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Dr. David Altig - 2013 National Economic Forecast
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The National Economic Outlook
2013 Arkansas Economic Forecast ConferenceLittle Rock, ArkansasNovember 6, 2013
… the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.
FOMC statement; October 30, 2013
Monetary Policy: SOSO
“We have a three-part baseline projection which
involves increasing growth…, continuing gains in
the labor market, and inflation moving back
towards objective… we’ll be looking to see if the
data confirm that basic outlook.”
Chairman Ben BernankeSeptember 18, 2013
“We have a three-part baseline projection which
involves increasing growth…, continuing gains in
the labor market, and inflation moving back
towards objective… we’ll be looking to see if the
data confirm that basic outlook.”
Chairman Ben BernankeSeptember 18, 2013
-1000
-800
-600
-400
-200
0
200
400
600
08 09 10 11 12 13
185
148
12-month average
Monthly change
Payroll Employment Changes seasonally adjusted, thousands of jobs
Source: Bureau of Labor Statisticsdata through September 2013
5
The longer-term average of monthly employment growth continued near its two-year trend….
50
100
150
200
250
300
350
12 12 13 13
185
148
12-month average
Monthly change
Payroll Employment Changes seasonally adjusted, thousands of jobs
Source: Bureau of Labor Statisticsdata through September 2013
6
…but recent months have generally fallen short of that trend.
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
2011 2012 2013 2014
Unemployment Rate: Actual and Blue Chip Consensus ForecastsPercent, quarterly averages
Actual data Sep-12 Oct-13
7Sources: Bureau of Labor Statistics; Blue Chip Economic Indicators, September 10, 2012 and October 10, 2013
actual data through Q3 2013;forecast data through Q4 2014
Job growth has been sufficient to drive the unemployment rate down beyond expectations.
The improving unemployment rate has been accompanied by continued declines in labor force participation.
8
63
64
65
66
67
68
2
4
6
8
10
12
00 02 04 06 08 10 12
Unemployment and Labor Force Participation Ratesmonthly, percent, seasonally adjusted
Source: Bureau of Labor Statistics
UnemploymentRate
ParticipationRate
through September 2013
63.2
7.2
Civilian Unemployment Rate (U3)
Labor ForceParticipation Rate
1/1/1900
1/2/1900
1/3/1900
1/4/1900
1/5/1900
1/6/1900
1/7/19001/8/1900
1/9/1900
1/10/1900
1/11/1900
1/12/1900
1/13/1900Leading Indicators
Employer Behavior
ConfidenceUtilization
Atlanta Fed Labor Market Progress Spider Chart
1/1/1900
1/2/1900
1/3/1900
1/4/1900
1/5/1900
1/6/1900
1/7/19001/8/1900
1/9/1900
1/10/1900
1/11/1900
1/12/1900
1/13/1900
Payroll Vacancies (JOLTS)
Hires (JOLTS)
NFIB Hiring Plans
Conference Board Job Availability
Quits (JOLTS)
UnemployedMarginally attached workers
Job finding
rate
Work part time for economic reasons
Initial claims
Difficult to fill (NFIB)
Temporary help services employment
Leading Indicators
Employer Behavior
ConfidenceUtilization
Atlanta Fed Labor Market Progress Spider Chart
PayrollExCensus
JOLTSOpens
JOLTSHires
NFIBHiringPlans
ConfBoardJobAvail
JOLTSQuits
UnemployedMarginAttachSA
UtoErate
PTER
InitialClaims
NFIBCantFill
Temp
Payroll Vacancies (JOLTS)
Hires (JOLTS)
NFIB Hiring Plans
Conference Board Job Availability
Quits (JOLTS)
UnemployedMarginally attached workers
Job finding
rate
Work part time for economic reasons
Initial claims
Difficult to fill (NFIB)
Temporary help services employment
Leading Indicators
Employer Behavior
ConfidenceUtilization
Q4 2007 = 100
Q4 2009 = 0
Atlanta Fed Labor Market Progress Spider Chart
PayrollExCensus
JOLTSOpens
JOLTSHires
NFIBHiringPlans
ConfBoardJobAvail
JOLTSQuits
UnemployedMarginAttachSA
UtoErate
PTER
InitialClaims
NFIBCantFill
Temp
Payroll Vacancies (JOLTS)
Hires (JOLTS)
NFIB Hiring Plans
Conference Board Job Availability
Quits (JOLTS)
UnemployedMarginally attached workers
Job finding
rate
Work part time for economic reasons
Initial claims
Difficult to fill (NFIB)
Temporary help services employment
Leading Indicators
Employer Behavior
ConfidenceUtilization
25%
50%
75%Q4 2007 = 100
Q4 2009 = 0
Atlanta Fed Labor Market Progress Spider Chart
13
Atlanta Fed Labor Market Progress Spider Chart: Viewed as a whole, the labor market picture is uneven.
