All right, so moving on to the main agenda. Now, without further ado, allow me to introduce our keynote speaker, Jim Dolmas. Jim is an economic policy advisor and senior economist at the Federal Reserve Bank in Dallas. His main research interests are in the field of macroeconomics, where he has worked on such topics as the cost associated with business cycles, the effectiveness of a stabilization policy, inflation measurement, and the politico-economic determinants of inflation, taxation, and immigration policy. His research has appeared in scholarly journals such as the International Economic Review, Review of Economic Dynamics, and the Journal of Economic Dynamics and Control. He holds a PhD in economics from the University of Rochester and a bachelor's degree with honors in economics from the University of Chicago. Prior to joining the Dallas Fed in June 2000, he taught economics at the undergraduate and graduate level at Southern Methodist University. He has also taught at the University of Rochester and the University of Texas in Austin. Jim developed and now maintains the Dallas Fed's trimmed mean PCE inflation rate, in addition to briefing the Federal Reserve Bank of Dallas's President on National Economic Conditions, Jim writes monthly analyses of inflation data for the bank's website. Please join me in welcoming Jim Domas. Thank you. It's good morning, everybody. It's very, very nice to be here with you in Fort Worth. So I'm going to talk about some long-run trends and some of what's been going on in the near term with the U.S. economy. And before I get into it, I need to say that the views I'm going to express are my own and don't necessarily reflect those of the Federal Reserve System. So let's jump right in. A kind of overview, I'm going to start with some long-term trends that were really shaping the U.S. economy prior to the pandemic that had to do with demographics, with productivity, and with interest rates and inflation. And then I'll turn to the past few years, which is really, I mean, it's hard to overstate how unique the recession and recovery associated with the pandemic were. But I'll try to give you some sense of what a really unique event that was. But then, as we all know, I mean, coming out of that and the recovery, we ended up with these snarled supply chains and a really, really, really tight labor market, as tight as we've really seen in decades, high inflation. And then central banks, not just the Fed, but central banks all around the world, right? Hiking interest rates to deal with this pickup in inflation. And since then, you know, since about really within the last year, we've seen kind of ample, a lot of progress on inflation coming down, as well as a better balance in the labor market. And then I'm going to turn to the outlook over the next several years, and also in the longer run, where I'm going to talk really about projections made by the FOMC, the members of the Federal Open Market Committee of the Federal Reserve, for the next few years, and sort of what they're projecting for the long run. And then I want to circle back at that point to some of those long-run trends that I talked about at the beginning, where really the questions that are being asked now are kind of, you know, are we in a different world? Are we just going to go back to those long-run trends that we saw pre-pandemic, or are things going to be different going forward? So let me start with these longer-run perspectives. And there are really three big trends that, you know, prior to 2020, we thought of as really shaping kind of the outlook for the U.S. economy. One of them had to do with demographics, which was this phenomenon in recent decades of slowing population growth, population getting older and older, and the labor growth and the labor force slowing. And then the second had to do with productivity growth. Now, productivity is this thing that tends to go through cycles. Sometimes we have periods of very rapid productivity growth. Sometimes we have periods of slower productivity growth. And over the last, over the couple decades prior to the pandemic, we were in a period where productivity growth had really slowed. And kind of those, putting those two, those first two together, and the demographics, slower labor force growth, productivity, sort of slow productivity growth, what those translate into is kind of a really lower normal for what we think about for real GDP growth, the real growth of the economy, which depends, in some sense, you can break it down into how much the labor force is growing and how productive that labor is becoming. And if both of those are slowing, well, then that's slowing down. So that, you know, pre-pandemic, it seemed like kind of what was normal GDP growth was something on the order of 2% per year, maybe a bit less. Which was down quite a bit from, if you think back a few decades prior to that, where what was normal seemed to be something more on the order of 4, 4.5%. And then, and this is not unrelated, interest rates and inflation. And one thing that we had seen, again, in the decades leading up to, oh, I just noticed there's like a copy of my slides down here. I keep looking back. They're there. Thank you. Okay. So, you know, this is something you're all certainly well aware of, is that, really, since about the 1980s, interest rates, the whole structure of interest rates has come down quite a bit, right? Up until very recently, right? So the last couple years have been different. But right up until the pandemic, interest rates were falling. A lot of that had to do with the fact that, really, since the early 80s, inflation had been falling until around the