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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 1
Growth “… Will Guide You Home” … “and Fix You”
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ECO
NO
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UPD
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, AFP
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 2
Everyone is growing againReal GDP in selected regions (percent change from four quarters earlier)
Sources: US Department of Commerce; JPMorgan Chase & Co.
-9-8-7-6-5-4-3-2-10123456789
1011
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-9-8-7-6-5-4-3-2-101234567891011
USEU-11 (black)Japan (red)
Emerging economies in Asia, Eastern Europe and Latin America (blue)
Global (shaded region)
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ECO
NO
MIC
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UPD
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, AFP
OF
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 3
The 2011-12 US outlook … gradually speeding upUS real GDP (annualized percent change)
Source: US Department of Commerce
2.9
0.4
1.9
3.8
3.12.7 2.4
0.2
2.93.4
4.0
-2.8
2.3
-7-6-5-4-3-2-10
12345678
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-7-6-5-4-3-2-10
12345678
Forecast ofquarter-to-quarter realGDP growth
Quarter-to-quarteractual realGDP growth
Annualgrowth ofreal GDP(Q4 to Q4)
Change inreal GDPfrom fourquartersearlier
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ECO
NO
MIC
OU
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OK
UPD
ATE
, AFP
OF
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EW Y
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 4
A big mistake corrected …Nominal gross income per household and house prices (ratio to 1970 Q1 level)
Sources: Loan Performance Corporation; US Department of Commerce
0
1
2
3
4
5
6
7
8
9
10
11
12
13
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120
1
2
3
4
5
6
7
8
9
10
11
12
13LoanPerformance Corporation
Gross nominal income per household
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ECO
NO
MIC
OU
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OK
UPD
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, AFP
OF
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 5
… and that’s why house prices are stabilizingSelected surveys of house prices (ratio of price indexes to the 2000 Q1 level)
Sources: Loan Performance Corporation; FHFA’; NAR; Standard & Poor’s; Radar Logic
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20101.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
Case-Shiller composite 10Case-Shilller composite 20
Case-Shiller national index
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
1980 1985 1990 1995 2000 2005 2010-250
-200
-150
-100
-50
0
6
“Under water” losses …Mortgage losses by vintage* ($ billions) Cumulative amount of loans under water* ($ billions)
Sources: MBA; CoreLogic; JPMorgan Chase & Co.
* Assuming that all loans taken out at the time were 100% loan-to-value
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ECO
NO
MIC
OU
TLO
OK
UPD
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, AFP
OF
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N N
EW Y
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K, J
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Mortgage losses by vintage* ($ billions) Cumulative amount of loans under water* ($ billions)
Sources: MBA; CoreLogic; JPMorgan Chase & Co.
7
… mostly “recognized”
43213
374508
686
952 1040 1133 1175 1241 1272 1275 1275 1275
10
53
95
109
152
212212
212 212212 212 212 212 212
12
23
48
76
115
154194
251 245260 272 272 272 272
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
GSEs
Insurance companies
Banks
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Cumulative houses built and new households formed since 1970 (thousands)
Source: US Department of Commerce
8
Builders are still hibernating, owing to the glut …
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1970 1975 1980 1985 1990 1995 2000 2005 20100
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Housing units built since December 1960
Number of new households since December 1969 (adjusted for breaks in population controls in the 2000 Census)
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ECO
NO
MIC
OU
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OK
UPD
ATE
, AFP
OF
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TER
N N
EW Y
OR
K, J
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Stock of housing (thousands) Housing starts and household formation (millions at an annual rate)
Source: US Department of Commerce9
… but current activity is in a work-off range …
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 20200
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
An estimate of the new housing glut:new homes built over the most recent 10 years less number of new households (left)
Total housing starts (right)
New households per year (right)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Home building and growth (contribution of res construction to % ch in real GDP over 4 qtrs, pct pts)
Sources: NBER recession bars; US Department of Commerce
10
… so builders will help us out eventually
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Actual/forecast
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ECO
NO
MIC
OU
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OK
UPD
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, AFP
OF
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N N
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 11
Business is positioning for the future again …Business investment for capital goods and software (percent change from a year earlier)
Sources: US Department of Commerce; Federal Reserve Board
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-30
-25
-20
