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 Fed Jerome Powell, Chairman of Federal Reserve Foote (Boston Fed) The Economic Outlook September 10, 2018 2 / 22
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 Foote (Boston Fed) The Economic Outlook September 10, 2018 3 / 22
Dual Mandate: Inflation and Unemployment 10 10 Unemployment Rate PCE Price Index (12−mo. change) 9 9 Core PCE Price Index (12−mo. change) 8 8 7 7 6 6 Percent Percent 5 5 FOMC Median Estimate of Long−Run Unemployment Rate (4.5%) 4 4 3 3 FOMC Inflation Target (2%) 2 2 1 1 The "Missing Disinflation" 0 0 2010m1 2012m1 2014m1 2016m1 2018m1 Foote (Boston Fed) The Economic Outlook September 10, 2018 4 / 22
Federal Funds Rate 15 10 Percent 5 0 Jan 1985 Jan 1990 Jan 1995 Jan 2000 Jan 2005 Jan 2010 Jan 2015 Jan 2020 Recessions Fed Funds Rate Foote (Boston Fed) The Economic Outlook September 10, 2018 5 / 22
From FOMC Summary of Economic Projections Foote (Boston Fed) The Economic Outlook September 10, 2018 6 / 22
From FOMC Summary of Economic Projections June 2018 Foote (Boston Fed) The Economic Outlook September 10, 2018 7 / 22
From FOMC Summary of Economic Projections June 2018 Foote (Boston Fed) The Economic Outlook September 10, 2018 8 / 22
From FOMC Summary of Economic Projections June 2018 Foote (Boston Fed) The Economic Outlook September 10, 2018 9 / 22
Forecasting Great Recession 1.0 (early 1980s) Foote (Boston Fed) The Economic Outlook September 10, 2018 10 / 22
Forecasting Great Recession 2.0 (late 2000s) Foote (Boston Fed) The Economic Outlook September 10, 2018 11 / 22
Forecasting the Recovery Foote (Boston Fed) The Economic Outlook September 10, 2018 12 / 22
Distribution of labor market states: April 2014 Foote (Boston Fed) The Economic Outlook September 10, 2018 13 / 22
LFPR Forecast and Aging Effect 65.5 65.5 Actual CBO Forecast (Ann. Avgs.) 65 65 64.5 64.5 Percent of Population 16+ Percent of Population 16+ 64 64 63.5 63.5 63 63 62.5 62.5 My unofficial estimate of economywide Aging Effect through 2021:Q1: −0.8 percentage point 62 62 2010q4 2012q4 2014q4 2016q4 2018q4 2020q4 Foote (Boston Fed) The Economic Outlook September 10, 2018 14 / 22
Participation among Prime -Age Workers 25−34 M 35−44 M 45−54 M 95 95 95 95 95 95 93 93 93 93 93 93 91 91 91 91 91 91 Percent Percent Percent Percent Percent Percent 89 89 89 89 89 89 87 87 87 87 87 87 85 85 85 85 85 85 1990q1 2000q1 2010q1 2020q1 1990q1 2000q1 2010q1 2020q1 1990q1 2000q1 2010q1 2020q1 25−34 F 35−44 F 45−54 F 78 78 78 78 78 78 76 76 76 76 76 76 Percent Percent Percent Percent Percent Percent 74 74 74 74 74 74 72 72 72 72 72 72 70 70 70 70 70 70 1990q1 2000q1 2010q1 2020q1 1990q1 2000q1 2010q1 2020q1 1990q1 2000q1 2010q1 2020q1 Foote (Boston Fed) The Economic Outlook September 10, 2018 15 / 22
Participation among Selected Older Groups 55−64 M 65−69 M 70−74 M 72 72 40 40 25 25 70 70 35 35 Percent Percent Percent Percent Percent Percent 20 20 68 68 30 30 66 66 25 25 15 15 64 64 1990q1 2000q1 2010q1 2020q1 1990q1 2000q1 2010q1 2020q1 1990q1 2000q1 2010q1 2020q1 55−64 F 65−69 F 70−74 F 30 30 60 60 16 16 14 14 25 25 55 55 Percent Percent Percent Percent Percent Percent 12 12 20 20 50 50 10 10 45 45 15 15 8 8 1990q1 2000q1 2010q1 2020q1 1990q1 2000q1 2010q1 2020q1 1990q1 2000q1 2010q1 2020q1 Foote (Boston Fed) The Economic Outlook September 10, 2018 16 / 22
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