The Economic Outlook Chris Foote Research Department Federal - - PowerPoint PPT Presentation

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The Economic Outlook Chris Foote Research Department Federal Reserve Bank of Boston September 10, 2018 Foote (Boston Fed) The Economic Outlook September 10, 2018 1 / 22 Disclaimer: I do not speak for: Eric Rosengren, President of Boston

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The Economic Outlook

Chris Foote

Research Department Federal Reserve Bank of Boston

September 10, 2018

Foote (Boston Fed) The Economic Outlook September 10, 2018 1 / 22

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Disclaimer: I do not speak for:

Eric Rosengren, President of Boston Fed Jerome Powell, Chairman of Federal Reserve

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Topics

1 Outlook for macroeconomy and Fed policy 2 Economists’ record at forecasting recessions 3 Trends in labor force participation and wealth by age group

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Dual Mandate: Inflation and Unemployment

FOMC Inflation Target (2%) FOMC Median Estimate of Long−Run Unemployment Rate (4.5%) The "Missing Disinflation"

1 2 3 4 5 6 7 8 9 10 Percent 1 2 3 4 5 6 7 8 9 10 Percent 2010m1 2012m1 2014m1 2016m1 2018m1 Unemployment Rate PCE Price Index (12−mo. change) Core PCE Price Index (12−mo. change) Foote (Boston Fed) The Economic Outlook September 10, 2018 4 / 22

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Federal Funds Rate

5 10 15 Percent Jan 1985 Jan 1990 Jan 1995 Jan 2000 Jan 2005 Jan 2010 Jan 2015 Jan 2020 Recessions Fed Funds Rate

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From FOMC Summary of Economic Projections

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From FOMC Summary of Economic Projections

June 2018

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From FOMC Summary of Economic Projections

June 2018

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From FOMC Summary of Economic Projections

June 2018

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Forecasting Great Recession 1.0 (early 1980s)

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Forecasting Great Recession 2.0 (late 2000s)

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Forecasting the Recovery

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Distribution of labor market states: April 2014

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LFPR Forecast and Aging Effect

Aging Effect through 2021:Q1: −0.8 percentage point My unofficial estimate of economywide

62 62.5 63 63.5 64 64.5 65 65.5 Percent of Population 16+ 62 62.5 63 63.5 64 64.5 65 65.5 Percent of Population 16+ 2010q4 2012q4 2014q4 2016q4 2018q4 2020q4 Actual CBO Forecast (Ann. Avgs.)

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Participation among Prime-Age Workers

85 87 89 91 93 95 Percent 85 87 89 91 93 95 Percent 1990q1 2000q1 2010q1 2020q1

25−34 M

85 87 89 91 93 95 Percent 85 87 89 91 93 95 Percent 1990q1 2000q1 2010q1 2020q1

35−44 M

85 87 89 91 93 95 Percent 85 87 89 91 93 95 Percent 1990q1 2000q1 2010q1 2020q1

45−54 M

70 72 74 76 78 Percent 70 72 74 76 78 Percent 1990q1 2000q1 2010q1 2020q1

25−34 F

70 72 74 76 78 Percent 70 72 74 76 78 Percent 1990q1 2000q1 2010q1 2020q1

35−44 F

70 72 74 76 78 Percent 70 72 74 76 78 Percent 1990q1 2000q1 2010q1 2020q1

45−54 F Foote (Boston Fed) The Economic Outlook September 10, 2018 15 / 22

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Participation among Selected Older Groups

64 66 68 70 72 Percent 64 66 68 70 72 Percent 1990q1 2000q1 2010q1 2020q1

55−64 M

25 30 35 40 Percent 25 30 35 40 Percent 1990q1 2000q1 2010q1 2020q1

65−69 M

15 20 25 Percent 15 20 25 Percent 1990q1 2000q1 2010q1 2020q1

70−74 M

45 50 55 60 Percent 45 50 55 60 Percent 1990q1 2000q1 2010q1 2020q1

55−64 F

15 20 25 30 Percent 15 20 25 30 Percent 1990q1 2000q1 2010q1 2020q1

65−69 F

8 10 12 14 16 Percent 8 10 12 14 16 Percent 1990q1 2000q1 2010q1 2020q1

70−74 F Foote (Boston Fed) The Economic Outlook September 10, 2018 16 / 22

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