The document summarizes the national economic outlook presented at the 2013 Arkansas Economic Forecast Conference. It includes the following key points: 1) The Federal Reserve will continue its quantitative easing program of $40 billion in mortgage backed securities and $45 billion in Treasury securities per month. 2) Recent economic data has fallen short of projections of increasing growth, ongoing job gains, and inflation moving back to 2%. Unemployment has declined faster than expected but labor force participation continues to drop. 3) While consumer spending growth has remained around 2%, government spending cuts have subtracted from GDP growth. Estimates of GDP growth have been revised downward and forecasts have historically been too optimistic. Inflation remains below the Fed

1. The National
Economic Outlook
2013 Arkansas Economic Forecast
Conference
Little Rock, Arkansas
November 6, 2013

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. “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. “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. 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. …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. 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. 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. 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. 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. 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. 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. 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. “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. 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. 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. 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. 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. Question: What is the largest source of
uncertainty affecting business decisions?
Source: FRB Atlanta Small Business Survey

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. Estimates suggest a significant negative
impact of uncertainty on GDP growth.

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. The definition of insanity: A clear record of
overly optimistic growth forecasts.
* Midpoint of range
Source: Federal Open Market Committee

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. “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. 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. The National
Economic Outlook