On June 3, David Altig, PhD, delivered the latest economic forecasts for the US economy in the IBA Symposium track during the 2010 NACVA/IBA Annual Consultants’ Conference. Dr. David E. Altig is senior vice president and director of research at the Federal Reserve Bank of Atlanta. In addition to advising the Bank president on monetary policy and related matters, Dr. Altig oversees the Bank’s regional executives and the Bank’s research department. He also serves as a member of the Bank’s management and discount committees.
In his presentation entitled What Next- An Economic Update from the Federal Reserve Bank of Atlanta, Dr. Altig described the current “Alice Cooper” labor markets, referring to a Cooper song about a guy who needed a car to get a girl, a job to get a car and a car to get a job, so he was looking for a girl with a job and a car. On a more serious note, the civilian unemployment rate was 9.9% for April 2010. Actual unemployment is much higher. Once the marginally attached employees and the part time employees, due to economic reasons, are added to the unemployed, the rate climbs to 17.1% for the same period.
The Federal Open Market Committee projects that the civilian unemployment rate is expected to improve slightly to 9.0% by the end of the year. The FOMC expects the labor market to recover slowly, with unemployment declining to somewhere between 8.1% and 8.5% in 2011, and between 6.5% and 7.5% in 2012.
As part of the larger picture, the US labor market declined more than any other developed country. In contrast, GDP losses were less severe in the US when compared to other developed countries. According to Dr. Altig, this could be due largely to the differences in the employment environment in the US as compared to other developed countries. US employees appear to be bearing more of the economic impact of the downturn than employees in other countries where the labor markets have been more stable. In other developed countries, it appears that businesses have been forced to absorb the brunt of the economic downturn, explaining their higher losses in GDP. Other factors could be at play in the labor markets, including a change in business models towards cross training and efficiency.
The leaner labor markets in the US have resulted in higher productivity. It is possible that the “normal” in the US labor market has changed. In the long run, these changes in employment could allow growth to progress at a faster pace in the future. For the time being, the first quarter of 2010 GDP is expected to be 3%.
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