The National Economic Outlook

2013 Arkansas Economic Forecast ConferenceLittle Rock, ArkansasNovember 6, 2013

… the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.

FOMC statement; October 30, 2013

Monetary Policy: SOSO

“We have a three-part baseline projection which

involves increasing growth…, continuing gains in

the labor market, and inflation moving back

towards objective… we’ll be looking to see if the

data confirm that basic outlook.”

Chairman Ben BernankeSeptember 18, 2013

“We have a three-part baseline projection which

involves increasing growth…, continuing gains in

the labor market, and inflation moving back

towards objective… we’ll be looking to see if the

data confirm that basic outlook.”

Chairman Ben BernankeSeptember 18, 2013

-1000

-800

-600

-400

-200

0

200

400

600

08 09 10 11 12 13

185

148

12-month average

Monthly change

Payroll Employment Changes seasonally adjusted, thousands of jobs

Source: Bureau of Labor Statisticsdata through September 2013

5

The longer-term average of monthly employment growth continued near its two-year trend….

50

100

150

200

250

300

350

12 12 13 13

185

148

12-month average

Monthly change

Payroll Employment Changes seasonally adjusted, thousands of jobs

Source: Bureau of Labor Statisticsdata through September 2013

6

…but recent months have generally fallen short of that trend.

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

2011 2012 2013 2014

Unemployment Rate: Actual and Blue Chip Consensus ForecastsPercent, quarterly averages

Actual data Sep-12 Oct-13

7Sources: Bureau of Labor Statistics; Blue Chip Economic Indicators, September 10, 2012 and October 10, 2013

actual data through Q3 2013;forecast data through Q4 2014

Job growth has been sufficient to drive the unemployment rate down beyond expectations.

The improving unemployment rate has been accompanied by continued declines in labor force participation.

8

63

64

65

66

67

68

2

4

6

8

10

12

00 02 04 06 08 10 12

Unemployment and Labor Force Participation Ratesmonthly, percent, seasonally adjusted

Source: Bureau of Labor Statistics

UnemploymentRate

ParticipationRate

through September 2013

63.2

7.2

Civilian Unemployment Rate (U3)

Labor ForceParticipation Rate

1/1/1900

1/2/1900

1/3/1900

1/4/1900

1/5/1900

1/6/1900

1/7/19001/8/1900

1/9/1900

1/10/1900

1/11/1900

1/12/1900

1/13/1900Leading Indicators

Employer Behavior

ConfidenceUtilization

Atlanta Fed Labor Market Progress Spider Chart

1/1/1900

1/2/1900

1/3/1900

1/4/1900

1/5/1900

1/6/1900

1/7/19001/8/1900

1/9/1900

1/10/1900

1/11/1900

1/12/1900

1/13/1900

Payroll Vacancies (JOLTS)

Hires (JOLTS)

NFIB Hiring Plans

Conference Board Job Availability

Quits (JOLTS)

UnemployedMarginally attached workers

Job finding

rate

Work part time for economic reasons

Initial claims

Difficult to fill (NFIB)

Temporary help services employment

Leading Indicators

Employer Behavior

ConfidenceUtilization

Atlanta Fed Labor Market Progress Spider Chart

PayrollExCensus

JOLTSOpens

JOLTSHires

NFIBHiringPlans

ConfBoardJobAvail

JOLTSQuits

UnemployedMarginAttachSA

UtoErate

PTER

InitialClaims

NFIBCantFill

Temp

Payroll Vacancies (JOLTS)

Hires (JOLTS)

NFIB Hiring Plans

Conference Board Job Availability

Quits (JOLTS)

UnemployedMarginally attached workers

Job finding

rate

Work part time for economic reasons

Initial claims

Difficult to fill (NFIB)

Temporary help services employment

Leading Indicators

Employer Behavior

ConfidenceUtilization

Q4 2007 = 100

Q4 2009 = 0

Atlanta Fed Labor Market Progress Spider Chart

PayrollExCensus

JOLTSOpens

JOLTSHires

NFIBHiringPlans

ConfBoardJobAvail

JOLTSQuits

UnemployedMarginAttachSA

UtoErate

PTER

InitialClaims

NFIBCantFill

Temp

Payroll Vacancies (JOLTS)

Hires (JOLTS)

NFIB Hiring Plans

Conference Board Job Availability

Quits (JOLTS)

UnemployedMarginally attached workers

Job finding

rate

Work part time for economic reasons

Initial claims

Difficult to fill (NFIB)

Temporary help services employment

Leading Indicators

Employer Behavior

ConfidenceUtilization

25%

50%

75%Q4 2007 = 100

Q4 2009 = 0

Atlanta Fed Labor Market Progress Spider Chart

13

Atlanta Fed Labor Market Progress Spider Chart: Viewed as a whole, the labor market picture is uneven.

