Economy Shifts to a Lower Gear in 2001 (Special Issue)

In the midst of a slowing economy, one can be deceived into thinking economic activity is slowing more than it actually is. The economic experience of the past several years has been similar to riding in a car driven at a very high speed, say 90 miles per hour. When the car slows down to 60 miles per hour, which is still reasonably fast, we might feel that we are traveling slower than we actually are. As the economy shifts to a lower gear—from 4.2% growth in 1999 and 5.9% in the first half of 2000 to 2.7% in the third quarter of 2000—it can be very difficult to discern whether this slowdown is a prelude to more significant declines in economic output or merely an adjustment to a lower growth path. Against this backdrop, the Federal Reserve Bank of Chicago held its fourteenth annual Economic Outlook Symposium on December 1, 2000. More than 60 economists and analysts from business, academia and government attended the conference. This Chicago Fed Letter reviews the accuracy of last year’s forecast for 2000 and summarizes the presentations at this year’s conference.