CHART OF THE DAY: Fed Lowers Economic Outlook
The Federal Reserve released its latest revisions to its outlook for the economy and unemployment after the FOMC meeting on Wednesday. While the Fed tracks it revisions from one meeting to the next I thought it would be interesting to compare to what the estimates were at the November 2011 meeting versus today.
The Fed continues to degrade its economic outlook at each meeting. In November the outlook for the 2012 economy was for it to grow at 2.7% versus 2.15% at the June meeting. This is a 20.37% decrease in the estimates. Furthermore, and more disturbing, is that they lowered their "Long Run" estimate by 5.8% to 2.4%. A 2.4% long run growth rate for the U.S. economy does not bode well for long term prosperity.
There was little change to the jobless estimates on average but the Fed does continue to see improvement in the jobless rate. This is a bit of a quandry as the level of economic growth doesn't support full employment. However, the employment rate has been dropping as of late due to the number of individuals that cease to be counted due to long term unemployment. This shift in the labor force could account for much of the decline in the estimated jobless rate as the masses of baby boomers move through the system into retirement. However, a low jobless rate with millions of individuals surviving on food stamps and government transfers does not translate into a country that is an economic powerhouse.
It is highly likely that in future FOMC meetings we will continue to see downward revisions to 2013 and 2014 growth rates for the economy. The pressures from the Eurozone, current montary policies and a lack of fiscal policies will continue to keep downward pressures on growth rates for the foreseeable future. For the Fed it will continue to be shampoo instructions: Wash, Rinse, Repeat.