Fed Challenge
Employment
• Even though unemployment is decreasing, hiring
for full-time jobs still remains low.
• Most of the jobs created are part-time.
• Wages and income have remained stagnant for
decades.
• Wage growth is slow.
Is unemployment rate a good
indicator?
This Recession was Different in
Terms of Unemployment
Wage Growth is Slow
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2009-2010: 2% Growth
2010-2011: 4% Growth
2011-2012: 4.5% Growth
2012-2013: 2.78% Growth
Avg. Growth Rate 2009-2013: 3.32%
Wage Growth is Slow
Inflation
• No imminent inflation threat
• The current inflation rate is running below the
target rate of 2%
• No imminent cost-push inflation threat
- low price of energy and commodity
- slow wage growth
● No inflationary pressure from the demand side
Inflation is Low
CORE PCE/PPI GROWTH
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Jan. 2009
PCE: 99.26
PPI: 170.8
Jan. 2010
PCE:100.81
PPI: 172.5
Jan 2010
PCE:100.81
PPI: 172.5
Jan 2011
PCE: 101.81
PPI: 175.3
Y-o-Y Growth
PCE: .99%
PPI: 1.62%
Jan. 2011
PCE: 101.81
PPI: 175.3
Jan. 2012
PCE: 103.91
PPI: 180.8
Y-o-Y Growth
PCE: 2.06%
PPI: 3.14%
Avg. Growth Rates ‘09-’14:
Jan. 2012
PCE: 103.91
PPI: 180.8
Jan 2013
PCE: 105.49
PPI: 184.0
Y-o-Y Growth
PCE: 1.52%
PPI: 1.77%
PPI: 1.63%
Jan. 2013
PCE: 105.49
PPI: 184.0
Jan. 2014
PCE:106.80
PPI: 187.6
Y-o-Y Growth
PCE: 1.56%
PPI: .99%
Y-o-Y Growth
PCE: 1.24%
PPI: 1.96%
PCE: 1.28%
Real GDP
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Real GDP growth is slow
Consumption has not been upbeat
Capital investment is stabilized
Government spending is declining
Real GDP
2014:Q3: 2.3 Percent Change from Quarter One Year Ago
Real PCE Growth
2014:Q3: 2.3 Percent Change from Quarter One Year Ago
Real Gross Private Domestic
Investment
2014:Q3: 3.8 Percent Change from Quarter One Year Ago
Government Spending
2014: Q2:
U.S. National Debt
2014:Q2: $17,632,606 Millions
Government’s hands are tied due to federal debt.
Global Economy
• China’s growth is slowing down quarter by quarter
• Eurozone is in danger of deflation
• Global growth was cut twice in a matter of weeks by the
IMF
• Geopolitical uncertainty (ISIS, Ukraine & Russia, Ebola,
Capitol Hill, and Mid-term Elections)
• Strong dollar will have negative impacts on net exports
Conclusion and
Recommendation
• Economic growth is not robust
• No imminent inflationary threat
• Our recommendation:
Accommodating monetary policies
Low Fed Funds Rate
Ample liquidity for financial markets