A recent instance is the decline in wage growth over recent years, which has been larger than implied by the historical relationship with the unemployment rate. Of course, we may be justified from time to time to think that history is likely to be a poor guide, but it’s worth being explicit about any such deviations.
Finally, while models play an important role in the forecasting process, the value of models should not be overstated, particularly because no one model that we have captures all of the relevant features of an economy or consistently “beats” other forecasts. 4 Central forecasts Central forecasts attract a great deal of attention and commentary from financial market participants, the press and the general public.