Economic Outlook, December 2013

I estimate GDP growth will be around 2 percent this year. Although there are a number of factors that may contribute to slower economic growth, I still see room for optimism regarding our fundamental prospects. Among the reasons for decreased growth estimates is greater caution on the part of both lenders and consumers. Policy uncertainty has led some businesses to postpone possible investments. Productivity growth is unlikely to change much, averaging roughly 1 percent per year. Employment growth is hard to forecast, though it seems that it, too, will likely continue to remain close to the recent trend of 1 percent, perhaps slightly lower. In some areas there seems to be significant mismatch between the jobs needed and the skills of workers seeking opportunities. It is unclear to me that the benefits of further monetary stimulus outweigh the costs, which could include making it more difficult for the Fed to ultimately pursue an “exit policy” from its accommodative stance.