Economy Alarm: Feds Project Bleaker Economic Outlook Than Last Month
Economy Will Grow At a Slower Pace Than Previously Predicted
Vice President Biden Promised This Would Be a “Recovery Summer”
“Vice President Joe Biden Thursday helps kick off what the White House calls “Recovery Summer,” a six week long push to highlight what the administration says will be jobs created this summer and fall by a surge in federal stimulus spending across the country.” (Dan Lothian and Paul Steinhauser, “White House begins new Stimulus push,” CNN, 6/17/2010)
Credibility Crash: Federal Reserve Officials Warn Unemployment Will Remain High, Economy Weak
Federal Reserve officials have a slightly dimmer view of the economy than they did in April, reflecting worries about how the European debt crisis could affect U.S. growth and job prospects.
Fed officials said Wednesday in an updated economic forecast that they think the economy, as measured by the gross domestic product, will grow between 3 percent and 3.5 percent this year. That’s a downward revision from a growth range in their April forecast of 3.2 percent to 3.7 percent.
The Fed’s latest forecast sees the unemployment rate, now at 9.5 percent, possibly staying at that figure or in the best case falling to 9.2 percent. In the April forecast, the Fed had a slightly lower bottom number of 9.1 percent.
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The Fed predicted that a key inflation gauge that’s tied to consumer spending would show prices rising 1 percent to 1.1 percent this year. That’s down from an April forecast that consumer prices would increase by 1.2 percent to 1.5 percent.
The absence of inflationary pressures gives the Fed leeway to keep interest rates low to try to bolster growth as the economy recovers from the deepest recession since the 1930s.
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The Fed’s new forecast made only minor changes to its outlook for growth, unemployment and inflation. But those changes underscored a view that economic prospects were slightly weaker.
The factors the Fed cited were household and business uncertainty, weak real estate markets, a tough job market, waning fiscal stimulus and still-tight lending by banks.
The Fed in April had said only a minority of Fed officials thought it would take more than five or six years to reach the Fed’s goals for maximum employment with low inflation. But in the new minutes, the Fed changed that to say that “most” expected it to take “no more than five or six years.”
Beyond this year, the Fed forecast growth in 2011 to be in a range between 3.5 percent to 4.2 percent. The upper limit of that range was reduced from 4.5 percent in the April forecast.
The expectation for the unemployment rate next year was also nudged higher to a range of 8.3 percent to 8.7 percent. That was up from a range of 8.1 percent to 8.5 percent in April. (Martin Crutsinger, “Fed paints weaker picture of growth and employment,” Associated Press, 7/14/2010)
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