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Macroeconomic Situation and Outlook Fall 2003

Macroeconomic Situation and Outlook Fall 2003. Craig Infanger Larry Jones. UK Center for Business and Economics Research.

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Macroeconomic Situation and Outlook Fall 2003

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  1. Macroeconomic Situation and OutlookFall 2003 Craig Infanger Larry Jones Agricultural Economics

  2. UK Center for Business and Economics Research “The U.S. economy appears to have come out of the 2001 recession in solid but not great shape … the economy will continue to grow in 2003 … but the current pace of recovery is fragile.” Kentucky Annual Economic Report 2003 Agricultural Economics

  3. Agricultural Economics

  4. U.S. Economic GrowthAnnual Change in Gross Domestic Product Percent forecast Agricultural Economics

  5. U.S. Economic GrowthQuarterly Change in Gross Domestic Product Percent Agricultural Economics

  6. Contributions to Economic Growth, 2002 Percent, annual Source: Federal Reserve Bank of Chicago Agricultural Economics

  7. Consumer Price IndexAll Items and Energy Source: BLS Agricultural Economics

  8. Interest Rate Trends, 2000-2003 Percent Source: Federal Reserve Bank Agricultural Economics

  9. Unemployment RatesU.S. and Kentucky Monthly Rates % Civilian Labor Force Source: U.S. Dept. of Labor Agricultural Economics

  10. Jobs are a big issue in the coming election. Agricultural Economics

  11. Number of Jobs in U.S. Manufacturing and Service Sectors, 1991-2003 millions Source: Bureau of Labor Statistics; 2003 = July estimate Lowest level since before WWII Agricultural Economics

  12. Monthly Net Change is U.S. Employment, 2000-2003 (thousands of nonfarm jobs) Recession ends Source: Dept of Labor Agricultural Economics

  13. Monthly Net Change is U.S. Employment, 2000-2003 (thousands of nonfarm jobs) 115-125,000 jobs per month Source: Dept of Labor Agricultural Economics

  14. U.S. International Trade Balance Billion$ Source: Dept of Commerce Agricultural Economics

  15. U.S. Agricultural Trade Balance Billion$, FY *projected Source: USDA, ERS Agricultural Economics

  16. Trade Weighted Dollar IndexTrade Weighted Exchange Index v. 26 Trading Partners 1997 = 100 Source: Federal Reserve Bank 10% decline since early 2002 Agricultural Economics

  17. Macroeconomic Consequences for the Kentucky Economy • UK CBER forecast for “steady recovery” for KY economy with 3.2% growth in ‘03 and 3.9% in ‘04 • Unemployment maxing out at 6.1% in 2003 with decline to 5.5% in 2004 • Recession + tax cuts = state revenues on a permanently lower growth path (structural deficit) • State budget deficit of $275 million + Medicaid deficit of $175 = $475 million (5% of state budget) Agricultural Economics

  18. Actual and Projected Federal Budget Surplus and Deficits, 1995-2006 Billions $ Source: OMB and CBO, 2003 Agricultural Economics

  19. Kentucky Net Farm Income Agricultural Economics

  20. USDA Farm Program Payments Agricultural Economics

  21. Kentucky Farm Balance Sheet Agricultural Economics

  22. Macroeconomic Outlook Summary • Modest economic growth for U.S. and KY • Historically low interest rates and inflation • Jobless recovery with relatively high unemployment for a growing economy • Trade deficit = serious drag on economic growth • Enormous Federal budget deficit and serious State structural budget deficit • Higher net farm income + USDA payments + Rising land values = Strong farm balance sheet • Growth in ag exports but disappearing trade surplus Agricultural Economics

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