What Our Economy Will Look Like in 2015

Focus: MARKETS

William Strauss Image William Strauss Senior Economist and Economic Advisor, Federal Reserve Bank of Chicago

William Strauss describes how the Fed feels the economy will perform over the next three years.

We're here in Chicago at The World MoneyShow, and I'm with William Strauss. William, where are we going to be in 2015?

That's a great question, Gregg, because just a couple of weeks ago, the Federal Open Market Committee, the FOMC, came out with their projections for economic growth, unemployment rates, and inflation rates all the way through the next three years.

What they see for this year, for 2012, is growth that is going to be somewhat below trend, next year a little bit above trend, and improving beyond that by 2014, 2015, growth that should be just somewhat above 3%. Better performance for the economy, but still not the kind of growth that is going to materially bring down the unemployment rate very rapidly.

In fact, the expectation for the unemployment rate is for it to remain above 8% through the end of this year, but with growth just slightly above trend for next year, unemployment rates are expected just to edge lower to remain still just slightly below 8%.

With growth accelerating in 2014 and 2015, unemployment rates are expected to come down, so that by the end of 2015 we'll be just above 6%. That is still above what we think of as the natural rate, the long-term rate, so imbalances even three years from now when the labor market remain, although they will be significantly reduced from where we are today.

Is this something that mature markets are going to go through?