Looking Back at 2010: How Did We Do?
We know you count on our advice. So we're our own harshest critic.
At Kiplinger, our eyes are usually fixed firmly on the horizon -- always looking ahead, anticipating Washington’s next move, assessing the economic outlook, scouting for technological breakthroughs and so on. Once a year, however, we turn our gaze backward, taking a look at the year that’s drawing to a close and how our expectations for that year panned out.
We couldn’t have come much closer on our economic forecasts for the year. As 2010 approached, we told our readers to expect a year of modest growth and transition, with the government scaling back its interventionist role. We anticipated GDP growth of about 3% -- and no double dip into recession, as some feared. As 2010 winds down, a gain of 2.8% is likely. What’s more, through November 2010, the economy has racked up a net gain of 951,000 jobs; 1 million -- and not much more than 1 million -- is certain by the end of the year. That’s exactly what we forecast, along with an end-of-the-year unemployment rate near 10%. The November jobless rate was 9.8%, and unemployment may be even closer to 10% when the December figure is announced.
Moreover, consumer spending picked up as we expected, gaining around 2.5% for the year; we forecast about 2%. As forecast, inflation remained in check and businesses added to growth by restocking inventories. But the housing industry proved weaker, and business spending, much stronger, than we anticipated. At the same time, our assessment of the Federal Reserve’s position on interest rates has been borne out, with no rate increases this year, despite the urging of inflation hawks.
Early in the year we drew readers’ attention to a huge soft spot in the economy: commercial real estate -- correctly noting that it would be a drag on growth for at least a year. Office vacancy rates won’t top out until year-end, at around 17.5%, we wrote in early March. And that’s where they were at last count. As for housing construction and prices, we overestimated the recovery in housing starts, which will likely wind up the year at about 600,000, up a mere 50,000 or so from 2009. But median home prices -- at least as of the third quarter -- haven’t declined as much as we expected.
Our outlook on the auto industry was on the right track. Kiplinger editors advised readers that the government takeover of General Motors and Chrysler would bear fruit in 2010, though we didn’t anticipate that taxpayers would benefit quite as quickly as they did. As forecast, annual sales of light vehicles will wind up at just about 12 million for the year, and Ford has indeed recaptured the No. 2 spot in U.S. sales. In addition, GM’s initial public offering in November raised over $20 billion, potentially cutting Uncle Sam’s ownership share of the company by nearly 50%.
Quick to see a bad year for Democrats, we were slower to foresee the GOP sweep of the House. In the first Kiplinger Letter of the year, we noted that Democrats were on the defensive and faced big losses. A month later, we accurately forecast the GOP’s gain of six seats, not enough to win a majority. A week later, however, we missed the boat with our 1-in-3 odds of a Republican takeover of the House. It wasn’t until early September that we were convinced the Democrats would lose control of the House.
Way back in March, though, we foreshadowed the success of the Tea Party, citing Marco Rubio in Florida and Rand Paul in Kentucky, in particular. We were also on the money in noting that the upstart political movement would “shoot itself in the foot by unwittingly helping Senate Majority Leader Harry Reid (D) win reelection.”
Forecasts on taxes were a mixed bag. Throughout the year, we consistently and correctly told readers to anticipate an extension of the Bush tax cuts and that a compromise was likely, with the White House ultimately swallowing the extension for high income taxpayers as well as for others. But we -- along with nearly everyone else -- blew it on estate taxes. Early in the year, we were confident that lawmakers would act responsibly, reinstating the estate tax retroactively at 2009 levels. As the months crept by, it slowly became clear that too much time had passed for Uncle Sam to claim a share of the estate of legendary Yankees owner and billionaire George Steinbrenner (or others who died after Jan. 1, 2010).
On other fronts, we scored some notable hits. Comprehensive financial reforms did become law this year, as we predicted. And lawmakers did finally give the nod to a new Strategic Arms Reduction Treaty, as we opined in April that they would. The airline industry did enjoy a turnaround. About 400 body scanners are now in use at major airports, despite the hue and cry of modesty-minded travelers. It was a particularly bad year for hurricanes, at least in terms of numbers, with the most storms since 2005 and enough named hurricanes to tie for second place. And our forecast on Jan. 1, 2010, that the year would prove to be the bloodiest and costliest yet in Afghanistan, sadly proved all too true: The price tag for the war has risen each year, and the annual death toll had already surpassed the previous record in September.
Here’s hoping for an even better forecasting record in 2011 -- and a much more peaceful year.