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Want an Accurate U.S. Economic Outlook? Ask an Independent

Independents have consistently held the most accurate outlook of joblessness.

Want an Accurate U.S. Economic Outlook? Ask an Independent
A visitor takes a photograph of the U.S. Capitol in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)

(Bloomberg) -- Political independents have emerged as the most accurate forecasters of the U.S. economy as partisan divides skew the outlook of Republicans and Democrats.

That's the finding in a University of Michigan study released Friday, which looked at how political allegiances have muddied economic expectations of American consumers. It noted that Republicans have consistently held a rosy outlook of the U.S. economy since President Donald Trump's election in 2016, while Democrats have proven decidedly more pessimistic.

“These reactions in response to the surprising election results were initially discounted as transitory,” according to the study by Richard Curtin, director of the school's consumer sentiment survey. The phenomenon continued, however, as “political divisions in economic expectations have persisted largely unchanged at record levels during the past two years.”

For example, Democrats in early 2019 expected the jobless rate to rise by 1.5 percentage point after expecting it to increase by 1 point in early 2017. Republicans in 2019 expected unemployment to fall 2.5 points after anticipating a 4 point drop in early 2017.

Both sides have been way off. Unemployment went from 4.7 percent in January 2017 to 3.8 percent in February of this year, a drop of less than a percentage point.

Independents, meanwhile, have consistently held the most accurate outlook of joblessness. The Michigan report notes that's also true when you look at how the three groups view the university's overall index for economic expectations.

“One might have anticipated that over the past two years both Democrats and Republicans would have moderated their extreme views on future economic prospects,” Curtin wrote. Instead, “independents appear to have discounted both parties' slanted rhetoric.”

©2019 Bloomberg L.P.