Here’s the interview with Ray C. Fair (now a professor at Yale) from the first episode of Almost Monday on the 7th of February, 1971.
I’ve transcribed the interview for you all:
KING: Fair created a sophisticated model, and some of his forecasts are interesting
FRANK KING: What kind of a track record does it have
RAY C FAIR: So far it’s had a very good track record. In terms of forecasting the slowdown that occurred starting in the fourth quarter of ’69 and continuing into 1970 it caught that very well. It also caught the pickup that started, essentially—the economy began to pick up in terms of GNP in the third quarter of 1970, it’s just that the auto strike made it look much worse than in fact it would have been.
And it caught the recovery—the beginning of the recovery—in the last part of 1970.
It’s had a very good record on the unemployment rate. I have always been forecasting the unemployment rate—or, not always, but in the last couple of years I’ve been forecasting the unemployment rate higher than most other people have been forecasting and it’s turned out that I’ve been right. The unemployment rate has been rising very rapidly in 1970 and somewhat in ’69 and I did catch that quite well.
The thing that I’m weakest on is forecasting the rate of inflation. Not unlike many other people, I have been under predicting the rate of inflation in 1969 and 1970 and that I would think is the weakest part of the model. In terms of the other, the basic GNP variable and the unemployment rate, I think I’m much closer to the mark.
FRANK KING: And what about—what about this coming year? What can we expect?
RAY C FAIR: To summarize, I’m expecting the economy to begin—to continue to recover. You might say to begin to recover since the auto strike had such a pronounced influence in the last half of 1970. I’m expecting the economy to recover in 1971, but not at a rate fast enough to keep the unemployment rate from rising above its current level of six percent.
I am forecasting the unemployment rate to rise to 6.6 by the end of 1970, by the middle of 1971 and to continue to be about 6.6 throughout the last half of 1971.
I do not forecast into 1972 with the model at this stage, and so I cannot say what I think the unemployment rate will be in the middle of 1972. I will hazard a guess based on my own judgement, not upon the model, that given an unemployment rate of 6.6 percent and the end of 1971 it’s very unlikely—virtually impossible—that the unemployment rate will be down to 4.5 percent by the middle of ’72, which is what I think president Nixon is forecasting.
I am much more pessimistic than President Nixon’s forecasts in terms of the unemployment rate. Also in terms of real growth, that he would—or he and his advisors would have much faster rate of growth in 1971 than I am projecting but the basic difference is in terms of the unemployment rate. I do not look to the unemployment rate to start falling, and they do.
The inflation we tend to agree upon. They—Nixon, I think had a forecast of the rate of inflation down to 3 percent by the middle of ’72. My forecast is for the rate of inflation to be down to 3 percent by the end of 1971, even.
Like I said though, I haven’t had a very good track record in terms of forecasting the rate of inflation. If anything I am—I am likely to be too low, so I would not put too much weight on the forecast I am making of that. And to the extent that it’s correct, it’s in agreement with Nixon’s. But I just don’t see the unemployment rate falling nearly as fast as he does.
I think it’s important to note that his forecasts—the council of economic advisers’ forecast is really nto so much a forecast as it is a goal. There’s an article in the Times a couple days ago about how the council was originally forecasting a much slower economy than they actually announced, and one day before the report was going to be released, Nixon or the White House advisors changed that forecast to be more to their liking. And that, you might argue, certainly could be a goal, but it does not seem to be a realistic forecast.
I think they’re—they’re just way too optimistic on how fast the economy will pick up and how much unemployment we will have.
FRANK KING: And that’s closer to what the model you have is trying to predict.
RAY C FAIR: That’s right.
FRANK KING: How the economy will actually perform.
RAY C FAIR: Right. Not so much a goal—because all of us would hope the unemployment rate would begin to fall and we would have a lot of real growth, but while that might be a goal it does not look in realistic term like that’s going to be close to being achieved.
FRANK KING: How do you expect Princeton will fare in the coming year, year and half?
RAY C FAIR: The people who are going to be unemployed are two categories, I think. Low skilled, marginal workers—people at the very bottom of the skill ladder. They tend to be laid off first in terms of a slowdown and they have been laid off. They will continue to be laid off. That has always been the case.
We have a new phenomenon, now, with the decline of the aerospace industry, we have a lot of engineers and professional technicians, things like that that are being laid off. Those people will hurt as well.
Princeton obviously has very few in the way of the first category. There are not very many marginal workers in Princeton. In terms of the second category I think there are no doubt more of professional technicians in Princeton than the low skilled. And some of those may be hurt.
But on the whole I think Princeton will do quite well. It’s not a town of people that become employed very much. While Los Angeles is hurt because of the aerospace industry, Princeton is not that closely tied to it.
My guess would be that Princeton will weather the recession without noticing much of anything. The primary effect on Princeton is the decline—or has been the decline of the stock market which I assume many people in Princeton have sizeable stock holdings. The stock market is coming back up so even that, in terms of this town, is not a bad sign.
FRANK KING: So the future for Princeton’s business community seems to be good.