Dr. David Altig - 2013 National Economic Forecast

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Dr. David Altig - 2013 National Economic Forecast

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Dr. David Altig - 2013 National Economic Forecast

  1. 1. The National Economic Outlook 2013 Arkansas Economic Forecast Conference Little Rock, Arkansas November 6, 2013
  2. 2. Monetary Policy: SOSO … 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
  3. 3. “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 Bernanke September 18, 2013
  4. 4. “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 Bernanke September 18, 2013
  5. 5. The longer-term average of monthly employment growth continued near its two-year trend…. Payroll Employment Changes seasonally adjusted, thousands of jobs 600 Monthly change 400 185 200 148 0 -200 12-month average -400 -600 -800 -1000 08 09 10 11 12 13 data through September 2013 Source: Bureau of Labor Statistics 5
  6. 6. …but recent months have generally fallen short of that trend. Payroll Employment Changes seasonally adjusted, thousands of jobs 350 300 250 12-month average 185 200 150 148 100 Monthly change 50 12 12 13 13 data through September 2013 Source: Bureau of Labor Statistics 6
  7. 7. Job growth has been sufficient to drive the unemployment rate down beyond expectations. Unemployment Rate: Actual and Blue Chip Consensus Forecasts Percent, quarterly averages 10.0 9.5 Actual data Sep-12 Oct-13 9.0 8.5 8.0 7.5 7.0 6.5 2011 2012 2013 2014 actual data through Q3 2013; forecast data through Q4 2014 7 Sources: Bureau of Labor Statistics; Blue Chip Economic Indicators, September 10, 2012 and October 10, 2013
  8. 8. The improving unemployment rate has been accompanied by continued declines in labor force participation. Unemployment and Labor Force Participation Rates monthly, percent, seasonally adjusted Unemployment Rate Participation Rate 12 68 Labor Force Participation Rate 10 67 8 66 7.2 6 65 Civilian Unemployment Rate (U3) 4 64 63.2 2 63 00 02 Source: Bureau of Labor Statistics 04 06 08 10 12 through September 2013 8
  9. 9. Atlanta Fed Labor Market Progress Spider Chart 1/1/1900 Leading Indicators Employer Behavior 1/2/1900 1/13/1900 1/3/1900 1/12/1900 1/4/1900 1/11/1900 1/5/1900 1/10/1900 1/9/1900 1/6/1900 1/8/1900 Utilization 1/7/1900 Confidence
  10. 10. Atlanta Fed Labor Market Progress Spider Chart Temporary help services 1/13/1900 employment Leading Indicators 1/1/1900 Payroll Vacancies (JOLTS) 1/2/1900 Difficult 1/12/1900 to fill (NFIB) Hires (JOLTS) 1/3/1900 1/11/1900 Initial claims 1/4/1900 NFIB Hiring Plans Work part time for 1/10/1900 economic reasons 1/9/1900 Job finding rate Utilization Employer Behavior 1/5/1900 Conference Board Job Availability 1/6/1900 Quits (JOLTS) 1/8/1900 Marginally attached workers 1/7/1900 Unemployed Confidence
  11. 11. Atlanta Fed Labor Market Progress Spider Chart Temporary help services Temp employment Leading Indicators PayrollExCensus Payroll Vacancies (JOLTS) JOLTSOpens Difficult NFIBCantFill to fill (NFIB) Hires (JOLTS) JOLTSHires InitialInitialClaims claims NFIBHiringPlans NFIB Hiring Plans Work part time for PTER economic reasons ConfBoardJobAvail Conference Board Job Availability Q4 2007 = 100 Q4 2009 = 0 Utilization Employer Behavior UtoErate Job finding rate JOLTSQuits Quits (JOLTS) MarginAttachSA Marginally attached workers Unemployed Unemployed Confidence
  12. 12. Atlanta Fed Labor Market Progress Spider Chart Temporary help services Temp employment Leading Indicators PayrollExCensus Payroll Vacancies (JOLTS) JOLTSOpens Difficult NFIBCantFill to fill (NFIB) Hires (JOLTS) JOLTSHires InitialInitialClaims claims NFIBHiringPlans NFIB Hiring Plans Work part time for PTER economic reasons 25% Utilization ConfBoardJobAvail Conference Board Job Availability 50% Q4 2007 = 100 Q4 2009 = 0 Employer Behavior 75% UtoErate Job finding rate JOLTSQuits Quits (JOLTS) MarginAttachSA Marginally attached workers Unemployed Unemployed Confidence
