The U.S. economy is expected to grow by 2.5 percent in 2013, improving to 3.5 percent growth in 2014, top Fed official Charles Evans said on Monday.
Evans also forecast the U.S. unemployment rate would be 7.4 percent this year, easing to about 7 percent in 2014.
The Chicago Fed president, who delivered the underwhelming forecast in Hong Kong today, said that U.S. unemployment was unlikely to fall below the magical level of 6.5% for another two-and-a-half years. Which means two things, apparently: that interest rates will remain on the floor, and that our sage leaders will have to cut spending—but not too much or too fast; they have to do it just right. Which is a totally reasonable scenario given the political situation in Washington.
Too much austerity too soon could be very damaging to near- and medium-term growth,” Evans said at the Asian Financial Forum. In a fragile economy, sudden spending cuts and tax increases “could cause longer-lasting damage if they result in lower growth in the physical productive capital stock and even more time out of work for the long-term unemployed, whose job skills would be further eroded.”
Our neighbors to the north, however, aren’t letting Evans’ gloom get them down, even if he gets an FOMC vote this year. No, the Canadians are pinning their own hopes on a turnaround down below the 49th parallel.
Economists predict a resurgent U.S. economy will be a growth leader in the developed world this year, allowing Canada to benefit by riding its coattails….
“The real strongest area of advanced economic growth this year will likely be in North America,” said Craig Alexander, senior vice-president and chief economist at Toronto-Dominion Bank. “People could be underestimating the growth we could see in the U.S.”
On the other hand, for Canada, apparently any growth in the U.S. would be good enough: The economists at the Economic Club of Canada’s forum predicted just 2% growth in the U.S. this year.
U.S. economy to grow 2.5 pct this year – Fed’s Evans [Retuers]
Evans Says Fed Support Needed While Deficit Tackled [Bloomberg]
Canada to get boost from U.S. in 2013, top economists predict [Financial Post]