mid-90s, when it kind of leveled off. But also, if you look at real or inflation-adjusted interest rates, those have come down a lot, too, to the point where, you know, pre-pandemic, they were close to zero. Close to zero real interest rates pre-pandemic. Let me just show you, just show you a little bit about some of these trends. So let's, I mean, start with the demographic one. This is a distribution, if everybody, I hope everybody can see that, the numbers at the bottom. This is kind of putting the resident population into buckets by age. Less than 15, 15 to 24. The big, the really, the modal one, the high one, is like prime working age years, 25 to 44, and then older. And so this is for, these gray bars are for 1992. And then you see, well, 30 years after that, in 2022, big drop in the percentage of the population that's in those prime working years or younger. And this pickup in the share that's in those older buckets, beyond prime working years, and in particular, beyond age 65, beyond sort of what, for a lot of people, is kind of typical retirement age. And then these census projections going forward for 30 years from now, that trend is expected to continue. And in fact, you know, we'll see further decline in kind of prime working, the share of the population that's in those prime working years, and even larger increase in the share of the population that's in those older buckets, in particular, the 65 plus bucket. And what that's translated into, I mean, in part, it's partly aging, but there's some other phenomena as well. But average labor force growth is slowed as a result because, you know, older individuals, the older you get, well, it's kind of hump shape, you know, when you're in your prime working years, most everybody is in the labor force, right? But as we look at people who are older and older and older, their participation in the labor force tends to decline. So if you add, if the population is sort of composition of it is tilting more and more toward those older buckets, then you'll see a decline in labor force participation and slower growth in the labor force. And so that's sort of what's accounting for part of what we see here, which is average labor force growth by decade, starting on the left in the 60s and all the way up to the 2010s. And you can see, I mean, we had this period where in the 60s, 70s, and 80s, labor force growth that was at worst sort of a little bit below 2% per year, and at its peak in the 70s, around 2.5% per year. I mean, some of that is, you know, this was a time when the baby boom generation was coming into their prime working age years. And we were also kind of on the tail end of this decade or more of increasing labor force participation by women in that peak in the 1970s and into the 80s. But since then, I mean, that trend sort of plateaued and kind of played itself out. And coming down that slope, a lot of that is really about aging of the population. And we see slower growth, slower growth, slower growth. So in the 2010s, we only had labor force growth of a six-tenths of a percent on average per year over the decade. And this, I didn't extend this out to the 2020s, but in the 2020s, we've seen kind of a bump. But that bump really has to do with immigration. And I'll show you some data a little later on about the impact that immigrants have had on the labor force over the last few years. But presuming that that bump's temporary or transitory, I mean, obviously, it all depends on policy. But assuming that bump is temporary, if you look at projections from the Bureau of Labor Statistics, from the Census Department, from the Congressional Budget Office for sort of the long-term trend of labor force growth, it's supposed to be, you know, as far as the eye can see, a little bit below six-tenths of a percent. So it's not projected to rebound anytime soon, but to remain at that kind of low pace. And like I said, you put this together, this is sort of one component of thinking about kind of what's the normal pace for growth in economic activity, for growth in GDP is the labor input. Productivity is sort of the second piece. And I said, and you can see it a bit in this chart, that productivity tends to go through periods where it may be productivity may be growing fast, it may be growing slower, but overall sort of the trend you see in that chart is generally speaking downward. Although there was this interruption of that downward trend in the 90s and 2000s with the boom in information technology, the IT boom. But in the decades since, the 2010s, and then sort of tentatively for the 2020s, based on the data up, you know, that we have in hand, we're talking about productivity growth, something on the order, averaging something like one and a half, or maybe a little less than one and a half percent. Versus look back in time, 3% per year, 3.4%, 2%, it's a really marked difference. If you think about sort of superimpose that labor force growth chart that I had in the previous slide up with this, right, you sort of sum those two things together, you can see why we had kind of rapid GDP growth in up through the 70s, 80s, in the sense of, talking in the sense of, well, what's normal or trend? And what was normal or trend back then was something on the order of four, four and a half percent. Now if you add up, you know, six tenths of a percent labor force growth per year plus something on the order of 1.4 or so percent per year growth in productivity, you get something on the order of 2%, which is, as I said, coming into the pandemic, this was sort of the view that, OK, normal's now around 2%. And going forward, it's probably going to be a bit less than that based on the