1. 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents

2. 2 The Economy is Growing …

3. 3 and Jobs are Being Created

4. 4 Unemployment is Retreating …

5. 5 and Wages are Picking Up

6. 6 The Fed is Highly Accommodative

7. 7 Keeping Interest Rates Low

8. 8 Banks are Lending Again

9. 9 Housing Starts are Climbing

10. 10 and Car Sales have Rebounded

11. 11 Exports are Growing

12. 12 But …

13. 13 But Growth is Still Sluggish …

14. 14 and Job Creation is Still Soft

15. 15 The Output Gap Remains Wide

16. 16 Leaving Employment Depressed

17. 17 with Lots of Part-Time Workers

18. 18 Unemployment is Still High

19. 19 Government Spending is Fading

20. 20 Government Spending is Fading

21. 21 Government Jobs Disappear

22. 22 Budget Deficit Rapidly Shrinks

23. 23 Money Supply Grows Slowly

24. 24 Banks Are Not Lending Much

25. 25 Banks Continue to Deleverage

26. 26 Consumers Also Deleverage

27. 27 Inflation Stays Low

28. 28 Below the Fed’s Target

29. 29 What about financial markets?

30. 30 Interest Rates to Stay Low

31. 31 Corporate Profits at Record Levels

32. 32 Stock Market at Record Levels

33. 33 Stocks Appear “Fairly” Valued

34. 34 But Profit Growth has Slowed

35. 35 The Major Known Risks 1.Confrontation with Russia/oil price shock 2.Weaker European growth/new recession 3.European sovereign debt problems 4.Political stalemate in Washington 5.The Chinese “bubble” economy 6.Slower emerging market growth

36. 36 Looking Better … but Still Not Great Questions?