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Testimony for Hearings on Further Revisions to FY 2010 Revenues Yolanda K. Kodrzycki Senior Economist and Policy Advisor Federal Reserve Bank of Boston Presented to: Massachusetts Senate Ways and Means Committee October 8, 2009 — amy FEDERAL RESERVE — oe aes BANK OF BOSTON Outlook for|U.S. economy has improved slightly, but economic recovery still expected to be very gradual. * Convincing evidence of positive GDP growth in Q3 — Due partly to federal fiscal stimulus: Cash for clunkers, First-time homebuyer credit, Federal government ‘spending * Some labor market indicators were at record weak levels in September \ y+ Hobless for at least six months rose to 35.6 percent * 7? Alternative unemployment measur luding discouraged and forced part-time worked Nf rose to 17 rercent s™ Average tot:l work week fell to 33 hours * Outlook for Cy 2010 premised on continued fiscal and monetary stimulus Federal Reserve officials continue to expect positive U.S. GDP growth in the second halfjof CY 2009 and in CY 2010. ©¥ 2009 cr 2010 cy 2011 aa as aa Real GDP growth (%) Jun-09 -15t0-10 211033 3.81046 ‘apr-09 2010-13 2.01030 351048 Unemployment rate (%) Jun-09 98to 10.4 951098 841088 Apr09 9.21096 90095 77085 PCE inflation (96) Jun-03 101014 121018 111020 Apr-09 061009 101016 101019 Source: Federal Open Market Comme, Summary of Economic Projections for the Meetings of June 2009 and Apri 2008, Table shows central tendencies among the Federal Reserve Board governors and Federal Reserve Bonk presidents, Note: Projections are fourth-quarter to-fourth-quarter growth rate except forthe unemployment rate, which i the fourth quarter level ;