San Francisco Fed Warns Of Sluggish Growth, Weak Wages, And Falling Inflation


Photo: San Francisco Fed

The San Francisco Fed, which is known for coming out with sober economic analysis, has published its latest outlook for the economy.It’s not good.

They see sluggish growth, weak end demand, a horrible housing market, and yes… diminishing inflation (though not quite outright deflation).

Some key ideas:

The economic recovery has lost some momentum in recent months. Not counting the effects of
hiring for the 2010 census, employment was rising by several hundred thousand jobs per month
earlier in the year. Since May, these gains have averaged only 55,000 jobs per month.

Consumer spending continues to grow, but at a fairly modest and uneven pace. Purchases of
durable goods, nondurable goods, and services all remain below their pre-recession peaks. In
recent months, services have picked up, durables have moved sideways, and nondurables have
ticked down. Consumers remain very cautious. Income growth has been subdued and
unemployment remains high. Moreover, households have taken big hits to their housing, stock
market, and other wealth. 

Consumer spending remains weak.

Employment has stalled.

Household net worth continues to fall, and consumers have thus become more thrifty.

Sure, the ISM is still indicating growth...

But businesses still see really bad sales



And don't look for a recovery

At best, a modest recovery

With weak wage growth

Falling inflation

And lower interest rates.

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