Insight & Thought Leadership on the Global Economy

When Mark Zandi talks, people listen. This fine book (Paying the Price) evaluates the policy responses to the financial crisis and the Great Recession in his usual authoritative and objective manner—a rare combination. You should read it. — Alan S. Blinder, Economics Professor, Princeton University, and former Vice Chairman of the Federal Reserve

US Macro Outlook: Nearing the Threshold

  • Reported GDP growth has lagged U.S. job creation, but this unusual discrepancy is unlikely to continue.
  • Weak productivity growth post-recession is part of the explanation, as investment in structures has waned.
  • The revival of homebuilding will help kick the U.S. expansion into a higher gear.
  • Slow household formation has created pent-up demand that could push housing starts well above trend.
  • Lenders are poised to open the credit spigot, if regulatory uncertainties are cleared up soon.
  • The Federal Reserve must carefully handle the normalization of monetary policy to avoid knocking the recovery off track.

The pace of U.S. GDP expansion has flagged in recent quarters, but job growth has held firm. If history is a guide, this discrepancy will not continue for long. Either GDP growth will rebound or job growth will founder. The Moody’s Analytics outlook is predicated on the former view: We think the job market will maintain its pace, and that GDP growth will pick up going into next year. The expansion should be in full swing by 2015.

View the full article here.

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