Payroll
Vacancies (JOLTS)*
Hires (JOLTS)*
Conference BoardJob Availability
Quits (JOLTS)*
UnemployedMarginally attachedworkers
Job finding rate
Work part time foreconomic reasons
Initial Claims
Difficult to fill (NFIB)
Temporary help services employment
Q4 2007 = 100Q4 2009 = 0Jul-2013-Sep-2013
Jul-2012-Sep-2012Jul-2011-Sep-2011
Leading Indicators
Employer Behavior
Utilization
Confidence
*Apr – June 2013 value is Mar – May 2013. **Apr – Jun 2013 value is Feb – Apr 2013. Sources: FRB Atlanta, Bureau of Labor Statistics, National Federation of Independent Businesses,The Conference Board, and Department of Labor
through September 2013
Labor market improvement: A mixed bag.
“We have a three-part baseline projection which
involves increasing growth…, continuing gains in
the labor market, and inflation moving back
towards objective… we’ll be looking to see if the
data confirm that basic outlook.”
Chairman Ben BernankeSeptember 18, 2013
15
1.0
1.5
2.0
2.5
3.0
3.5
2010 2011 2012 2013 2014 2015 2016
U.S. 4Q GDP Growthyear-over-year, percent change
Actual Jun-13 SEP
The June Summary of Economic Projections: An anticipated bump in growth.
* Midpoint of range
Sources: Bureau of Economic Analysis, Federal Open Market Committee
Source: Bureau of Economic Analysis, Macroeconomic Advisers
2013Q3 Tracking Forecasts
Reported Real GDP and 2013:III,IV Forecast
Q1actual
Q2Actual
Macroeconomic Advisers
3rd Quarter Tracking Model
Forecast
Macroeconomic Advisers
4th Quarter Tracking Model
Forecast
Annualized Real GDP Growth 1.1 2.5 2.6 1.7
Tracking estimates for real GDP do not yet suggest an acceleration in growth.
17
The trend growth in overall consumer spending remains near 2%--just a shade under its recovery average.
-6
-4
-2
0
2
4
6
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Real Personal Consumption Expendituresyear-over-year % change, monthly
through August 2013Source: Bureau of Economic Analysis
(annualized % change) 12-month
Durable goods 8.0
Nondurable goods 1.9
Services 1.1
18
Since the end of the recession, the government sector has subtracted an average 0.32 percentage points from GDP growth each quarter.
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
07 08 09 10 11 12 13
Contributions from Federal and State & Local Government to GDP Growthpercentage points, quarterly, seasonally adjusted annualized rate
Federal State & Local Combined
Source: Bureau of Economic Analysis through Q2-13
Question: What is the largest source of uncertainty affecting business decisions?
Source: FRB Atlanta Small Business Survey
The Economic Policy Uncertainty Index was approaching pre-recession levels until September 2013, when it increased to the highest point since December 2012.
20through October 2013Source: PolicyUncertainty.com
50
70
90
110
130
150
170
190
210
230
250
2007 2008 2009 2010 2011 2012 2013
Economic Policy Uncertainty IndexSeptember 1985 = 100 monthly
3-year average
Estimates suggest a significant negative impact of uncertainty on GDP growth.
22
1.0
1.5
2.0
2.5
3.0
3.5
2010 2011 2012 2013 2014 2015 2016
U.S. 4Q GDP Growthyear-over-year, percent change
Actual Jun-13 SEP Sep-13 SEP
The September Summary of Economic Projections: A downward revision
* Midpoint of range
Sources: Bureau of Economic Analysis, Federal Open Market Committee
The definition of insanity: A clear record of overly optimistic growth forecasts.
* Midpoint of rangeSource: Federal Open Market Committee
The gap that won’t go away: Time for a different storyline?
24
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
50 54 58 62 66 70 75 79 83 87 91 95 00 04 08 12
Source: Bureau of Economic Analysis, Congressional Budget Office
GDPbillions, 2009$
through 2Q 2013
CBO Potential GDP
Real GDP
“We have a three-part baseline projection which
involves increasing growth…, continuing gains in
the labor market, and inflation moving back
towards objective… we’ll be looking to see if the
data confirm that basic outlook.”
Chairman Ben BernankeSeptember 18, 2013
26
-2
-1
0
1
2
3
4
5
00 02 04 06 08 10 12
PCE Price Indexyear-over-year percent change, monthly
Headline Core Trimmed Mean
Sources: Bureau of Economic Analysis and Dallas Fed through August 2013
FOMC Objective
The inflation trend remains well short of 2%.
The National Economic Outlook