Economists have too many hands. On the one hand, they may feel that oil prices are going to go up because of increased demand from emerging giants like India and China. On the other hand, there is a global slowdown, and the overall demand is likely to fall, putting downward pressure on the prices. Then again, the rampant corruption and inherent deficiencies in markets like India might push the prices high. On another hand, price-driven improvements on the supply-side (like better production techniques) may eventually push the prices down. My ex-boss, an economist himself, once told me that he wished he could chop off some of these hands!
But seriously, economists are the mouthpieces of the bank. When you see someone from an investment bank on TV making an intelligent observation about the market outlook, it is likely to be a staff economist. If you manage to navigate through the jumble of hands, you will hear what the bank wants to say to the world.
That is precisely why you have to pay close attention and try to read between the lines. You are listening to what the bank wants you to hear. When you listen to a Morgan-Stanley economist assert that Facebook is the best thing since sliced bread, should you trust him, given that they were the investment bank behind Facebook IPO? Of course, the lingo you will hear from the economist would be a lot nicer, subtler and more convincing than I can muster. But you should still ask yourself, “Is there a hidden agenda?”
Economists may seek to influence the market; they also distill and condense their take on the market and share it with the traders and executives so that they can formulate and fine-tune their tactics and strategies. Thus, they play an important role in the directional views that banks take when navigating the tricky waters of trading and speculating.