Outlook for the United States*

Transcription

1 I N T E R N A T I O N A L M O N E T A R Y F U N D Outlook for the United States* Stephan Danninger Division Chief International Monetary Fund * Based on the IMF Staff Report for the United States (see July

2 The U.S. economy is overall in good shape Seven years of continuous expansion with temporary setbacks Labor market Housing Balance sheets Unemployment rate at.9% (June) 5 thsd new jobs per month over last years Housing starts:. million p.a. (May) Home vacancy rate at pre-crisis level DFA stress tests: all banks passed (June) HH savings rate 5.% May

3 Outlook is for a continued expansion Slowdown in first quarter (.% saar) expected to be temporary

4 Domestic demand is main growth driver Job growth accompanied by faster but still moderate wage growth Households returning more forcefully to housing market 5 Wage Growth (percent, yoy) Average hourly earnings Atlanta Fed wage growth tracker (mma of median, eop) Employment cost index, wages and salaries Household Formation and Vacancy Rates Household formation (millions, LHS) Homeowner vacancy rate (percent, LHS) Rental vacancy rate (percent, RHS) Sources: BLS; FRB; and Haver Analytics. 5 Sources: Census Bureau; and Haver Analytics; and IMF staff calculations

5 Financial conditions remain supportive Historically low consumer Historically low consumer lending rates lending rates Corporate Corporate financing financing costs are costs low, and as risk-free yields have risk-free seen yields a major low decline 7 Consumer Credit (percent) 8 Treasury and Corporate Yields (percent) 5 Home mortgage rate ( year fixed, LHS) Consumer credit growth (yoy, RHS) 8 BAA Yield AAA Yield 8 - New car loan rate (8 month, LHS) - yr treasury yield

6 Risks to growth now tilted to downside Fallout from Brexit Baseline assumes muted impact; equity market rebound; dollar appreciation partly reversed; LT yields down Trade exposure small (exports to U.K.:.7% of GDP) Financial and forex channels have largest potential US dollar % real appreciation since summer of 5% REER appreciation about -¼ % growth Oil prices Asymmetric risks for US shale sector Investment and production sensitive

7 Monetary policy: a slow train to normal Inflation very gradually rising Data dependency implies gradual rate path. Inflation to overshoot temporarily Policy Rates Expectations (percent) IMF staff projection (as at /7/) FOMC median dots (as at /5/) Primary Dealers Survey (expectation range, as at /8/) Fed funds futures (as at /5/) Q 7Q 8Q 9Q Q Q Sources: Federal Reserve; Bloomberg; and IMF staff estimates 7

8 Risk of being too optimistic on potential growth Would imply lower growth and more inflation pressures, faster path of rate increases, a stronger US$ and negative spillovers Growth: Potential and Actual (percent) Projection Consensus Long-run Growth Forecasts (%) United States United Kingdom France Germany Canada Japan Potential - Actual Sources: BEA; and IMF staff estimates Source: Consensus Forecasts 8

9 Growing threat to gains in living standards Confluence of forces interact and reinforce each other to drag down growth Productivity Steady decline in TFP Lower dynamism (?) Participation Population aging weighs on labor supply Polarization Shrinking of middle class lowers demand Poverty Increase (non)-working poor limits labor supply 9

10 Productivity growth has declined on broad basis TFP growth in the US is well below past levels Across various sectors less firm creation.5..9 US Average TFP Growth (percent) Utilization-adjusted TFP Private business, multi-factor Firm Entry Rates Across Sectors (percent) Retail and IT (simple average) s 99s s -5 / Sources: BLS; FRB; Haver Analytics; and IMF staff calculations / For multi-factor, -5. is included in s. 8 Manufacturing and wholesale (simple average) Sources: Census Bureau; and IMF staff calculations 8

11 Declining dynamism among firms and workers Increase in business concentration Job market is less fluid. Reallocation of labor has slowed Job-to-Job Transition Rate (percent) Annual job change rate among full-time, full year employed workers Sources: Census Bureau; and IMF staff calculations

12 Accompanied by pernicious income trends Steady shrinkage of middle income household share Declining labor income share Share of Households by Income (percent) 5 Labor Share of GDP (percent) 5 5 Middle Income 5 High Income 59 United States 59 Low Income Source: Current Population Survey Note: Adjusted for family size using OECD's equivalence scale Sources: BLS; and Haver Analytics 57 55

13 Policies: supply side reforms Public Investment, Structures (% of GDP) Infrastructure Large gap: 5-8% of GDP Raises demand in short term Trade integration Go beyond tariff reduction (e.g., TPP) Manage adjustment costs Sources: BEA; Haver Analytics; and IMF staff calculations 7 Private Services Exports (US$ billions, ) 7 Corporate tax reform High rate, distortions, tax avoidance Part of broader reform geared toward more indirect taxation 5 % of global services exports 5 US UK Germany France China Sources: U.S. International Trade Commission; WTO; and IMF staff calculations

14 Support labor supply and skills Immigration Large economic impact (CBO) Skill based Support low-income HHs Expand tax credit (EITC) Minimum wage Family friendly benefits Child care, family leave, more efficient education delivery

15 I N T E R N A T I O N A L M O N E T A R Y F U N D Thank you! July, 5