projections for the labor force. Assuming productivity doesn't enter into a period where it really picks up again. And so that's where we were in terms of productivity and the labor force. Let me turn now to interest rates, which was the other big trend that sort of shaped the way we thought about the US economy prior to the pandemic. And that was that interest rates really fell significantly since the 1980s, up until recently. That little piece at the end is obviously all that's happened with interest rates going up since the recovery from the pandemic, since we had higher inflation, since we had central banks raising interest rates, and so forth. But prior to that, we had this long, steady decline from the early 80s up until the pre-pandemic period. So this is a yield on a 10-year Treasury note. And as I said, some of that's obviously due to inflation. So this is inflation in this chart. This is PCE inflation, less food and energy. PCE is a lot like this. It's very similar to the CPI. It's a little bit broader. And it's the measure that the Fed targets when they talk about their inflation target. But you can see from the early 80s up through the mid-90s, inflation fell a lot, too. So you think about the role of inflation in terms of what role it plays in determining interest rates. As inflation falls, yields on fixed income security should fall as well, because people will demand less. You need less yield to hold these nominal securities in a world where inflation's lower. And so part of that was the fall in inflation, which had to do with, really, central banks, not just the Fed, but central banks around the world, committing to things like inflation targets, central banks becoming more independent, central banks resolving to fight the inflation that we saw in those earlier decades, and to target a low and stable rate of inflation. But that's not the whole story. That's part of the story with interest rates, but that's not the whole story, because you can look at real interest rates. So this is a 10-year Treasury yield where I've adjusted it for inflation expectations using, well, what do professional forecasters think inflation's going to be over the next 10 years? So each point on here is sort of, well, what's a yield on a 10-year Treasury minus what's the inflation forecasters are expecting over that 10-year horizon to get the real yield? And that really came down dramatically to the point where, as I said, you think about that pre-pandemic, just in that immediate decade before the pandemic, we were in this world where, you know, the yield on a 10-year treasury was basically close to zero. It's kind of hard to believe that something like that could come about, but, you know, that's where we were. And I should say, I mean, this is not just a U.S. phenomenon. I'm showing you U.S. data, but this is a global phenomenon, right? Interest rates around the world, real interest rates around the world, came down in this way to the point where, you know, not just in the U.S., but in Europe, in Japan, basically all the developed foreign central banks were facing this situation where, well, geez, interest rates are, real interest rates are close to zero. And I should say, you know, there are theories about why this happened, right? What brought down the structure of interest rates around the globe. There are a lot of sort of plausible theories about why that have to do with the fact that potential growth has slowed over this period. This is relating to those first two long-run trends I was talking about. Because there is this, at least in theory, there should be a relationship between how fast the economy is growing and what's the real return on securities in that economy. And if trend growth is slowing, then those real interest rates should come down as well. So that's sort of one explanation that people have thought of. Others have to do with globalization, with excess savings, demand for safe assets. I mean, if you think about it, the thing to think about is, in the background of these interest rates on sovereign debt going to zero in real terms, is that sovereigns were issuing a lot of debt over those couple decades, right? Not just in the U.S., but in Europe and elsewhere. And yet, there was this sort of insatiable appetite for safe assets, so that the necessary return on those sovereign securities turned out to be zero, even though sovereigns were pushing more and more and more debt out the door, right? So it's kind of dramatic, their theories about why it's happened. We don't, there's a lot of uncertainty about it. So I wouldn't say that there's one that, oh, everybody agrees it was this, right? Which makes it tougher, so we're thinking forward about whether or not this will continue if you don't have a clear picture of how you got into this situation in the first place. But one thing, and I'll show you the next slide. And this sort of challenge, this next slide kind of challenges some of the theories about why interest rates have fallen. So here it is. This is, I know it's a little hard to see, just look at the general trend. This is 800 years of real sovereign yields. So if you look, I know it's hard to see from back there, but on the far left of the axis is like the year 1300, and it goes up to 2018. And this was, you know, this is from a really, really interesting data work by this economist named Paul Schmelzing, and this was a Bank of England working paper a couple years ago. Just putting this data together, it showed that, you know, the phenomena that we think is like, oh my gosh, real rates have come down so much since the 1980s, is really just the tail end of something that's been going on