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What growth will be like in 2012 & 2013

February 23, 2012

Bill Conerly, Conerly Consulting, Businomics,
Oregon economist

I’ve updated my economic forecast, and it’s not as favorable as last quarter’s projection. I continue to see upward pressure on the economy this quarter and next from the lagged impacts of the Federal Reserve’s second round of quantitative easing. However, I’ve offset most of that with a hit to exports and attitudes from the European financial crisis. The result is a very boring forecast.

This continues our pace far below our potential. Using the CBO’s estimate of Potential GDP, we’re more than four percent below where we should be at the end of 2013. Unemployment will fall to around 6.5% by end of next year; an improvement for sure, but not nearly good enough for people to feel happy.

Policy response? I see not much change for fiscal or monetary policy. (That’s my forecast, not my recommendation.)

Further reading click here to go to the full Forbes article

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Bob Clark February 23, 2012

I don’t think it possible to have robust real priced economic growth because much of the world’s economy is weighed down by tight oil supplies. There’s not a whole lot of spare oil producing capacity (OPEC is producing nearly full out and shale oil supply growth is comparatively modest). If leaders try to pump prime economic growth, they get a surge in oil price not soon thereafter. The surge in oil price subsequently cuts off the step up in economic growth. In essence, there is a very serious bottleneck causing Potential GDP not to be as great as mainstream economics suggests.

On the other hand, if China and Europe economies slow this allows oil prices to soften giving U.S a mixed economic opportunity. Slower China and Europe economies cause U.S exports to slump and imports rise, nicking U.S economic growth. But lower oil price, helps the U.S retail consumer giving an offsetting boost to U.S economic growth.

Therefore, I would say we might have the best economy we can have currently, excepting for the ballooning federal debt level. On the latter, I would be inclined to substitute the actual electronic printing of new monies to meet federal government (deficit) funding needs in place of new treasury debt. I would also deregulate the labor market so as to dampen possible inflationary affects of going the electronic printing route inplace of the debt route.

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