Annual derby tests ability to forecast U.S. economy

“THINK of the economy as a big exuberant dog that jumps up on people,” my father said to me long ago, “and think of the Fed as a man with a rolled up newspaper.”

The winners in my 21st annual Derby of Economic Forecasting Talent understand what my father meant. The first-, second-, and thirdplace finishers all expect a recession this year, brought on by the Federal Reserve.

The derby

In my DEFT competition, contestants must guess six economic variables: economic growth, inflation, interest rates, the price of oil, U.S. retail sales and the unemployment rate.

The person with the most accurate guess for each variable gets three points. Second-closest gets two points and third-closest one point. In case of ties, the points are pro-rated.

The theoretical maximum score is 18. But no one ever comes close to that. A score of around seven will usually win.

Thirty-one people entered last year, including a professional trader, an airline pilot and several engineers.

Paul “Bo” Gottlieb of Chesapeake, Virginia, a general contractor in commercial construction, grabbed first place this year. He racked up 7.2 points and scored some points in four of the six categories, which doesn’t happen very often.

“I think we are in for something worse than a soft landing,” he says. “I believe many suppliers are taking advantage of inflationary pressures to profiteer.”

Ray Holzer, a recently retired manufacturing cost accountant from Jeannette, Pennsylvania, finished second, thanks mainly to a very accurate forecast on interest rates.

“I think the Fed is going to have to raise the federal funds rate all the way to 6 percent,” he says.

Holzer figures the Fed will hike rates two or three more times in 2023.

David Debo, a mechanical engineer from North Huntington, Pennsylvania, came in third. He had tied for second in the derby a year ago.

“The war in Ukraine is affecting almost everything,” he says, “and we’re still in recovery mode from COVID.”

How to enter

To enter the derby, answer the six questions below and send your entry to me at jdorfman@dorfmanvalue.com, or John Dorfman, Dorfman Value Investments, 101 Federal Street, Suite 1900, Boston MA 02110. Entries must be postmarked or timestamped by midnight, March 15, 2023.

Please provide:

■ Your name.

■ Address.

■ Phone (in case you win and I want to interview you, please include a weekend phone number).

■ Email address.

■ Occupation.

You aren’t required to state the reasons behind your forecasts, but I appreciate it if you do.

Here are the questions:

1. The U.S. economy grew 2.1 percent in 2022. How much will the gross domestic product grow or shrink in 2023?

2. Inflation ran 6.4 percent in 2022, down slightly from 7 percent in 2021.

As measured by the Consumer Price Index, what will inflation be this year?

3. The interest rate on 10-year U.S. government notes rose to 3.88 percent in 2022 from 1.52 percent at the end of 2021. What will it be as of the end of 2023?

4. The price of a barrel of crude oil (West Texas Intermediate, or WTI) shot up to around $120 in the spring and summer of 2022 but ended the year little changed at $76.44. What will the oil price be on Dec. 31, 2023?

5. U.S. retail sales (including food) totaled $748.24 billion in December 2022. What will they be in December 2023?

6. Unemployment fell in both 2021 and 2022, ending last year at 3.5 percent. What will the unemployment rate be as of December 2023?

The winner of the derby will receive a plaque, trophy or engraved clock. Good luck to all.