The Washington Post's John Berry writes about Federal Reserve expectations:
Posted by DeLong at November 19, 2003 04:20 PM | TrackBackBonds (washingtonpost.com): William Poole, president of the St. Louis Federal Reserve Bank, gave the bond market a shot in the arm last week when he said in an interview with Bloomberg News that with the "modest" economic growth forecast for next year the Fed could keep its interest rate target low "well beyond March." Poole, like many other Fed officials, believes productivity growth has risen enough that the economy will have to grow at more than about a 4 percent annual rate before unemployment begins to fall. Many private economists and those in the Bush administration are predicting growth at a 4 percent rate or less in 2004. Until joblessness begins to decline, the Fed is unlikely to start to raise its target. "The standard forecast is still for good but by no means gangbusters growth," Poole said. "We are only going to make very slow gains in reducing unemployment."...
I doubt I am saying anything original here, but all of the growth won't mean anything if it doesn't translate to increased employment. But a fair amount of jobs - I believe the official numbers were somewhere around 300,000 or 400,000 for the past few months - have been created, so the question is, will the good employment news continue? Additionally, this is probably very hard if not impossible to forecast, but with all of the good news about the 7.2%, it is possible that the growth that simply must be lower would look bad, and if that is the case, then couldn't that hurt consumer confidence and other stuff like that and then hurt the economy? Or would that be too minor to make a big difference?
Posted by: Brian on November 19, 2003 05:18 PMWhat's the consequence of the dollar's further fall on this? Is the government opting to (or being forced to) protect the housing industry's growth even if it hurts import-reliant industries and retailing?
paulo
http://whosecapitalism.typepad.com/
4% real GDP growth with 4% productivity growth
implies roughly 0% employment growth.
John Bradford, Encyclopedia of Word and Phrase Origins
Posted by: Green Mark on December 20, 2003 05:28 PM