Macroeconomic Outlook for
The U.S.
Jeffrey H. Dorfman
The Current State of the US Economy
 Retail sales are growing.
 Incomes are creeping upward.
 Debt is expanding again.
 Many agricultural commodity prices are rising.
 Mostly, the economy is growing slowly while
waiting to see a political solution (if any).
Retail has been recovering
1992-01-01
1992-09-01
1993-05-01
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2012-01-01
Billions
Food retail also rising
$50
$45
$40
$35
$30
$25
$20
$15
Source: Federal Reserve series and author calculations.
Incomes are rising
Consumer debt is rising, too
Consumer debt is manageable
Are We Slowly Going Back to Work?
Disappearing from Unemployment
But … Many Didn’t Go Back to Work
So … Where Have People Gone
Population Composition Changes
0%
12%
33%
40%
15%
Adult population growth = 9.3 million from Dec. 2008 to Dec. 2012
Unemployed
Gave Up
Disability
Retired/Aged
Employed
So… Employment Picture
 Business is producing more with the same or fewer people
 Business growth is not enough to grow employment
 Instead, people are giving up, getting on disability, or
collecting unemployment.
 Even those who have aged out are collecting benefits, so
 9 million more adults are not working than 4 years ago.
US Budget Picture – What Changed?
Deficit Change
Revenue
Spending
From 2001 to 2012, all figures adjusted for inflation and population growth. Total change = $1.32T
Why Can the Government Afford This?
If Interest Rates Were Normal …
 Should probably be paying 3x as much interest on debt
 In FY2012, US paid $435 billion in interest
 At normal rates, we would be paying over $1 trillion
 Federal deficit would be twice as big.
 That means: interest rates are not going
back up to “normal” for a long time.
Consumer confidence is still AWOL
US Budget Outlook
 Republicans and Democrats will continue to make last minute
compromises.
 Spending cuts by sequester ($85 billion this year) probably
continue.
 This was a very modest (2%) cut in spending.
 Democrats will push for more tax revenues, but probably won’t
get much if any.
 We will continue with deficits that are 2-3 times what used to be
the historical record.
Bringing it Home to Your Community
 Sales tax collections should grow at good rate.
 Property taxes should be recovering.
 Local gov’t revenue should be back to “normal”
or close to it in 2014.
And now … questions
 Ask me stuff that would be too risky to put on the slides.