the strength of the state economy's rebound since 1993.
Current director Edward Leamer and senior economist Tom Lieser have kept the forecast out front by correctly analyzing the current cycle of economic downturn, triggered largely by the collapse of the technology sector. When the National Bureau of Economic Research recently declared that America's long-running period of growth gave way to a recession back in March, it came as no surprise to Leamer. Leamer had predicted back in December 2000 that a recession would hit the nation by the second quarter of 2001. On the nose.