U.S. Economic Outlook

Transcription

1 U.S. Economic Outlook WVU Economic Outlook Conference October 2, 2014 R. Andrew Bauer Senior Regional Economist

2 Are we there yet? 2

3 Are we there yet? Another year of moderate growth in 2014 Consumer spending remains moderate Business investment improved over past three quarters but remains restrained Housing sector improving but pace uncertain 3

4 Are we there yet? Another year of moderate growth in 2014 Consumer spending remains moderate Business investment improved over past three quarters but remains restrained Housing sector improving but pace uncertain Expectations for higher growth in

5 Are we there yet? Another year of moderate growth in 2014 Consumer spending remains moderate Business investment improved over past three quarters but remains restrained Housing sector improving but pace uncertain Expectations for higher growth in 2015 Inflation is expected to remain low with longer-term inflation expectations remaining stable 5

6 Are we there yet? Another year of moderate growth in 2014 Consumer spending remains moderate Business investment improved over past three quarters but remains restrained Housing sector improving but pace uncertain Expectations for higher growth in 2015 Inflation is expected to remain low with longer-term inflation expectations remaining stable Uncertainty still an impediment to stronger growth 6

7 Are we there yet? Another year of moderate growth in 2014 Consumer spending remains moderate Business investment improved over past three quarters but remains restrained Housing sector improving but pace uncertain Expectations for higher growth in 2015 Inflation is expected to remain low with longer-term inflation expectations remaining stable Uncertainty still an impediment to stronger growth Could recent moderate growth represent a fundamental change in the economy? 7

8 Bernanke s view of headwinds 8

9 Bernanke s view of headwinds European sovereign debt and banking crisis Source: Ben Bernanke, Speech to Annual Meeting of the American Economic Association, January 3,

10 Bernanke s view of headwinds European sovereign debt and banking crisis Natural disaster in Japan Source: Ben Bernanke, Speech to Annual Meeting of the American Economic Association, January 3,

11 Bernanke s view of headwinds European sovereign debt and banking crisis Natural disaster in Japan Imbalances from housing boom/bust deleveraging and balance sheet repair Households pulling back on spending to recoup lost wealth and reduce debt burdens Financial institutions restricting credit to restore capital ratios and reduce risk Source: Ben Bernanke, Speech to Annual Meeting of the American Economic Association, January 3,

12 Bernanke s view of headwinds European sovereign debt and banking crisis Natural disaster in Japan Imbalances from housing boom/bust deleveraging and balance sheet repair Households pulling back on spending to recoup lost wealth and reduce debt burdens Financial institutions restricting credit to restore capital ratios and reduce risk Weakness in homebuilding sector Fiscal policy Source: Ben Bernanke, Speech to Annual Meeting of the American Economic Association, January 3,

13 Bernanke s view of headwinds European sovereign debt and banking crisis Natural disaster in Japan Imbalances from housing boom/bust deleveraging and balance sheet repair Households pulling back on spending to recoup lost wealth and reduce debt burdens Financial institutions restricting credit to restore capital ratios and reduce risk Weakness in homebuilding sector Fiscal policy Weaker productivity growth: productivity puzzle Source: Ben Bernanke, Speech to Annual Meeting of the American Economic Association, January 3,

14 Productivity growth very modest in recent years Source: Bureau of Economic Analysis/Haver Analytics 14

15 Labor force participation rate in decline Source: Bureau of Labor Statistics/Haver Analytics 15

16 Estimates of potential output revised lower Source: CBO, Revisions to the CBO s Projection of Potential Output Since 2007, February

17 Estimates of potential output revised lower Source: CBO, Revisions to the CBO s Projection of Potential Output Since 2007, February

18 Estimates of potential output revised lower Source: CBO, Revisions to the CBO s Projection of Potential Output Since 2007, February

19 Outlook for potential growth Trends indicate slower growth in the labor force Retiring of baby-boomers Increase in long-term unemployed Labor productivity weak in recent years Perhaps temporary in part due to cyclical weakness Perhaps due to slowdown in innovation 19

20 Outlook for potential growth Trends indicate slower growth in the labor force Retiring of baby-boomers Increase in long-term unemployed Labor productivity weak in recent years Perhaps temporary in part due to cyclical weakness Perhaps due to slowdown in innovation Given slower growth in labor force and weaker productivity, potential growth has been revised lower 20

21 Outlook for potential growth Trends indicate slower growth in the labor force Retiring of baby-boomers Increase in long-term unemployed Labor productivity weak in recent years Perhaps temporary in part due to cyclical weakness Perhaps due to slowdown in innovation Given slower growth in labor force and weaker productivity, potential growth has been revised lower January 2007: 2.6%; February 2014: 2.1% 21

22 Outlook for potential growth Trends indicate slower growth in the labor force Retiring of baby-boomers Increase in long-term unemployed Labor productivity weak in recent years Perhaps temporary in part due to cyclical weakness Perhaps due to slowdown in innovation Given slower growth in labor force and weaker productivity, potential growth has been revised lower January 2007: 2.6%; February 2014: 2.1% FOMC longer run projection for real GDP revised from 2.5% in January 2009 to 2.2% in September 2014 (central tendency) 22

23 FOMC anticipates increase in real GDP growth Source: Federal Reserve/Bureau of Economic Analysis/Haver Analytics 23

24 Surveys indicate strong growth in recent months Source: Institute for Supply Management/Haver Analytics 24

25 Capital goods orders suggests pickup in investment Source: Census Bureau/Haver Analytics 25

26 Moderate income and consumption growth Source: Bureau of Economic Analysis/Haver Analytics 26

27 Strong job growth in 2014 Source: Bureau of Labor Statistics/Haver Analytics 27

28 Job hires and separations rate remain subdued Source: Bureau of Labor Statistics/Haver Analytics 28

29 Rise in part-time workers also may indicate slack Source: Bureau of Labor Statistics/Haver Analytics 29

30 Rise in part-time workers also may indicate slack Source: Bureau of Labor Statistics/Haver Analytics 30

31 Housing market continues to improve Source: National Association of Homebuilders/Haver Analytics 31

32 Housing market continues to improve Source: Census Bureau/Haver Analytics 32

33 The views expressed here are those of the author, and do not necessarily represent those of the Federal Reserve Bank of Richmond or the Federal Reserve System. 33