Economic Forecast 2014 - Jay Hartzell, Professor of Finance, McCombs School of Business
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Transcript of Economic Forecast 2014 - Jay Hartzell, Professor of Finance, McCombs School of Business
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Jay Harzell, Ph.D.2014 Economic Forecast
Professor of Finance, McCombs School of BusinessThe University of Texas as Austin
October 17, 2013Federal Reserve Bank-Houston Branch
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Economic Outlook 2014
Jay C. HartzellChair, Department of Finance, McCombs School of Business
The University of Texas at Austin
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Economic Forecasts Research Department, Federal Reserve
Bank of Philadelphia “Survey of Professional Forecasters” First quarter (August 16, 2013) Doing this since 1968
42 “Professional Forecasters” Provide advice used by large commercial
institutions Members of National Association for Business
Economics (NABE) Use a variety of techniques and assumptions to
arrive at forecasts
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Real Gross Domestic Product Definition Historic average annual rate of growth
~ 3.0% Median forecasts (annual rate of growth)
2013 2.2%2014 2.3%2015 2.7%2016 2.9%
Risk of negative quarter (probability)2013: Q3 10.5%2013: Q4 11.2%2014: Q1 11.7%2014: Q2 11.5%2014: Q3 11.8%
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Unemployment & Workforce Participation Unemployment (natural rate ~ 6.0%)
2013 7.5% (~12.5 million)2014 7.1%2015 6.6%2016 6.1%
Under-employed (BLS “Alternatives”)~ 12%-18%
Workforce Participation Rate2000 67.3% (143 million)2008 66.3% (154 million)2013 63.2% (155 million)
Okun’s Law~ 3.0% Real GDP Growth to reduce unemployment
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Foundations of Low Growth Consumer spending and households
Stagnant incomes High or under employment Deleveraging Uncertainty
Business investment In aggregate, slim profit prospects
Contraction in household and government sectors Uncertainty, particularly in government policy
Government spending AAAAGGGGHHH! (debt-to-GDP ratio)
Net Export Slowing global growth
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Inflation (Consumer Price Index) Definition Historical average (annual rate)
~ 4.0% Median forecasts (annual rate)
Long-term forecasts (annual rate)
Comments of Fed on controlling inflation Managing liquidity (e.g., bank and non-bank reserves) Commitment to inflation
Headline CPI Core CPI
2013 1.4% 1.8%
2014 2.0% 2.0%
2015 2.3% 2.1%
Headline CPI
2012-2016 2.0%
2012-2021 2.0%
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View from 30,000 Feet (2013-2016)
Slow growth Improving private sector balance sheets Deteriorating (dramatically) public sector balance
sheets High unemployment High under-employment Lower workforce participation Low interest rates Low-ish inflation More wealth re-distribution than creation
Energy Health care Education
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Latest Fed Forecasts
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US Economic Policy Uncertainty Index
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US Economic Policy Uncertainty Index
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Fed Policy: Growth and Inflation Forecasts
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Texas Job Growth
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Texas Leading Index