Friday, January 20, 2017

San Francisco Fed: GDP growth 1.5%-1.7% in 2017


FAIRFIELD — “The U.S. economy is healthy and the financial system of the U.S. is much more resilient today than it was prior to the Great Recession that hit bottom in 2008,” said John C. Williams, president and CEO of the Federal Reserve Bank of San Francisco at a Solano County economic conference today.

He was the keynote speaker before more than 200 county business leaders and public officials at Solano Economic Development Corporation’s 34th annual meeting. Fed monetary policy has two key goals — to maximize employment and achieve price stability to avoid inflation, Williams said. The ideal situation would be to maintain an unemployment rate between 4.75 percent and 5 percent — since full employment is not practical with some people between jobs, students who are not working, etc. Today’s 4.7 percent rate has achieved the first goal with some 140 million people employed in the workforce.

He said in 2009 the unemployment rate nationally was 10 percent. Back then, the unemployment rate in in the Solano area was 12.5 percent. “Since then we’ve added 15.5 million jobs, and the local unemployment rate in this county is down to 5 percent,” he said.

Williams noted that the U.S. added 180,000 jobs a month on average during 2016, but that the new norm for job creation moving forward will probably be in the 80,000 jobs per month range.

He observed that national gross domestic product growth in 2016 was about 2 percent and sees this rate remaining about the same, or perhaps a little lower, in 2017. Williams believes average GDP growth could be between 1.5 percent and 1.75 percent this year and into 2018.

“There are a lot of uncertainties when it comes to setting the Federal Reserve System’s central bank U.S. funds base rate, currently at 0.75 percent after two increases,” he said. The last increase occurred in December.

According to Williams, to achieve the price-stability objective involves balancing future upside and downside uncertainties when setting monetary policy.

“Inflation has been a big issue with the goal of keeping it between 1.75 percent and 2 percent year over year — which we have done,” he said.

While more incremental increases are anticipated over the next year or so, he believes it is time to move toward a long-term, neutral monetary policy that will not stall a recovery but rather continue to expand the economy as long as possible.

However, he cautioned that when an economic recovery lasts for a long time, market forces can lead to a downturn. For example, oil and housing prices are rising dramatically again. While history shows that the U.S. has had a recession about once every four years, the current recovery is one of the longest on record, with almost seven years of slow economic growth. One variable fueling the rebound is the gradual nature of the ongoing turnaround.

At the same time, Williams said there is a huge difference between today’s economy and factors that led to the 2007–2009 “great recession.”

“Banks are now required to keep higher reserves, and have more liquidity,” he said. “There is also a greater understanding of the interrelationships between the various segments that comprise the financial infrastructure of our country.”

Sponsored Links The Solano EDC annual meeting also featured at presentation by four-star Gen. Carlton D. Everhart II, commander of the Air Mobility Command that includes Travis Air Force Base in Fairfield. He recapped the mission of this command and the contribution made by the local base, its 24,000 uniformed personnel and dependents, to the regional economy.

Sandy Person, president of the Solano EDC, provided an overview of economic development highlights leading to a total gross regional product of $19.65 billion. Here are the economic contributions from just the top five Solano County industry sectors: Food and beverage ($0.81 billion), biotech and biomed ($1.28 billion), logistics ($1.47 billion), Travis AFB ($1.69 billion) and advanced materials ($2.23 billion).

Link to original article found in the North Bay Business Journal.