Speech by Chairman Powell on the outlook for the U.S. economy
April 09, 2018 / Source: FRB
April 06, 2018
The Outlook for the U.S. Economy
Chairman Jerome H. Powell
At The Economic Club of Chicago, Chicago, Illinois
For more than 90 years, the Economic Club of Chicago has provided a valued forum for current and future leaders to discuss issues of vital interest to this city and our nation. I am honored to have the opportunity to speak to you here today.
At the Federal Reserve, we seek to foster a strong economy for the benefit of individuals, families, and businesses throughout our country. In pursuit of that overarching objective, the Congress has assigned us the goals of achieving maximum employment and stable prices, known as the dual mandate. Today I will review recent economic developments, focusing on the labor market and inflation, and then touch briefly on longer-term growth prospects. I will finish with a discussion of monetary policy.
Recent Developments and the State of the Economy
After what at times has been a slow recovery from the financial crisis and the Great Recession, growth has picked up. Unemployment has fallen from 10 percent at its peak in October 2009 to 4.1 percent, the lowest level in nearly two decades (figure 1). Seventeen million jobs have been created in this expansion, and the monthly pace of job growth remains more than sufficient to employ new entrants to the labor force (figure 2). The labor market has been strong, and my colleagues and I on the Federal Open Market Committee (FOMC) expect it to remain strong. Inflation has continued to run below the FOMC's 2 percent objective but we expect it to move up in coming months and to stabilize around 2 percent over the medium term.
Beyond the labor market, there are other signs of economic strength. Steady income gains, rising household wealth, and elevated consumer confidence continue to support consumer spending, which accounts for about two thirds of economic output. Business investment improved markedly last year following two subpar years, and both business surveys and profit expectations point to further gains ahead. Fiscal stimulus and continued accommodative financial conditions are supporting both household spending and business investment, while strong global growth has boosted U.S. exports.
As many of you know, each quarter FOMC participants—the members of the Board of Governors and the presidents of the Reserve Banks—submit their individual projections for growth, unemployment, and inflation, as well as their forecasts of the appropriate path of the federal funds rate, which the Committee uses as the primary tool of monetary policy. These individual projections are compiled and published in the Summary of Economic Projections, or SEP. FOMC participants submitted their most recent forecasts three weeks ago, and those forecasts show a strengthening in the medium-term economic outlook (table 1). As you can see, participants generally raised their forecasts for growth in inflation-adjusted gross domestic product (GDP) and lowered their forecasts for unemployment. In addition, many participants expressed increased confidence that inflation would move up toward our 2 percent target. The FOMC sees the risks to the economic outlook as roughly balanced.