-15
-10
-5
0
5
10
15
20
25Shaded area denotes real
business spending for equipment &
software
Industrial output of business equipment
Orders for capital goods excluding civilian aircraft and defense
Nonauto capital goods imports
Shipments of nondefense capital goods
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ECO
NO
MIC
OU
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OK
UPD
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, AFP
OF
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 12
… because it has restored profitabilityAfter-tax GDP profits (percent of nominal Gross Domestic Income)
Sources: NBER recession bars; US Department of Commerce
0
1
2
3
4
5
6
7
8
9
1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 20120
1
2
3
4
5
6
7
8
9
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 13
Consumers are back in the game too …Real consumer spending and income (percent change from 12 months earlier)
Source: US Department of Commerce
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
Real consumer spendingReal disposable personal income
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ECO
NO
MIC
OU
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UPD
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, AFP
OF
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Private sector employment (thousands per month)
Source: US Department of Labor
14
… with hiring starting …
-900
-800
-700
-600-500
-400
-300
-200
-100
0
100200
300
400
500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-900
-800
-700
-600-500
-400
-300
-200
-100
0
100200
300
400
500
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ECO
NO
MIC
OU
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OK
UPD
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, AFP
OF
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EW Y
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K, J
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Personal saving rate (percent of disposable personal income)
Sources: NBER recession bars; US Department of Commerce
15
... households saving more again ...
0123456789
101112131415
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100123456789101112131415
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ECO
NO
MIC
OU
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OK
UPD
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, AFP
OF
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N N
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 16
… and the equity market recoveringEquity P-E Wilshire 5000 index
Sources: Federal Reserve Board; Dow Jones; US Department of Commerce
6
8
10
12
14
16
18
20
22
24
26
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Price-earnings ratio (left scale)
Wilshire 5000 (right scale)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
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N N
EW Y
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K, J
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 17
Low inflation gives the Fed a lot of latitudeSelected core consumer price indexes (percent change from 12 months earlier)
Sources: NBER recession bars; US Department of Commerce; US Department of Labor
0
2
4
6
8
10
12
14
16
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 20200
2
4
6
8
10
12
14
16
Core CPI
Core chain PCE price index
The Federal Reserve's long-run inflation
target (for chain core PCE price inflation)¹
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
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N N
EW Y
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K, J
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UA
RY
26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 18
A vision of the future …US potential and real GDP (chained 2005 dollars)
Sources: US Department of Commerce; Macroeconomic Advisers LLC
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 207,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
Real GDP associated with 5% unemployment
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 19
… but there’s lots of work to do …US unemployment rate (percent of the labor force)
¹ Range of FOMC members’ viewsSources: NBER recession bars; US Department of Labor; Federal Reserve Board
0
1
2
3
4
5
6
7
8
9
10
11
12
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150
1
2
3
4
5
6
7
8
9
10
11
12
The Fed's view about the near-term and sustainable (Nairu) unemployment level¹
Note: thin line represents my forecast, which is more cautious than the Fed's
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 20
… the damage is greater than we measure …Official and hidden unemployment (thousands)
Source: US Department of Labor
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 20120
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Working part time because can't find full-time work
Actively looking for a job and unemployed
Gave up looking and are doing other things
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 21
The employment status of folks …Status of people in the job market (thousands)
Source: US Department of Labor
130,000
135,000
140,000
145,000
150,000
155,000
160,000
1999 2001 2003 2005 2007 2009 2011130,000
135,000
140,000
145,000
150,000
155,000
160,000Dot.com dropouts
Recession 2008 dropouts
Frictional unemployment (4%)
Long-term unemployment
Short-term unemployment
Underemployment (part-timers, beyond the norm, for economic reasons)
Full-time, part-time by choice, and "normal" part-time for economic reasons
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 22
… and what it takesStatus of people in the job market (thousands)
Source: US Department of Labor
Dot.com dropouts
Recession 2008 dropouts
Frictional unemployment (4%)
Long-term unemployment
Short-term unemployment
Underemployment (part-timers, beyond the norm, for economic reasons)
