Monthly Economic Outlook

By Dr. Scott Brown

A Moderate Outlook, But Downside Risks

July 8, 2010

Summary:

• Recent economic data reports have generally been on the soft side of expectations, consistent with moderate growth.
• The outlook for 2H10 economic growth has softened over the last few months. A double dip recession appears unlikely, but the risks to the growth outlook are tilted to the downside.
• If needed (the recovery falters more significantly), there is limited scope for further monetary and fiscal policy stimulus.

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Still A Moderate Recovery

June 10, 2010

Summary:

• The economic recovery continued in May, but with a lackluster increase in private-sector jobs. The economy faces a number of headwinds in the near term, but a double dip recession appears unlikely.
• Core inflation figures have continued to trend lower.
• Federal Reserve policymakers are likely to keep short-term interest rates low well into 2011. The government’s fiscal policy is expected to be less supportive at the federal level, and contractionary at the state and local level.

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Headwinds and New Worries

May 10, 2010

Summary:

• The recovery has progressed further in April, with private-sector job growth finally picking up.
• A number of headwinds remain in the near term and some further hurdles lie ahead. A greater European debt crisis would have a mixed impact on the U.S. economy.
• Federal Reserve policymakers are likely to keep short-term interest rates low well into 2011.

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A Moderate Path, With Continued Headwinds

April 22, 2010

Summary:

• The U.S. economy continued to expand in the first quarter. The job market appears to have finally turned the corner. Still, the recovery will likely be relatively moderate.
• In contrast to fears of higher inflation, core inflation measures have actually been trending lower. The Federal Reserve is unlikely to raise the overnight lending rate this year.
• Long-term interest rates normally creep higher in an economic recovery. However, they should not rise so much that they threaten the recovery

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The Long Road Back

March 17, 2010

Summary:

• The recovery has progressed further in the first quarter of 2010. The pace of job losses has continued to slow and the economy appears to be on the verge of employment growth.
• However, a number of serious headwinds remain, restraining the pace of improvement for the next few quarters.
• Federal Reserve policymakers have already unwound most of the special liquidity facilities set up during the financial crisis and the normalization of monetary policy will continue. However, the Fed is expected to keep the federal funds rate low well into the second half of the year and probably into 2011.

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Still A Gradual Economic Recovery

January 21, 2010

Summary:

• The pace of job losses has slowed and the economic expansion continued to advance into early 2010. New hiring should begin to pick up. However, the economy will continue to face a number of headwinds in the near term.
• More fiscal stimulus in the form of a job creation bill is likely. However, stimulus will begin to ramp down later this year and into 2011. Uncertainty regarding whether the Bush tax cuts will be extended could be a problem for the stock market.
• The Fed is expected to keep the federal funds rate low well into the second half of the year and possibly into 2011. However, the policymakers will have a number of tools available during this tightening cycle.

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The 2010 Economic Outlook

December 11, 2009

Summary:

• The economic expansion should continue in 2010, but at a moderate pace as the economy continues to work through financial difficulties. The outlook for 2011 is more clouded as the Bush tax cuts are scheduled to sunset at the end of 2010.
• The key factor in the growth outlook will be bank lending to consumers and small businesses. Credit should loosen over time.
• Conditional on an elevated unemployment rate, a subdued inflation trend, and well-anchored inflation expectations, the Federal Reserve is expected to keep short-term interest rates at exceptionally low levels well into the second half of next year and probably won’t start raising rates until 2011.

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The Recovery: “V”, “U”, “L”, Or “W”?

November 11, 2009

Summary:

• Recent data have continued to suggest that the economy is improving. The pace of job losses has moderated.
• Tight credit should keep the recovery on a relatively moderate track into the early part of next year. The labor market will remain soft in the near term, but fiscal stimulus and hiring for the census will provide support into early 2010.
• The Fed has signaled that short-term interest rates will stay low until the unemployment rate falls, core inflation picks up, or inflation expectations start to rise.

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