Economists should pay more attention to the emerging giants

Barry Ritholtz asks: Why have Economists been so wrong -- and by so much, and for so long -- about Job Growth?

He thinks accelerated depreciation of capital spending is part of the reason. Possibly.

Personally, though, I don't see why offshore outsourcing can't explain most of the disparity between economists' projections and the actual numbers. After all, the emergence of China and India almost simultaneously is really a once-a-generation phenomenon (see my earlier post on this).

Imagine -- a third of the world's population suddenly competing to take away your jobs. Well, I can't imagine too many economists having models that can deal with that.

As a start, though, they should probably pay more attention to what's happening in these two countries. Today, China reported "a marked slowdown in investment and money supply growth on Monday, but stubbornly high inflation suggested it was too early to rule out further steps to cool the world's seventh-largest economy" (see "China investment slows but inflation stays high").

The slowdown in investment is needed for China's overheating economy, but high inflation could be a sign that it's too late to try to achieve a soft landing.