Full-time, part-time by choice, and "normal" part-time for economic reasons
130,000
135,000
140,000
145,000
150,000
155,000
160,000
165,000
170,000
175,000
180,000
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019130,000
135,000
140,000
145,000
150,000
155,000
160,000
165,000
170,000
175,000
180,000
Projection
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
0.90
1.00
1.10
1.20
1.30
1.40
2007 2008 2009 2010 20110.90
1.00
1.10
1.20
1.30
1.40Emerging Markets
Trend global real GDPGlobal
EU-11USJapan
Global slack
23
Ditto for the rest of the world …Actual real GDP in selected regions (chained 2005 dollars)
Sources: US Department of Commerce; various international agencies
Estimated level of potential global real GDP (US dollars)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 24
Conclusion: things to cheer and fearTo cheer To fear
Recession shines light on state finances State fiscal sector challenged
Private sector in good shape Builders restrained by work-off of housing glut
Double-digit cap X spending growth Europe’s sovereign / banking issues
Record business profitability Understanding relative prices versus inflation (the
Consumers spending again winter commodity pressures)
Equities 15% from record
Household balance sheets better
Private employment growing 1%
Global economy booming
Risk assets pricing a recovery
Layoffs back to normal in half our states
Auto industry on the rebound
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 25
Appendix 1. The Empire State …
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 26
The pulse of New York …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
New YorkUS (bars)
New York accounts for 2.6% of auto manufacturing employment
![Page 27: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/27.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 27
Unemployment has crested …Unemployment in New York versus the nation (percent of the labor force)
Source: US Department of Labor
0
2
4
6
8
10
12
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 20180
2
4
6
8
10
12
New York
US
![Page 28: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/28.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 28
… employment is rising again …Employment in New York versus the nation (ratio to 2000 Q4)
Source: US Department of Labor
-5
-4
-3
-2
-1
0
1
2
3
4
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13-5
-4
-3
-2
-1
0
1
2
3
4
New YorkUS
![Page 29: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/29.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 29
… and tracking national trends, like it usually doesEmployment in New York versus the nation (ratio to 2000 Q4)
Source: US Department of Labor
0.95
0.96
0.97
0.98
0.99
1.00
1.01
1.02
1.03
1.04
1.05
1.06
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.95
0.96
0.97
0.98
0.99
1.00
1.01
1.02
1.03
1.04
1.05
1.06
US
New York
![Page 30: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/30.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 30
But real estate is a little pricey …Ratio of New York’s house prices to the US average (1995 Q1 = 1.0)
Source: FHFA
0.9
1.0
1.1
1.2
1.3
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20100.9
1.0
1.1
1.2
1.3
![Page 31: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/31.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
New York home building activity (thousands of units at an annualized rate)
Source: US Department of Commerce
31
... and we’re still working off a glut too
0
50
100
150
200
250
300
350
400
450
500
1970 1975 1980 1985 1990 1995 2000 2005 20100
50
100
150
200
250
300
350
400
450
500
Average units put up over the most recent decade
Current new home building pace
![Page 32: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/32.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 32
Appendix 2. State of the states …
![Page 33: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/33.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 33
Financial red flags ...State and local debt obligations per capita (dollars)
Source: Bureau of the Census
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
IdahoW
yoming
ArkansasM
ississippiO
klahoma
Iowa
Georgia
West Virginia
North C
arolinaN
orth Dakota
TennesseeM
aineAlabam
aO
hioU
tahSouth D
akotaN
ew M
exicoArizonaM
ontanaM
arylandM
issouriVirginiaVerm
ontLouisianaIndianaKansasW
isconsinM
ichiganFloridaO
regonN
ebraskaM
innesotaN
ew H
ampshire
South Carolina
Haw
aiiTexasKentuckyD
elaware
California
PennsylvaniaN
evadaIllinoisW
ashingtonC
oloradoN
ew Jersey
Connecticut
Rhode Island
New
YorkM
assachusettsAlaska
![Page 34: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/34.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 34
Headwinds remain stiff in the Sunshine State, but ....Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
FloridaUS (bars)
![Page 35: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/35.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 35
A new breeze from the Great Lakes … Illinois … Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
IllinoisUS (bars)
![Page 36: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/36.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 36
… Indiana …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
IndianaUS (bars)
Indiana accounts for 21.6% of auto manufacturing employment
![Page 37: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/37.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 37
… Kentucky …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
KentuckyUS (bars)
Kentucky accounts for 9.1% of auto manufacturing employment
![Page 38: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/38.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 38
… Michigan …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
MichiganUS (bars)
Michigan accounts for 33.5% of US auto manufacturing employment
