Monday, February 18, 2013

Been down so long...

It may look like up to Barack Obama, but Keith Hennessey is made of sturdier stuff and has the pictures to prove his point, as in the above.  Take note of where the red line (actual GDP) diverges from the blue (normal, aka 'potential', GDP growth).

The last time we had a serious recession(s), 1980-82, the economy quickly rebounded to the blue line.  Same story for the periods immediately after mild recessions of '90-91 and 2001.

This time IS different.  And, according to the CBO, don't expect a return to normalcy soon;
CBO’s GDP projection has three significant features:
  1. CBO projects that real GDP will continue to grow only as fast as potential GDP this year;
  1. They then project that growth will accelerate; but
  1. They project that the output gap won’t close until the end of 2017, almost five years from now.
Attaching numbers to this, CBO projects real GDP will grow 1.4 percent in 2013, 3.4 percent in 2014, and 3.6 percent per year from 2015-2017, reaching potential GDP at the end of 2017.
This translates into their (un)employment projections as well. CBO projects an 8.0% unemployment rate in the fourth quarter of this year and a 7.6% rate at the end of 2014, only three-tenths of a percentage point below where we are now. They then project that the unemployment rate will decline to reach full employment by the end of 2017.
Be careful what you vote for!

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