5/23 Blu Putnam's Take on the U.S. Economy

The topic today is the U.S. economy. The U.S. has the healthiest 2% economy ever. Real GDP is only growing 2% the last seven years. It was growing 4% in the 60's, 3.5% in the 80's and 90's. We're down to 2%, but it's a great economy. Unemployment is at 4.4%. That is really low. Private job growth is very strong. Now, there was a hiccup with government jobs. Back between 2009 and May of 2013 we lost 850,000 government jobs. By the way, quantitative easing was never going to fix that. Bad policy. Anyway, government jobs are growing again, too. Corporate profits, they had a set back when energy prices fell. They're growing again. The main risk for the U.S. economy is debt. We have $20 Trillion in U.S. National debt, and we have another $12.7 Trillion in consumer debt. That's mortgages, credit cards, car loans, student loans. Too much debt makes the economy fragile and vulnerable to shocks. But it doesn't mean recession. What it does probably mean is the Fed will be super cautious on raising rates once they get rates up to say just a little bit below 2%. Why that number? Well 2% is the long-term inflation path that they're targeting, and so if they get rates close to that, they're done. And by keeping rates a little lower, it protects the economy from all its debt. I'm Blu Putnam, Chief Economist, CME Group.