Payroll

Vacancies (JOLTS)*

Hires (JOLTS)*

Conference BoardJob Availability

Quits (JOLTS)*

UnemployedMarginally attachedworkers

Job finding rate

Work part time foreconomic reasons

Initial Claims

Difficult to fill (NFIB)

Temporary help services employment

Q4 2007 = 100Q4 2009 = 0Jul-2013-Sep-2013

Jul-2012-Sep-2012Jul-2011-Sep-2011

Leading Indicators

Employer Behavior

Utilization

Confidence

*Apr – June 2013 value is Mar – May 2013. **Apr – Jun 2013 value is Feb – Apr 2013. Sources: FRB Atlanta, Bureau of Labor Statistics, National Federation of Independent Businesses,The Conference Board, and Department of Labor

through September 2013

Labor market improvement: A mixed bag.

“We have a three-part baseline projection which

involves increasing growth…, continuing gains in

the labor market, and inflation moving back

towards objective… we’ll be looking to see if the

data confirm that basic outlook.”

Chairman Ben BernankeSeptember 18, 2013

15

1.0

1.5

2.0

2.5

3.0

3.5

2010 2011 2012 2013 2014 2015 2016

U.S. 4Q GDP Growthyear-over-year, percent change

Actual Jun-13 SEP

The June Summary of Economic Projections: An anticipated bump in growth.

* Midpoint of range

Sources: Bureau of Economic Analysis, Federal Open Market Committee

Source: Bureau of Economic Analysis, Macroeconomic Advisers

2013Q3 Tracking Forecasts

Reported Real GDP and 2013:III,IV Forecast

Q1actual

Q2Actual

Macroeconomic Advisers

3rd Quarter Tracking Model

Forecast

Macroeconomic Advisers

4th Quarter Tracking Model

Forecast

Annualized Real GDP Growth 1.1 2.5 2.6 1.7

Tracking estimates for real GDP do not yet suggest an acceleration in growth.

17

The trend growth in overall consumer spending remains near 2%--just a shade under its recovery average.

-6

-4

-2

0

2

4

6

00 01 02 03 04 05 06 07 08 09 10 11 12 13

Real Personal Consumption Expendituresyear-over-year % change, monthly

through August 2013Source: Bureau of Economic Analysis

(annualized % change) 12-month

Durable goods 8.0

Nondurable goods 1.9

Services 1.1

18

Since the end of the recession, the government sector has subtracted an average 0.32 percentage points from GDP growth each quarter.

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

07 08 09 10 11 12 13

Contributions from Federal and State & Local Government to GDP Growthpercentage points, quarterly, seasonally adjusted annualized rate

Federal State & Local Combined

Source: Bureau of Economic Analysis through Q2-13

Question: What is the largest source of uncertainty affecting business decisions?

Source: FRB Atlanta Small Business Survey

The Economic Policy Uncertainty Index was approaching pre-recession levels until September 2013, when it increased to the highest point since December 2012.

20through October 2013Source: PolicyUncertainty.com

50

70

90

110

130

150

170

190

210

230

250

2007 2008 2009 2010 2011 2012 2013

Economic Policy Uncertainty IndexSeptember 1985 = 100 monthly

3-year average

Estimates suggest a significant negative impact of uncertainty on GDP growth.

22

1.0

1.5

2.0

2.5

3.0

3.5

2010 2011 2012 2013 2014 2015 2016

U.S. 4Q GDP Growthyear-over-year, percent change

Actual Jun-13 SEP Sep-13 SEP

The September Summary of Economic Projections: A downward revision

* Midpoint of range

Sources: Bureau of Economic Analysis, Federal Open Market Committee

The definition of insanity: A clear record of overly optimistic growth forecasts.

* Midpoint of rangeSource: Federal Open Market Committee

The gap that won’t go away: Time for a different storyline?

24

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

50 54 58 62 66 70 75 79 83 87 91 95 00 04 08 12

Source: Bureau of Economic Analysis, Congressional Budget Office

GDPbillions, 2009$

through 2Q 2013

CBO Potential GDP

Real GDP

“We have a three-part baseline projection which

involves increasing growth…, continuing gains in

the labor market, and inflation moving back

towards objective… we’ll be looking to see if the

data confirm that basic outlook.”

Chairman Ben BernankeSeptember 18, 2013

26

-2

-1

0

1

2

3

4

5

00 02 04 06 08 10 12

PCE Price Indexyear-over-year percent change, monthly

Headline Core Trimmed Mean

Sources: Bureau of Economic Analysis and Dallas Fed through August 2013

FOMC Objective

The inflation trend remains well short of 2%.

The National Economic Outlook