Economic Outlook, May 2011

It's a pleasure to speak to you today about the outlook for the economy and economic policy. It was nearly two years ago, in the spring of 2009, that the U.S. economy hit bottom, and though our economy has recovered since then, the pace of expansion has been disappointingly slow. Unemployment remains high, and many sectors of the economy remain in the doldrums. While I don't want to minimize the extent of lingering weakness in economic activity, we should not lose sight of the fact that the economy has been expanding at a significant pace and the fundamentals for future growth are strong right now. Before we look at the economic outlook in more detail, I would like to emphasize that these remarks are my own and the views expressed are not necessarily shared by my colleagues in the Federal Reserve System.1 Let me set the stage by reviewing how we got here. In 2008 and through the first half of 2009, we experienced the worst recession since the Great Depression. We saw growth turn positive again in July 2009. Our best measure of overall economic activity, gross domestic product or GDP, increased at a modest 2.8 percent annual rate over the next seven quarters. Many observers have been disappointed with this modest growth, which was barely above the long-run trend rate that results from population growth and productivity growth. But at least real GDP has improved, and its level is now above its previous peak in the fourth quarter of 2007. Other important indicators of growth have not recovered. The number of employees on nonfarm payrolls has risen by 1.8 million persons in the last 14 months, but that increase is dwarfed by the 8.7 million jobs that were lost in the previous two years. It's fair to say that we have a way to go before we make up all of the ground lost during what many are calling the Great Recession.