Economic Outlook Discussed at NGA

Biloxi, Mississippi -- Declaring that "the green shoots are real," Dr. David Altig, Senior Vice-President and Director of Research for the Federal Reserve Bank of Atlanta, argued that the current recession will end sometime during the third quarter of this year. However, speaking before the Economic Development and Commerce Committee of the National Governors Association, Dr. Altig said that many people would not notice. He compared the end of the recession to a person beginning to be hit in the head with a hammer only once a day after having endured twice a day hits. While the economy will stabilize, he does not see a significant return of economic growth or an improved employment outlook in the short term.

Dr. Altig emphasized that he was only speaking for himself and that his statements did not express the views of the Federal Reserve.

Over the course of his presentation, the economist also stated the following:

• High rates of personal savings will hinder the return of the kind of robust consumer spending that drove previous economic growth.
• He does not see any quick return to pre-recession GDP levels before 2011.
• Demographic changes also weigh heavily on long term economic forecasts, which he admitted are tentative, at best. The aging of the U.S. population would suggest slower rates of growth in the long-term than have been previously experienced since World War II.
• The lack of clarity regarding policy changes in major areas of the economy creates uncertainty that makes entrepreneurs reluctant to invest at this time.
• The current economic crisis has shaken the U.S.'s standing as one of the three financial centers in the world, the others being Europe and Asia. The nature of future regulation could determine whether the U.S. remains among those three.
• In a cursory response to questions regarding the Chinese economy, Dr. Altig emphasized the difference between stimulus spending on infrastructure that increased long-term productivity from such spending that did not meaningfully impact the economy.