for 800 years. And like I said, it kind of challenges, if this data is to be trusted, and you know, this is sort of a new data set and people are still arguing about it, arguing about how well it measures what it says it's measuring. But if it's to be trusted, then it kind of challenges some of the stories we had for why real interest rates came down since the 1980s. Because this is saying they've been coming down for 800 years, when a lot of those stories that we would tell about the period since the 80s wouldn't be applicable, right? Or we'd go against what's going on here. So it's really, this is really, really fascinating. So it's when people say that, oh, if you hear like, you know, coming over, as we go forward, we're going to be in a new higher interest rate environment, right? Interest rates have come up a lot in the last couple years, and going forward, we're not going to go back to those low rates before. And I'm not giving you a definitive answer on that one way or the other, because I'm extremely uncertain myself. But in the back of my mind, I would be thinking of this chart that says that, you know, 800 years of data have this pattern. So that is sort of the long run setting, right? I should probably move a little faster here. Well, this can be quick. It's talking about pandemic, recession, and recovery, which, as I said, it's like, it's a business cycle like none we've seen before. For one thing, it's like the shortest, it was the shortest recession on record, right? It's just two months. And if we measured, you know, and this is just an artifact of the fact that the National Bureau of Economic Research, the body that determines when recessions start, when they end officially, they only, they don't look at anything shorter than a month. If they looked at weekly data, this would probably not, the recession probably wouldn't be two months, wouldn't even be two months long, it would be something less. Because, you know, mid-March, it's mid-March of 2020, it starts, and then, like, by mid-April, the economy was growing pretty sharply again, if you would look, be able to look at high-frequency data, which a lot of us were doing at that time. But you know, it's remarkable what happened over the course of that month where things were going down. Employment fell by 22 million. The unemployment rate rose from what we thought, you know, back in 2019, we're thinking, wow, unemployment's so low, 3.5%, suddenly within the space of a couple months, it shoots up to close to 15%. That's probably an underestimate, too, given the way the Bureau of Labor Statistics sort of handles people who are, who are, who are furloughed, but not sort of permanently separated from their employer in calculating the unemployment rate. It's probably closer to 20% if you correctly address people like that in the labor force. But then the fiscal response was huge, right? Over the next couple years, from 2020 through to 2021, you know, we had basically about $6 trillion worth of spending in response to COVID to support businesses, to support consumers, to support the unemployed, which is really, really big. And this, as I said, I said this before, I should reiterate it here, a lot of this isn't unique to the United States. These patterns, these sort of extreme patterns are true across the advanced economies. But you know, it's possible, it's probably the case that the fiscal response was larger in the United States than it was, than it was elsewhere. And so we ended up with this situation where, you know, within, within two months, the economy is growing pretty sharply again. Takes a little while to get everybody back to work and everything back to, you know, it takes a little while to recover to, in terms of the level of employment, the level of output and stuff where it was pre-pandemic, but it's growing at a rapid rate. You know, disposable income, disposable personal income actually rose significantly during the pandemic. That's something that hasn't happened in past recessions, it owes a lot to the big fiscal response. But, you know, but that resulted in, you know, very strong demand for consumption by households. And also because of the nature of the pandemic, the shift in composition where, you know, services where you had to do, where to enjoy them, you have to do a lot of face-to-face stuff. Services really tank. Nobody wanted to spend on those, but they had like a lot to spend. And so a lot of people and probably a lot of people in this room and myself included, what do you do? Well, I'm going to buy a Peloton. I'm going to add, you know, buy some new furniture if I'm going to be spending all this time at home. I'm going to, you know, invest in consumer durables, this and that. We had this big shift in consumption away from consuming services toward consuming goods. So, you know, you put together a big increase in spending on consumer goods with constrained supply partly having to do with COVID-related shutdowns here and there. You end up with kind of a recipe for higher inflation and overheating economy where supply just can't keep up with demand. That's what we saw. And as I said, central banks, not just the Fed, but all the advanced economy central banks, except for Japan, they're always sort of an exceptional case. And most emerging market central banks raised interest rates to the highest levels that they had in many years and at the fastest pace that they had in many years. This is just goods consumption. This is real inflation-adjusted goods consumption. Just so you can see what I mean about this kind of unprecedented jump in the amount of spending that people wanted to engage in in terms of buying goods, buying