The Federal Reserve is just out with its latest economic projections. Since the last edition in June, they’ve turned gloomier for the short, medium, and long term. They see growth as slower, and unemployment as higher, for 2011, 2012, 2013, and for the “longer run” than they did just three months ago. For this year, they’re looking for GDP growth to average 1.6–1.7%, compared with a projection of 2.7–2.9% in June. They see unemployment as staying in its current 9.0–9.1% range, instead of falling into the high 8s. For next year, they see growth at around 2.7% instead of 3.5%, and unemployment around 8.6% instead of 8.0%. And for the long run (in which we’re all dead, of course), they’re a little gloomier than they were in early summer (I’m not quoting numbers, lest reader fatigue set in—they’re at the link). Their forecast for very modest inflation remains unchanged.
What does this all mean? One, the Fed is likely to remain very indulgent. I don’t get the complaints coming from a lot of left–liberals about they’re not doing enough. They’re doing about all they can, given the limits of monetary policy amidst such economic wreckage. They need fiscal help, and they’re not likely to get it. Two, the recovery from the economic crisis is likely to take even longer than most prognosticators prognosticated; the Fed has a pretty good track record in forecasting. And three, elite projections for the long term—not just the Fed, but the CBO as well—are quite gloomy, and popular discourse hasn’t really caught up to this fact.
Maybe they’re wrong, and a boom will take us by surprise. But even so, shouldn’t we be talking about this openly?