Wander into Colby's economics department computer lab any December evening before the winter break and you're sure to find the room crowded with students--laptops open, neck deep in numbers.
The students aren't banging out final term papers or cramming for your average end-of-semester exam. Instead, the dozen or so students from Professor of Economics 's senior seminar on economic forecasting are putting the finishing touches on the Colby Economic Outlook (CEO), a short-term forecast of the Maine and U.S. economies that's read by policy makers in Maine and in Washington, D.C.
Economics 473, one of many capstone courses, is designed to be the culmination of a student's three years of economics and statistics classes. For 17 years, Donihue '79 has taught his students the ins and outs of economic forecasting--which one former student called "an obscure, dark art."
Donihue doesn't lecture on macroeconomic theory or give students hypothetical case studies. Instead, Donihue, who studied econometrics in graduate school at the University of Michigan, tosses his students into the deep end of the pool. "[Typically] we teach our students these theoretical models like how government spending in the war will affect the U.S. economy. It all works nice and neatly on the blackboard," Donihue said. "But it's not always so nice and neat" in the real world.
Many of Donihue's students end up in finance or policy work, where he says the real world will involve using raw data to create a forecast, whether it be a company's future sales or the price of oil. It's the world Donihue says he tries every year to prepare his students for. "It's the thought process and skill set that's attractive to employers," he said.
“I really had to understand that when something happens to oil prices, something happens to consumption, and then something happens to overall GDP. Forecasting helped me think like an economist.”
— Caroline Theoharides ’06, a former Donihue student, now a senior research assistant at the Federal Reserve Bank of Boston
"At some point the textbooks are left behind," said Caroline Theoharides '06, a former student in Donihue's seminar who is now a senior research assistant at the Federal Reserve Bank of Boston. Theoharides, a Maine native who grew up in Lincoln, says a key to doing her Fed job is being able to look at the economy, not as a single entity but as a complex machine with hundreds of moving parts.
"I really had to understand that when something happens to oil prices, something happens to consumption, and then something happens to overall GDP," she said. "Forecasting [at Colby] helped me think like an economist."
But forecasting can help more than just economists. Trevor Hanly '07 used his experience putting together the CEO to land a job on L.L. Bean's sales forecasting team. He can now forecast shoe sales or the number of calls expected at a call center a given week for the Freeport-based outdoor retailer. "It's definitely not something a lot of people get to have a background in," Hanly, a Michigan native, said of forecasting. "To put out a Colby Economic Outlook and bring it to an interview is not something everybody can do."