appliances, doing home renovations, buying that Peloton, buying, you know, equipping their home office since now they're going to be working a lot from home and so forth. It's really remarkable. If you look, I mean, toward the end, I mean, I didn't put in a trend line, but toward the end of the chart, it's probably getting closer to what would have been the trend you would have extrapolated pre-COVID. But it's still kind of materially above that. And so, you know, this was one factor in terms of generating all those supply chain snarls and rising prices. Sorry, I apologize for the title getting cut off here. But you know, also at the same time, you know, we had this phenomenon of the labor market getting really, really, really tight because we had a kind of reduction in labor supply during the pandemic. But then we had all this big demand for workers, especially once services started to reopen. And so, you know, I think if you ask any employer about the year, about what they thought about, you know, the labor market from around the middle of 21 through 22, and even through the first part of 2023, they'd say, my gosh, that was the tightest labor market. It was so hard to find people. This is kind of an illustration of that. This is the quits rate. I mean, there are other measures we look at. We look at a whole range of measures for judging how tight or slack the labor market is. But the quits rate is a good one. Why look at quits? Because when the labor market's really hot and there are lots of labor demand is really strong and supply is not keeping up with it, well, then it's a good time if you were thinking about job hopping, it's a really good time to do it, right? Because there's a lot of demand out there. It's kind of an expression of workers' confidence in how strong the labor market is, how tight the labor market is when you see people quitting. And so, I mean, this went up from, which, I mean, 2019 was already a relatively tight labor market with the quits rate was something like 2.3%. So that's 2.3% of total employment, like quitting each month. This is monthly data. And it went all the way up to 3% at its worst across really late 2021 into 2022. And that's a record high. The data doesn't go back all that far, but it's higher than anything we'd ever seen. That's about, if you translate that into people, that's about four and a half million people at its peak. Four and a half million people quitting each month at the peak. And now it's come down to something more normal, which still, there's a lot of churn in the U.S. labor market, and something more normal is still something like three million people quitting each month. But that was really extreme. And as I said, part of that tightness in the labor market had to do with the fact that the labor force fell in the pandemic, and it recovered only gradually. So this is plotting the civilian labor force in thousands of people. And I'm plotting, that's the red series. And I'm also plotting here, and you should note the scales are on the two different axes. In blue is the foreign-born labor force. And as I said, we had this big drop in the labor force, just focus on the red line for now. And it took quite a while up through, it wasn't until 2022 where we really got back to, even just got back to where we were in 2020 in terms of the labor force. And since then, it's pushed well beyond that, which is good in terms of balancing the, cooling down that overheating in the labor market and balancing supply and demand. And as it's pushed beyond that, that's that period in the previous chart where you see the evidence of quits is telling you that the labor market's getting cooler, cooler, cooler. Though still not cold, right? But coming down to something more normal as labor supply pushed upward. The reason I have the blue line, the foreign-born labor force, is that a lot of the growth in the aggregate in the red line, I know it's hard for everybody to see the numbers on the scales. So, I won't ask you to do the math, but you can trust me on this, is that the way the math works out, I mean, a big chunk of the increase in the red line is due to the increase in the blue line, the increase in the labor force that's accounted for by the foreign-born by immigrants. And so, we got that kind of welcome boost, at least in welcome if you think in terms of, well, the labor market's overheated, it's out of balance, it needs to, supply and demand need to come into better balance. We got a welcome boost from immigration over, you know, really, it really started to pick up very, very sharply starting in 22, 23. And as I said, I think I said this in that earlier part about labor force growth. We do see this, if you look at the labor force, labor force growth in the 2020s, because my chart member only ended at the 2010s, we do see this bump up and it really has to do with immigration. Yes, the red line is everybody. And the blue line is just looking at the foreign-born, so, okay. And then as we all know, inflation took off, but it's slowed over the past, slowed considerably over the past year. I showed you in that earlier, that long run chart I was showing you, core PCE inflation. This is just that broken into its two big pieces, which are core services and core goods prices. And you can see the core goods is the one that has the bigger movement in blue. That's inflation in the price of goods, the price of physical stuff. Pelotons, cars. Mainly, a lot of that's being driven by cars and used cars. You guys remember what happened to used car prices when we had these shortages of new automobiles? So this is very consistent with that picture I showed you of goods consumption, that