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And so the Great Frustration continues. That is the term that Australia's central bank governor, Glenn Stevens, has applied to the prolonged period of sluggish growth coming out of the 2008-09 "Great Recession," and one can't help but think we won't see the end of it any time soon given the latest pronouncement from the U.S. Federal Reserve.
Following a meeting of the U.S. Federal Open Market Committee (FOMC), the Fed Reserve Board announced Wednesday it was trimming its real GDP growth forecast for 2013 to between 2.3 per cent and 2.8 per cent, from its forecast in December of 2.3 to 3 per cent. Unemployment, now at 7.7 per cent, is forecast to come in between 7.3 and 7.5 per cent and fall to between 6 and 6.5 per cent in 2015.
Some good news, some bad news, but first, some perspective: the Fed's forecast is relatively sunny compared with other predictions: for example, IHS Global Insight pegs U.S. GDP growth at just 1.8 per cent this year. Just because market watchers have predicted a second-half pickup doesn't mean the economy will deliver, as we've seen during the Great Frustration – indeed, the FOMC states it "continues to see downside risks to the economic outlook."
And don't forget what the Fed's predictions for 2013 looked like just two years ago: GDP growth of between 2.5 per cent and a sparkling 4.3 per cent, and unemployment at between 6.8 and 7.2 per cent. Bank of Canada predictions from not that long ago also proved sunnier than our humdrum economy actually delivered, and now the OECD and others are warning of weak growth ahead for this country (Our central bank recently trimmed its forecast for 2013 to 2 per cent growth from 2.3 per cent).
There's no doubt the U.S. has been on a bit of a roll: after dodging a fiscal cliff crisis, the market has been peppered with some promising statistics in recent months. Growing retail sales, positive factory figures, a four-year low in the unemployment rate and surging stocks have helped to offset worries of a sequestration-related impact on overall growth.
But the big picture remains the same: economic recovery since the start of the Great Recession in the U.S. and Europe is trundling along at the slowest pace since the Second World War. The U.S. unemployment rate is still a full 330 basis points above the pre-crisis level, meaning the Fed will continue its policy of quantitative easing for the foreseeable future.
Meanwhile, a simple solution exists, as Bank of Canada deputy governor John Murray laid out in a speech last November: all it would take is for lawmakers in the U.S to fix the budget, for Europe to "set itself right" and for countries like China to loosen controls on the value of their currency. We could become mighty frustrated waiting for all that to happen.
Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff.
Sean Silcoff