  13. 13. Atlanta market Market Progress Spider Chart: bag. Labor Fed Labor improvement: A mixedViewed as a whole, the labor market picture is uneven. Temporary help services employment Leading Indicators Payroll Vacancies (JOLTS)*Employer Behavior Difficult to fill (NFIB) Hires (JOLTS)* Initial Claims Utilization Work part time for economic reasons Conference Board Job Availability Q4 2007 = 100 Q4 2009 = 0 Jul-2013-Sep-2013 Job finding rate Quits (JOLTS)* Jul-2012-Sep-2012 Jul-2011-Sep-2011 Marginally attached workers Unemployed *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 Confidence through September 2013 13
  14. 14. “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 Bernanke September 18, 2013
  15. 15. The June Summary of Economic Projections: An anticipated bump in growth. U.S. 4Q GDP Growth year-over-year, percent change 3.5 3.0 2.5 2.0 1.5 1.0 2010 * Midpoint of range 2011 2012 2013 Actual Sources: Bureau of Economic Analysis, Federal Open Market Committee 2014 2015 Jun-13 SEP 2016 15
  16. 16. Tracking estimates for real GDP do not yet suggest an acceleration in growth. 2013Q3 Tracking Forecasts Reported Real GDP and 2013:III,IV Forecast Q1 Q2 actual Actual Annualized Real GDP Growth 1.1 2.5 Source: Bureau of Economic Analysis, Macroeconomic Advisers Macroeconomic Macroeconomic Advisers Advisers 4th Quarter 3rd Quarter Tracking Model Tracking Model Forecast Forecast 2.6 1.7
  17. 17. The trend growth in overall consumer spending remains near 2%--just a shade under its recovery average. Real Personal Consumption Expenditures year-over-year % change, monthly 6 4 2 0 -2 (annualized % change) Durable goods 8.0 Nondurable goods 1.9 Services -4 12-month 1.1 -6 00 01 02 03 Source: Bureau of Economic Analysis 04 05 06 07 08 09 10 11 12 13 through August 2013 17
  18. 18. Since the end of the recession, the government sector has subtracted an average 0.32 percentage points from GDP growth each quarter. Contributions from Federal and State & Local Government to GDP Growth percentage points, quarterly, seasonally adjusted annualized rate 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 Federal State & Local Combined -1.5 07 08 Source: Bureau of Economic Analysis 09 10 11 12 13 through Q2-13 18
  19. 19. Question: What is the largest source of uncertainty affecting business decisions? Source: FRB Atlanta Small Business Survey
  20. 20. The Economic Policy Uncertainty Index was approaching prerecession levels until September 2013, when it increased to the highest point since December 2012. Economic Policy Uncertainty Index September 1985 = 100 monthly 250 230 3-year average 210 190 170 150 130 110 90 70 50 2007 2008 Source: PolicyUncertainty.com 2009 2010 2011 2012 2013 through October 2013 20
  21. 21. Estimates suggest a significant negative impact of uncertainty on GDP growth.
  22. 22. The September Summary of Economic Projections: A downward revision U.S. 4Q GDP Growth year-over-year, percent change 3.5 3.0 2.5 2.0 1.5 1.0 2010 * Midpoint of range 2011 2012 Actual 2013 2014 Jun-13 SEP Sources: Bureau of Economic Analysis, Federal Open Market Committee 2015 Sep-13 SEP 2016 22
  23. 23. The definition of insanity: A clear record of overly optimistic growth forecasts. * Midpoint of range Source: Federal Open Market Committee
  24. 24. The gap that won’t go away: Time for a different storyline? GDP billions, 2009$ 18,000 CBO Potential GDP 16,000 14,000 Real GDP 12,000 10,000 8,000 6,000 4,000 2,000 0 50 54 58 62 66 70 75 79 Source: Bureau of Economic Analysis, Congressional Budget Office 83 87 91 95 00 04 08 12 through 2Q 2013 24
  25. 25. “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 Bernanke September 18, 2013
  26. 26. The inflation trend remains well short of 2%. PCE Price Index year-over-year percent change, monthly 5 4 FOMC Objective 3 2 1 0 -1 Headline Core Trimmed Mean -2 00 02 04 Sources: Bureau of Economic Analysis and Dallas Fed 06 08 10 12 through August 2013 26
  27. 27. The National Economic Outlook

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