1 looking better... but still not great steven a. wood lecturer university of california, berkeley...
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![Page 1: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/1.jpg)
1
Looking Better... but Still Not Great
Steven A. WoodLecturer
University of California, BerkeleyMarch 26, 2014
Rudney Associates Presents
![Page 2: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/2.jpg)
2
The Economy is Growing … Real Gross Domestic Product
Quarter-to-Quarter Percent Change
Real Gross Domestic ProductBillions of Chained 2009 Dollars
141312111009080706Sources: Bureau of Economic Analysis /Haver Analytics
9
6
3
0
-3
-6
-9
16000
15600
15200
14800
14400
14000
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3
and Jobs are Being CreatedNonfarm Payroll Employment
Monthly Change, Thousands
Nonfarm Payroll EmploymentMillions
141312111009080706Source: Haver Analytics
800
400
0
-400
-800
-1200
140
138
136
134
132
130
128
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4
Unemployment is Retreating …
Civilian Unemployment Rate
Percent
141312111009080706Source: Bureau of Labor Statistics /Haver Analytics
10
9
8
7
6
5
4
10
9
8
7
6
5
4
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5
and Wages are Picking Up
Average Hourly Earnings
Year-to-Year Percent Change
141312111009080706Source: Bureau of Labor Statistics /Haver Analytics
5
4
3
2
1
5
4
3
2
1
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6
The Fed is Highly Accommodative
Federal Reserve Credit Outstanding
Billions of Dollars
141312111009080706Source: Haver Analytics
4500
3750
3000
2250
1500
750
4500
3750
3000
2250
1500
750
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7
Keeping Interest Rates LowFederal Funds Rate, Percent
10-Year Treasury Note Yield, PercentMoody's Seasoned Baa Corporate Bond Yield, Percent
1005009590858075706560Sources: Federal Reserve Board /Haver Analytics
20
16
12
8
4
0
20
16
12
8
4
0
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8
Banks are Lending Again
Commercial Bank Loans
Billions of Dollars
141312111009080706Source: Federal Reserve Board/Haver Analytics
8400
8000
7600
7200
6800
6400
8400
8000
7600
7200
6800
6400
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9
Housing Starts are ClimbingNew Single Family Home Sales
12-Month Average, Thousands of Units
Existing Single Family Home Sales12-Month Average, Thousands of Units
1005009590Sources: Census Bureau, National Association of Realtors /Haver Analytics
1400
1200
1000
800
600
400
200
6750
6000
5250
4500
3750
3000
2250
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10
and Car Sales have Rebounded
Total Motor Vehicle Sales
12-Month Average, Millions of Units
1005009590Source: Autodata /Haver Analytics
18
16
14
12
10
18
16
14
12
10
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11
Exports are Growing
Exports of Goods & Services
Billions of Chained 2009 Dollars
141312111009080706Source: Bureau of Economic Analysis /Haver Analytics
2200
2000
1800
1600
1400
2200
2000
1800
1600
1400
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12
But …
![Page 13: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/13.jpg)
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But Growth is Still Sluggish …
-4 -3 -2 -1 PEAK
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 3090
100
110
120
130
140
Real GDPBusiness Cycle Peak = 100
1948 Q4
1953 Q2
1957 Q3
1960 Q2
1969 Q4
1973 Q4
1981 Q3
1990 Q3
2001 Q1
Average 10 Prior Re-cessions
2007 Q4
Cumulative Quarterly Change Relative to Business Cycle Peak
Ind
ex
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14
and Job Creation is Still SoftPayroll Employment
Business Cycle Peak = 100
90
95
100
105
110
115
120
-12 Peak 12 24 36 48 60 72
Cumulative Monthly Change Relative to Business Cycle Peak
Inde
x
October 1949May 1954April 1958February 1961November 1970March 1975July 1981March 1991November 2001Average of 10 Prior RecessionsJune 2009
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15
The Output Gap Remains WideReal Gross Domestic Product
Billions of Chained 2009 Dollars
Real Potential Gross Domestic ProductBillions of Chained 2009 Dollars
141312111009080706050403020100Sources: BEA, CBO /Haver
17000
16000
15000
14000
13000
12000
11000
17000
16000
15000
14000
13000
12000
11000
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16
Leaving Employment Depressed
Employment-to-Population Raio
Ratio
1005009590858075706560Source: Bureau of Labor Statistics /Haver Analytics
65
63
61
59
57
55
65
63
61
59
57
55
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17
with Lots of Part-Time Workers
Working Part-Time for Economic Reasons
Percent of Total Employment, 12-Month Average
1005009590858075706560Source: Haver Analytics
7
6
5
4
3
2
7
6
5
4
3
2
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18
Unemployment is Still High
