Relax: “Best years just around the corner”

The WSJ reports: “The U.S. Economy Will Soon See Its Best Years in a Decade, Federal Forecasters Say”:

The White House, Congressional Budget Office and Federal Reserve unanimously see the nation on the cusp of the best years for the economy in a decade or more.

In its latest round of economic forecasts, released Monday with the president’s budget, the White House sees the unemployment rate falling below 5% by the end of 2016, the lowest since before the recession. The White House sees growth of 3% this year and in 2016–the best back-to-back years since 2004 and 2005.

“The U.S. economy has substantial room for growth, although there are factors that could continue to limit that growth in the year ahead,” the White House report said. On the positive side, the report noted declining unemployment, support from Federal Reserve policy, and pent-up demand as consumers regain confidence after nearly seven years of economic doldrums. On the negative side, the report sees lingering effects of the credit crisis and continued weakness in European and Asian economies.

Given that the ‘bad decade’ includes the ‘annus horribilis’ of 2008-09, that´s not necessarily saying much. While unemployment will likely continue to inch down (mostly for ‘bad’ reasons), it is unlikely real growth will reach 3% in that time frame. At least not if the Fed (which the WH mistakenly thinks is “supportive”) keeps limiting nominal spending growth to  average less than 4% as it has done since 2010!

Annus Horribilis

One thought on “Relax: “Best years just around the corner”

  1. The Fed is targeting 1% inflation…and let’s hope that is on the PCE, not the CPI. The ECB likewise, maybe worse.
    Low ITs seem to lead to Japan.

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