Thursday, June 23, 2011

The Fed's New Number

More big-picture bad news from the Fed on Wednesday: Officials now project that GDP will grow at 2.7 to 2.9 percent over the course of the year, down from an earlier estimate of 3.1 to 3.3 percent. GDP came in at a disappointing 1.8 percent in the first quarter, so although the forecast as down, it's still a bit up from what we've seen recently.

But 2.7 to 2.9 percent is still less than optimal. From 1947 to 2010, the average annual GDP growth for the U.S. came in at 3.3 percent. And obviously, to burst until full recovery, we'll need better than average growth. Studies show that growth needs to be at least 2.5 percent to make a dent in the unemployment rate, so we're projected now to be just barely above that.

The Bureau of Economic Analysis releases its first estimate of second-quarter GDP growth on July 29. That will be an important indicator.

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