we have this big increase in goods inflation. But it's come down a lot now to something that looks kind of normal, sort of the normal behavior of those core goods prices, if you look back at those pre-pandemic years. It's really on an average basis to fall a little bit each year, at least in quality adjusted terms. Look at TVs. TVs, it's like you get a bigger and bigger TV for less and less money. Same thing with cars. Same thing with audio equipment, video equipment, computers. So a lot of those goods like that drive the long run trend is that those prices, if you aggregate them all together, tend to fall a little bit on average. And we're back to something like that. Services, that's in red. Services prices move much more slowly. And that's where housing's at. Shelter, rent are in there. And those tend to move very slowly because it takes time between, we all know over the past year, we'll really think maybe a year ago, if you were going to go out and rent an apartment and get a new lease, if you were moving, rent increases for new leases. Prices jumped up a lot. It takes a while for that to filter through to all the people who aren't moving or aren't changing their status. So it's slow to filter through. So that tends to move gradually. That's come down noticeably, but it's still well above its pre-pandemic rate. And really, for both the red and blue lines, over the last few months, we've seen a little bit of not good news. Let's put it that way, a bit of a pickup in both of those over the last few months. So the response to this, we all know. The Fed and other central banks raised rates rapidly. And I think everybody knows how rapidly rates went up here. Snapshot of where we currently are. Real GDP. Those previous slides are talking about the last few years all lumped together. It's just a snapshot of recent months. Real GDP has grown pretty smartly, like 3.3% since the middle of last year. Owing to, if you think back to that pre-pandemic trend, trend growth is like 2%, right? Should be 2% or a little less. Well, it grew 3.3%. That's owing to a temporary blip in more labor force participation, and owing in big part to immigration. And even with that blip, there's also sort of pickup in measured productivity growth, labor productivity growth, over the last half of last year. So we're growing at a 3.3% rate. Payrolls have risen at this really very strong pace, almost above $240,000 per month for the last six months. And the unemployment rate is 3.9%. It had been as low as like around 3.5%. So it has ticked up a little bit. But still, it's been 27 months, I think, below 4%, which is, you have to go back a long way to find a period where we've had that sustained a period of unemployment below 4%. And then in terms of wage growth and inflation, wage growth, it's been averaging around 4% since the middle of 2023. That's down a bit from that peak in the tightness of the labor market. But it's still probably higher than what would be consistent with a 2% inflation, which is what the Fed targets over time, and inflation. PC inflation is still above target, too. It's averaged 2.5% over the six months through March. If we had looked at the six months, just the last six months of 2023, and hadn't gotten the data for, the bad, you know, I was talking in that last chart, oh, we got this not good data, right? That was January, February, and March of this year. If you just looked at the last half of last year, inflation had come down to something like, it was close to 2% over those six months. But even then, I think, we sort of had good reason to believe that that slowing in the last half of 2023 was probably overstating how much disinflation was going on, just because of some unique factors in the data. And it's probably likely to come up. And of course, at the beginning of this year, we get the first three months of data, and it does look like it's still a bit above, it's still held material a bit above target, 2.5%. So now, quickly, so we have time for questions. Looking ahead, so the outlook. So I'm going to show you, this is a view from the FOMC, Federal Open Market Committee. Every other FOMC meeting, so they meet eight times a year, but at four of those, they make these projections. They give their projections for what's going to happen to output, unemployment, inflation, over the next two or three years. And then they also ask them in the longer run. And when I get to the next slide, I'm going to show you those projections. I really want to focus on the longer run, because that sort of ties back to, at least as the FOMC thinking, things are going to be different than they were in those pre-pandemic trends that I talked about. And the last summary of projections was released in March 20. So that's also a good reason to not put too much emphasis on, say, what the projections are for 2024 or the very near term, because these were based on what the FOMC data the FOMC had in hand back in March, which given the lags that we have, the lags in data release coming out. So if you're sitting in mid-March, you don't know. The last inflation reading you have was you would know January and maybe know February, but you wouldn't have March inflation data. You wouldn't know what first quarter GDP was. You wouldn't necessarily be 100% sure what fourth quarter of the previous year's GDP was. And so there's data that comes in that means that if you made a forecast back then, given the data that you've seen, you probably want to revise your forecast somewhat. I'm not going to try and guess what members of the FOMC are going to do, but I would just say in terms of private forecasts, if you just look around, based on the