Everyone Agrees Economy’s Salad Days Are Back

But don't start celebrating just yet.
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You tell'em, Janet!

This news is not necessarily as good as it sounds.

In its latest round of economic forecasts, released Monday with the president’s budget, the White House sees the unemployment rate falling below 5% by the end of 2016, the lowest since before the recession. The White House sees growth of 3% this year and in 2016–the best back-to-back years since 2004 and 2005….

The White House, CBO and Fed all see growth strengthening in coming years, and all see unemployment declining.

But...

Under secular stagnation, developed economies like the United States are facing a period of perpetually weak demand, driven by some combination of factors such as pessimism about the future, economic inequality, excessive budget austerity, an aging population, slow productivity growth or weak investment growth. These factors combine to create an era of low growth, low inflation and low interest rates….

If secular stagnation is right, the economy’s equilibrium has been altered to a lower trajectory. And indeed, long-term forecasts from the Congressional Budget Office and White House show estimates of an economy with declining interest rates.

The U.S. Economy Will Soon See Its Best Years in a Decade, Forecasters Say [WSJ Real Time Economics blog]
A Whiff of Secular Stagnation in Budget Forecasts [WSJ Real Time Economics blog]

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