The predictions that guide policies are failing to perform as expected — especially those that defy common sense. These failures make it harder for forecasters to project the future. Here are some recent examples:

Today’s employment figures were released. The number of new workers rose more than expected and more than any economic group predicted. The long-standing view that the employable workforce was limited has not come to pass. Instead, the increased supply of job openings attracted more workers. Payrolls expanded by 225,000 — well above the consensus forecast of 165,000 and higher than any economist had projected.

At the same time, the unemployment rate rose slightly from 3.5% to 3.6%. While unusual, this happens. It means that while 225,000 people found jobs, an additional 350,000 began looking for work. A growing labor force is positive when job openings outnumber job seekers.

The percentage of the workforce filing new claims for unemployment insurance hit a historic low. This could be due to American workers being satisfied with their current jobs — confirmed by several surveys — or a hesitancy to seek new employment, especially if relocation is required. Likely it’s a mix of both.

The tariff war has not stalled growth entirely. It has, however, neutralized the gains that were expected from corporate tax cuts designed to align the U.S. tax code with international standards.

One persistent but flawed idea is that high employment leads to inflation. This belief causes the Federal Reserve to consider rate hikes to reduce employment as a tool for lowering inflation. Yet the past decade has shown strong growth with low inflation. Despite this, the Fed continues to aim for a 2% inflation target — a policy that arguably harms lower-income individuals the most.

One of the most important recent insights, voiced by several prominent Democrats including Larry Summers, is that economic growth is essential. Only with growth will we have the resources to address the many social and economic priorities raised during the campaign season.

Katz Family Financial