FRBSF Economic Outlook

Here’s a graph from latest forecast from the San Francisco Fed. No surprise – they are not expecting a quick recovery relative to past recessions:

As for the timing, they believe we are past the bottom, and headed back up – slowly – into positive growth by the end of the year:

That’s for GDP. To me the forecast seems optimistic, but in any case, employment is unlikely to turn around until many months after output recovers. From the report:

In sum, we expect GDP growth to turn positive by the fourth quarter of this year. However, we envision a much slower recovery than those of the past four recessions. In fact, we only expect GDP growth to return to its trend level by the end of 2010. …We expect this persistent slack in the economy will result in a peak unemployment rate of around 9.5 percent and a very slow decline in the rate during 2010 and 2011.

And again, to me that seems optimistic. Let’s hope the forecast is correct, or even understates the speed of recovery, but policymakers must take seriously the possibility that this forecast – as has been generally true for all the forecasts from various sources that have come before it – will have to be revised downward later.

Graphs: San Francisco Fed

About Mark Thoma 243 Articles

Affiliation: University of Oregon

Mark Thoma is a member of the Economics Department at the University of Oregon. He joined the UO faculty in 1987 and served as head of the Economics Department for five years. His research examines the effects that changes in monetary policy have on inflation, output, unemployment, interest rates and other macroeconomic variables with a focus on asymmetries in the response of these variables to policy changes, and on changes in the relationship between policy and the economy over time. He has also conducted research in other areas such as the relationship between the political party in power, and macroeconomic outcomes and using macroeconomic tools to predict transportation flows. He received his doctorate from Washington State University.

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