data that's come in, forecasts have moved toward, oh, inflation is not going to come down as fast as we thought it was, say, a few months ago. And the economy looks even a bit stronger than we thought it was a few months ago. So the data that's come in is saying that the economic activity's a bit stronger and inflation's a bit stickier. And forecasts have moved in that direction in the private sector. So the next exercise where the FOMC's going to do this is going to be at their June meeting. And as I said, I don't want to try and predict that this is going to change in a particular way, but private sector forecasts have moved in that way. But still, you can see the broad patterns. To me, the remarkable thing is the stability of the unemployment rate that they expect, that it'll rise to about its long-run level, what they see as its long-run level, and then move sideways. Inflation will come down. And then here, this is the long-run column where they're asked to make these projections for what's the longer run, which is something beyond the current, once the current cycle plays itself out and conditions are normal and we're looking far ahead, what do you see for GDP growth, the unemployment rate, inflation, and the federal funds rate. And the numbers in that column, they're very much consistent with the patterns, the tail end of all those structural forces that I was showing you, those longer run trends, the tail end of them pre-pandemic. The median FOMC member sees, in the longer run, GDP growth consistent with that kind of continued slow growth in the labor force and relatively muted productivity growth. Inflation, of course, they target, they aim for 2%, so they're going to get it back to 2%. But then the federal funds rate, the median FOMC member sees the long-run value of that at 2.6%, which that's in nominal terms. So in real terms, if they hit their 2% inflation target, inflation's 2%, that's 2.6%. And that's saying that the real rate's going to be low. The prediction is that the real rate is still going to be low. May not be zero, but it's going to be like half a percent is the prediction. And I should say, I guess I meant to say this at the beginning, a couple caveats about this is that the first and maybe most important is this isn't something where the FOMC gets together, the committee members get together, and they hammer out a consensus forecast. The way it works is each individual member makes a projection. And then they report the median of the individual's projections. So that's all 12 Reserve Bank presidents and seven governors make projections, and these are the median. So that's a caveat about it. And they do, when they release it, they release this data. They don't just release the medians. They also tell you about the range of views out there. And you could see, I mean, one thing you could see, I guess, is that the range of predictions for the long run funds rate, that long run interest rate, have been sort of, even though the median has been, well, the median ticked up now for the first time in a long time, from 2.5 to 2.6, which isn't much, but it did tick up. But you see this sort of spread of, sort of the tail of the distribution of projections that are being made that's sort of drifting up a little bit. But still, the median is still something that's saying interest rates are going to be, going forward, they're going to be low, like they were going into the pandemic. And what about these long run trends? Well, I think I've sort of tied things together on the previous slide, but just to be clear. Demographics. Demographics are pretty inexorable. So you kind of get why, at least when you're making a projection about what's going to be normal GDP growth, you don't want to suddenly assume the population's going to get younger, or things like that. It's pretty, based on what the population looks like today, it's pretty straightforward to say how many 65-year-old people there are going to be five years from now by looking at how many 60-year-old people there are this year. But immigration is a wild card, and we saw that over the last couple years. Well, I guess I'll just leave it as it's a wild card. If it goes back to something like it's normal, like a normal pace, sort of a normal pace of inflows, then we're back in this world where it's just going to be slow growth in the labor force. Because a normal pace of inflows of immigrants isn't enough to boost those numbers in that first bar chart I showed you. So does that mean that we're going to continue to see low GDP growth? Well, it depends on productivity. There's good reasons not to try and predict productivity, because it's so hard to do, and it's so volatile. And I'm not going to try and do that here, other than to remind you that it does cycle between faster and slower. And if you look around, there's a lot of technological advance going on now that may lead you to think that, well, maybe we're going to enter into one of those higher growth periods going forward. Things like AI, you could see having kind of a big impact. Although these are things that the economic impact of AI is something that just now is being seriously studied and thought about and debated among economists. But from my limited experience with it, I think it holds the potential to make people a lot more productive. But obviously, it's highly uncertain. And then inflation and interest rates. Inflation, as I said, the Fed's committed to 2%. It's going to get inflation back to 2%. Interest rates, go back to that slide I showed you with the 800 years of interest rates declining. It's hard to bet against that. Although there are certain factors that you think might