`Revolutionary' Fed Study Has Economists Rethinking Forecasts

[swag]

http://www.bloomberg.com/apps/news?pid=10000103&sid=acqbH7wK9LK8&refer=us

April 13 (Bloomberg) -- A new Federal Reserve study has shaken economists' forecasts by suggesting the U.S. economy will have to decelerate much more over the next decade than most now expect.

The study, to be published in July, finds that the retirement of the Baby Boom generation will force far-reaching adjustments in the way the economy works. Forecasts for everything from growth and employment to corporate profits and interest rates will have to be recast.
. . .

The study suggests that growth over the next 10 years will average less than 3 percent, instead of the 3.3 percent of the last decade, economists said. A 0.3 percentage point difference in growth in the $12 trillion U.S. economy translates into $360 billion over 10 years, equal to the size of Switzerland's economy. Payroll gains, which averaged 200,000 a month in the 1990s, may be half that.

``This is a very big story,'' said Laurence Meyer, vice chairman of Macroeconomic Advisers LLC and a former Fed governor. ``It makes the challenge for the Fed a little greater.''
. . .

The study projects what the authors call a ``conservative'' 3 percentage-point decline over the next 10 years in the labor force participation rate -- the percentage of people who are either working or looking for work. Much of that drop is driven by the retirement of the baby boomers, the 78 million Americans born between 1946 and 1964.

. . .

[NVMojo]

1. is there a link for this story or the report???

[swag]

3. Thanks, I just added it. My mistake.

I'm wondering why three question marks, though, when one usually suffices.

[bananas]

13. How about a link for the report??????

"A preliminary version of the report is available on Brookings' Web site."

I looked at brookings.edu and couldn't find it.

[swag]

14. For six question marks, anything.

http://www.brookings.edu/es/commentary/journals/bpea_macro/200603bpea_aaronson.pdf

[bananas]

15. Thanks!!!

[swag]

2. Does anyone else note a case here for immigration liberalization?

Does anyone else here also see a chance for the resurgence of organized labor?

[Fenris]

5. Yes on the first point.

And I get the feeling organized labor has reached its nadir. At least I hope so. No where to go but up, so to speak.

[benburch]

6. Amen!

And the Unions see it this way too, Dog bless them.

[daleo]

4. Nice mixing of numbers, for sensationalism

"A 0.3 percentage point difference in growth in the $12 trillion U.S. economy translates into $360 billion over 10 years, equal to the size of Switzerland's economy."

Or, equal to the size of one-tenth of Switzerland's economy in any one year.

[swag]

7. Well it is Bloomberg, after all.

Their headline writers told us yesterday that Iran would have nukes in 16 days.

[unblock]

9. haha! or $3.6 trillion in a century! equal to, um, TEN switzerlands!

sometimes the comparisons are indeed silly.

my favorite is when they compare financial numbers to the number of feet between the earth and the moon, or something else completely irrelevant.

[Rex]

10. Lol, noticed that too.

Does forecasting EVERYTHING mean a huge amount of no-bid contract money for somebodies major campaign contributor? I bet so.

[VegasWolf]

8. Time to start practicing my FOREX skills!

[swag]

11. Or at least keep diversifying that portfolio internationally.

[Dogmudgeon]

12. 3% -- just a teensy weensie little Super-Depression

These people have brains to spare -- and their heads up their asses.

Well, I shouldn't blame them. It's their circumstances, for certain. I'm glad they got the information out.

--p!

[bemildred]

16. Hey, let's pull some more numbers out of our ass!

I wonder what this is supposed to justify?

[swag]

17. Your speculation is certainly welcome by me on that count,

though this particular demographic trend has been evident for decades now.

[bemildred]

18. I don't doubt the problem.

I have a discussion of it bookmarked from a couple years ago.
I just don't believe this report is anything but drivel, or
that these fellows have any idea what to do about it. I think
they pulled their numbers straight out of their asses, and I
KNOW nobody has that sort of handle on what the US economy is
up to. These sort of ".3%" numbers are supposed to instill
confidence in the Rubes. My guess would be that this is about
Social Security "deform" or something of that sort.

[swag]

19. I won't waste any time looking for your rebuttal in the

Quarterly Journal of Economics then. In fact, I'll just call them now and cancel my subscription.

Thanks. I just saved some bucks!

[bemildred]

20. Good, I wasn't going to waste time writing a rebuttal, anyway. nt

[converted_democrat]

21. Wow.. K&R n/t

[Gormy Cuss]

22. The Fed Reserve assumes most boomers will leave the workforce

How does that square with the endless reports that boomers won't have the assets to do so? I'm thinking the Social Security Administration estimate of a 1 percent decline in lfp rate is more on the mark.

[AnneD]

23. What they are saying basically...

is they are going to have to kill the economy to save it. Look for them to reduce EVERY thing they can that might help those about to retire. Look for them to cut further into Education, Health, etc. This is the point where they are going to further starve the beast to kill it.

[drduffy]

24. agree with Michael Ruppert.....

things will be much much much worse..... end of the petro dollar, peak oil, climate change, major depression........


buy a farm. That's what I'm doing.