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US Economy - PowerPoint Presentation

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US Economy - PPT Presentation

Forecast 2014 2015 Till Schreiber Senior Lecturer Professor College of William amp Mary September 26 th 2014 Nafa Annual Convention Aspen CO Looking back to Savannah My forecast a year ago ID: 266230

investment growth year economy growth investment economy year forecast 2014 recovery unemployment rate government 2015 emerging disappointing market markets

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Slide1

US Economy Forecast 2014, 2015

Till Schreiber

Senior Lecturer Professor

College of William & Mary

September 26

th

2014

Nafa

Annual Convention, Aspen, COSlide2

Looking back to Savannah

My forecast a year ago:

Slow (below long-term average) growth in 2014

Unemployment falls slowly

Disappointing recovery continues

Government muddling through instead of implementing pro-growth policies

Unfortunately, this turned out to be about rightSlide3

Realistic forecast must make assumptions about some factors

No ideological agenda

Based on current and historical data, facts (and some theory)

Where is the economy now?

What do some leading indicators suggest about the near future?Slide4

Snapshot of the economy

Unemployment rate 6.2% (ticked up recently)

Labor force participation still really low

GDP growth disappointing

FELL 2.1% in first quarter (at annual rate), then went up by 4.2% second quarter

Economy slowed down by multiple “headwinds”

Cold winter in first part of the year

Government deadlock

Slowdown in Europe and emerging markets

Inflation expected to be about 2% each year going forward over the next decade (based on bond yields)Slide5

Will the jobs/workers come back?Slide6

Share of workers claiming social security disability (Mueller et al, 2013)Slide7

Government regulation

How much does ‘too much regulation’ reduce growth?

Talk of secular stagnation, permanently lower growth

Can US economy return to 20

th

century trend growth?

Immigration

Not just you. Talk to Virginia Credit Union League some month ago, very similar issues

Assume

: No reduction in red tape imminentSlide8

Investment, Investment, Investment

Main issue of disappointing “recovery”

Private sector investment (spending by businesses on R&D, new machines etc.) fell of a cliff in late 2008, early 2009

It has recovered somewhat, will it now continue to increase or flatten out?Slide9

Investment as share of GDP (blue) vs. Unemployment rate (red)Slide10

Business Sector

You guys!

High levels of uncertainty

Regulations and Taxes

Consumer and Industry demand going forward

Purchasing Managers’ Index (ISM)

High last summer/fall. Then big fall in early 2014, now has regained the ground. Temporary blip or beginning of faster recovery???

Assume

: Resilient investment demand, total construction spending up over last yearSlide11

Exports

Questions about growth prospects in emerging markets

Dollar has recently appreciated versus many emerging market currencies

Eurozone faces internal issues, so does Japan

No export boom likely overallSlide12

What to make of all this?

Growth

in

the second half

of 2014

will likely be around 3%.

But don’t be too optimistic (see below)Slide13

Forecast for 2015

Growth

should

pick up once the recovery really takes hold

Has been predicted since late 2009, many businesses and households have now paid down debt substantially

Crucial market: Investment! Both residential (housing) and other fixed investment

No government policies in sight to address regulation mess boldly

Muddling through continuesSlide14

Forecast for 2015

If economy grows fast, interest rate hikes may slow down recovery of housing market and investment generally

somewhat

Federal Reserve scheduled to raise rates next year

“Disappointing” economy may continue

Growth of 3%

unlikely to be topped next year

Unemployment comes down further very, very slowly if at allSlide15