lead to a higher structure of interest rates that have to do with, if you thought globalization was important in bringing interest rates down since the 80s, well, some of that looks to be getting reversed. If you think, you might think an aging population means more dissaving going on. As people stop their working years and they've accumulated all these assets, they start decumulating them, is sort of the intuition, which adds to the supply of savings, which would reduce interest rates. And there are a lot of stories you could tell about why that might reverse. But it's too early to say with any confidence. And with that, I apologize. I probably went very long. I just point you, if you find this stuff interesting, we have a blog called Dallas Fed Economics, where we have a lot of content on issues like the ones addressed here. And with that, I'll stop and see if there are, I guess we have four minutes left, if there are any questions. Yes. Yeah. Oh, I'll repeat the question. Where does cryptocurrency fit in? Where would we see it in the data? That I don't have a good answer to. I don't know. I mean, I know that, you know, it's taking, I mean, when we calculate, when the economic agencies, the statistical agencies calculate savings, I mean, it's going to be in there. Because basically they're calculating, okay, here's your, here's what, here's the income. We measure your income. We measure your consumption. The difference between the two must be saving or dis-saving, regardless of what it's going into. We have, like, the U.S. financial accounts, which break down balance sheets by type of instrument that, and I'm not sure if, I'm not sure where crypto fits in in there. I mean, really, it should probably be treated as like you're buying, it's like buying, same as buying foreign exchange, right? It's like, you know, you could make an argument it should be wherever, if people are investing in yen or euros or whatever, put crypto in there. But I should say, I mean, I'm really not, I'm not an expert on where it fits in statistically. I know that it's, you know, it's grown, it has grown quite a bit. But it's still, you know, I think what we would, what we want to measure, what we'd want to measure, well, there are financial stability risk issues for things you'd want to measure that have to do with financial institutions' holdings of things like that, or the, you know, runnability of things like stable coins, where, you know, are the assets really that they say are backing up, are keeping this pegged to a dollar, do they really have those assets, or are they, you know? I lost my train of thought. I should just stop talking about crypto, because I don't, yeah, let me take another, yeah. How is the increase in unionization affecting your long-run trends? So the question is, how is the increase in unionization affecting our long-run trends? That, also, I'd say it's not clear. It's not something I've thought a lot about in terms of the longer run. I know when we go out and think about inflation and wage pressures in the short run, say over these last couple of years, I think hearing from business people, business contacts and labor contacts, and I think it's been an important factor in wage dynamics over the last few years, and, you know, may have some relation to product price developments over the last few years, as well. But in terms of, like, a long run, I really don't, I wouldn't want to hazard a guess on that. Yes? So you show 2024 GDP 1.4%, and I'm trying to reconcile that with the productivity growth of 1.6%. Can you discuss the interplay between GDP and productivity? Uh-huh. Yeah, well, one thing is that, you know, that productivity, productivity is not guaranteed to, productivity bounces around a lot for, I was showing you like averages over a decade, right? But year to year, it bounces around quite a bit. You know, it's, so productivity and that kind of potential growth in the labor force, we think of those as just defining or describing kind of what's possible if resources are fully utilized. Think of it as like the potential output. So those longer run trends I was really talking about, about the economy's potential. But over the course of any year, it could deviate for potential where it's producing more than, more than, more than it could, which usually corresponds to a big drop in the unemployment rate and the labor market getting really tight. Or it could produce less than it's capable of, given the sort of trend productivity growth, labor force growth, which means that resources are going to be unutilized, which is usually corresponds to an increase in the unemployment rate, slackening in the labor market. And you can see in those projections that they were making that they did have, they do have the unemployment rate going up. What's really a significant, significant increase, at least relative to 2023, it's 4.1, but it's 4.1 versus, you know, we were like 3.7, 3.8 at the end of 2023. So that would be a significant, that's sort of a significant pickup in, in kind of idle labor lying around. And that's how you end, that's how you trend, you end up with, with growth that's below what you think would be its potential, the economy's potential, just given product to trend productivity and trend labor force growth. Does that make sense? Yeah. Okay. I guess we're out of time. I don't want to get you guys behind schedule. I apologize for not leaving more time for questions, because you all I'm sure have lots of interesting questions. And I will stop. Thank you so much.

Jim Dolmas

economic trends

demographics

productivity

interest rates

inflation

pandemic

FOMC projections

GDP and productivity