Marketplace Scratch Pad

Brown leaves are more like it

Scott Jagow May 20, 2009

A couple months ago in a 60 minutes interview, Fed Chairman Ben Bernanke used the phrase “green shoots” to describe those small signs the economy may be recovering. Since then, the phrase has been repeated a bazillion times. But today, the Fed released the minutes of its April meeting, and while I wouldn’t say all the leaves are brown, the sky is still gray.

The Fed’s Open Market Committee members revised their forecast for GDP down from January’s projections. Their range for GDP growth this year was between negative 1.3% and negative 2%. In January, the forecast was greener – negative 1.3% to negative .5%.

As for unemployment:

Their projections for the average unemployment rate during the fourth quarter of 2009 had a central tendency of 9.2 to 9.6 percent, noticeably higher than the actual unemployment rate of 8.5 percent in March–the latest reading available at the time of the April FOMC meeting…

Most participants anticipated that growth next year would not substantially exceed its longer-run sustainable rate and hence that the unemployment rate would decline only modestly in 2010… With output growth and job creation generally projected to pick up appreciably in 2011, participants anticipated that joblessness would decline more noticeably…

So, it could be two years from now before we really see the unemployment rate start to come back down. But the Fed members expect GDP to start growing again in 2010.

What I took from the minutes was nothing new or dramatic. It’s just a reality check that while there are a few positive signs here and there, this is a long economic winter that requires a gradual thaw. We shouldn’t expect that Spring is just around the corner.

You can read the entire forecast here.

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