Tuesday, August 12, 2008

Philly Fed: Economy slowing more sharply

From Reuters:

U.S. economic growth is expected to slow more sharply in the coming months than previously forecast with employers shedding staff into next year, according to a Philadelphia Federal Reserve survey released on Tuesday.


"Growth in U.S. real output over the next few quarters looks slower now than it did just three months ago," the Philadelphia Fed said on its Web site.


The current survey also forecast the U.S. unemployment rate would be 5.7 percent in the third quarter, above its previous 5.4 percent forecast, then rising to 5.8 percent in the fourth quarter.

"A weaker near-term outlook for the labor market accompanies the outlook for slower output growth," the Philadelphia Fed said.

We have been talking about the poor labor markets for a while.  As the labor market gets worse, housing is going to get worse.

Economists expect employers to shed jobs at a slower rate in the first three months of next year before adding workers in the second quarter of 2009.

They are already looking to second quarter of 2009 for a recovery.

U.S. core PCE inflation, a gauge the Federal Reserve watches closely, is estimated at 2.2 percent in the third quarter and 2.1 percent in the fourth quarter.

While the inflation is under-reported, going forward, we will be looking at deflation.

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