Civilian Unemployment Rate
Percent
1005009590858075706560Source: Bureau of Labor Statistics /Haver Analytics
12
10
8
6
4
2
12
10
8
6
4
2
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19
Government Spending is Fading
Federal Government Outlays
Billions of Dollars, 12-Month Average
141312111009080706050403020100Source: Haver Analytics
3200
2800
2400
2000
1600
1200
3200
2800
2400
2000
1600
1200
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20
Government Spending is FadingReal Federal Government Purchases
Index: 2007 Q4 = 100
Real State & Local Government PurchasesIndex: 2007 Q4 = 100
141312111009080706Sources: Bureau of Economic Analysis /Haver Analytics
120
115
110
105
100
95
90
120
115
110
105
100
95
90
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21
Government Jobs DisappearTotal Government Employment
Business Cycle Peak = 100
90
95
100
105
110
115
120
-12 Peak 12 24 36 48 60 72
Cumulative Monthly Change Relative to Business Cycle Peak
Ind
ex
October 1949May 1954April 1958February 1961November 1970March 1975July 1981March 1991November 2001Average 10 Prior RecessionsJune 2009
![Page 22: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/22.jpg)
22
Budget Deficit Rapidly Shrinks
Federal Government Budget Balance
Billions of Dollars, 12-Month Total
1005009590858075706560Source: Haver Analytics
250
0
-250
-500
-750
-1000
-1250
250
0
-250
-500
-750
-1000
-1250
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23
Money Supply Grows SlowlyFederal Reserve Credit Outstanding
Index: 2007 Q4 = 100
Money SupplyIndex: 2007 Q4 = 100
141312111009080706Sources: Federal Reserve Board /Haver Analytics
500
400
300
200
100
0
500
400
300
200
100
0
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24
Banks Are Not Lending MuchTotal Reserve Balances
Billions of Dollars
Required Reserve BalancesBillions of Dollars
141312111009080706Source: Haver Analytics
2500
2000
1500
1000
500
0
2500
2000
1500
1000
500
0
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25
Banks Continue to Deleverage
Financial Institutions Debt Outstanding
Percent of GDP
1005009590858075706560Source: Federal Reserve Board/Haver Analytics
120
100
80
60
40
20
0
120
100
80
60
40
20
0
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26
Consumers Also Deleverage
Household Debt Outstanding
Percent of Disposable Income
1005009590858075706560Source: Federal Reserve Board/Haver Analytics
125
100
75
50
125
100
75
50
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27
Inflation Stays LowPersonal Consumption Expenditure Price Index
Year-to-Year Percent Change
Core Personal Consumption Expenditure Price IndexYear-to-Year Percent Change
1005009590858075706560Sources: Bureau of Economic Analysis /Haver Analytics
12
10
8
6
4
2
0
-2
12
10
8
6
4
2
0
-2
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28
Below the Fed’s TargetPersonal Consumption Expenditure Price Index
Year-to-Year Percent Change
Core Personal Consumption Expenditure Price IndexYear-ot-Year Percent Change
141312111009080706Sources: Bureau of Economic Analysis /Haver Analytics
6
4
2
0
-2
6
4
2
0
-2
![Page 29: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/29.jpg)
29
What about
financial markets?
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30
Interest Rates to Stay LowFederal Funds Rate, Percent
10-Year Treasury Note Yield, PercentMoody's Seasoned Baa Corporate Bond Yield, Percent
1005009590858075706560Sources: Federal Reserve Board /Haver Analytics
20
16
12
8
4
0
20
16
12
8
4
0
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31
Corporate Profits at Record Levels
Corporate Profits
Percent of GDP
1005009590858075706560Source: Haver Analytics
14
12
10
8
6
14
12
10
8
6
![Page 32: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/32.jpg)
32
Stock Market at Record Levels
S&P 500 Compsite Index
Index: 1941 - 43 = 100
1005009590858075706560Source: Standard & Poor's /Haver Analytics
2000
1600
1200
800
400
0
2000
1600
1200
800
400
0
![Page 33: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/33.jpg)
33
Stocks Appear “Fairly” Valued
S&P 500 Composite Index
Price/Earnings Ratio
1005009590858075706560Source: Standard & Poor's/Haver Analytics
50
40
30
20
10
0
50
40
30
20
10
0
![Page 34: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/34.jpg)
34
But Profit Growth has Slowed
Corporate Profits
Year-to-Year Percent Change
1005009590858075706560Source: Bureau of Economic Analysis /Haver Analytics
60
40
20
0
-20
-40
60
40
20
0
-20
-40
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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
![Page 36: 1 Looking Better... but Still Not Great Steven A. Wood Lecturer University of California, Berkeley March 26, 2014 Rudney Associates Presents](https://reader035.vdocuments.us/reader035/viewer/2022062718/56649ebd5503460f94bc6a12/html5/thumbnails/36.jpg)
36
Looking Better
… but Still Not Great
Questions?