Saturday, October 30, 2010

Federal Reserve Bank of San Francisco: "A Long Time to Return to Normal"

Mark Thoma at Economists View:
...I've been expecting a long, slow, agonizing recovery, in part because there's little chance that fiscal policy authorities will give the economy the boost it needs to recover faster. As I noted yesterday, the forecast from Macroadvisers is that employment won't fully recover until 2013. I made the same forecast about a year ago, but full recovery by 2013 is looking optimistic now. I wouldn't be surprised if it takes even longer than that.
The San Francisco Fed is also expecting a slow recovery:


And, again, even that might be optimistic given that they are forecasting an average growth rate for 2010 of 2.5% and today's estimate came in below that.

This is not a strong report. As Calculated Risk notes above, this won't derail quantitative easing. However, I don't expect another round of quantitative easing to have a large impact on the growth rate of GDP. Thus, while this won't derail QEII the problem is that it won't move fiscal policymakers to action, and fiscal policy is, in my opinion, the best way to help the economy recover faster.