![Page 39: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/39.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 39
… Minnesota … Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
MinnesotaUS (bars)
![Page 40: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/40.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 40
… Ohio …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
OhioUS (bars)
Ohio accounts for 19.8% of auto manufacturing employment
![Page 41: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/41.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 41
… Wisconsin … Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
WisconsinUS (bars)
Wisconsin accounts for 1.8% of auto manufacturing employment
![Page 42: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/42.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 42
… and from other “auto” states … North Carolina …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
North CarolinaUS (bars)
![Page 43: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/43.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 43
… and South Carolina Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
South CarolinaUS (bars)
![Page 44: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/44.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 44
Good news from the Farm Belt too … Arkansas …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
ArkansasUS (bars)
![Page 45: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/45.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 45
… Iowa …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
IowaUS (bars)
![Page 46: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/46.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 46
… Kansas …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
3.50
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
3.50
KansasUS (bars)
![Page 47: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/47.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 47
… MississippiApplications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
MississippiUS (bars)
Mississippi accounts for 0.6% of auto manufacturing employment
![Page 48: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/48.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 48
… Missouri …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
MissouriUS (bars)
Missouri accounts for 1.3% of auto manufacturing employment
![Page 49: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/49.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 49
… North DakotaApplications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.50
0.75
1.001.25
1.50
1.75
2.002.25
2.50
2.75
3.00
3.253.50
3.75
4.00
2008 2009 2010 20110.50
0.75
1.001.25
1.50
1.75
2.002.25
2.50
2.75
3.00
3.253.50
3.75
4.00North DakotaUS (bars)
![Page 50: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/50.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 50
The Energy Belt too … Oklahoma …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
OklahomaUS (bars)
Oklahoma accounts for 0.3% of auto manufacturing employment
![Page 51: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/51.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 51
The Home Building Footprint … Oregon …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
OregonUS (bars)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 52
And in some unexpected places … Connecticut …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25ConnecticutUS (bars)
![Page 53: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/53.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 53
… Delaware …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25DelawareUS (bars)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 54
… MassachusettsApplications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
MassachusettsUS (bars)
![Page 55: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/55.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 55
… New Jersey …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
New JerseyUS (bars)
![Page 56: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/56.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 56
… Pennsylvania …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
PennsylvaniaUS (bars)
![Page 57: Growth “… Will Guide You Home” … “and Fix You”](https://reader036.vdocuments.us/reader036/viewer/2022062423/56814dd0550346895dbb2d12/html5/thumbnails/57.jpg)
ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 57
… Vermont …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
Source: US Department of Labor
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2008 2009 2010 20110.75
1.00
1.25
1.50
1.75
2.00
2.25
VermontUS (bars)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 58
Appendix 3. Fiscal red herrings …
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
The red ink … big in absolute terms …Federal budget balance (billions of dollars over the most recent 12 months)
Sources: NBER recession bars; NBER Macroeconomic database
-1,600
-1,400
-1,200
-1,000
-800
-600
-400
-200
0
200
400
1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009-1,600
-1,400
-1,200
-1,000
-800
-600
-400
-200
0
200
400
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
… and relative terms too …Federal budget balance (percent of GDP)
Sources: NBER recession bars; NBER Macroeconomic database
-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
0.00
0.05
1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009-0.30
-0.25
-0.20
-0.15
-0.10
-0.05
0.00
0.05
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
… and all about the recession (remember the bonds)Federal budget indicators (rolling 12-month tally as a percent of GDP)
Sources: Congressional Budget Office; US Treasury
-11-10-9-8-7-6-5-4-3-2-101234
1960 1970 1980 1990 2000 2010-11-10-9-8-7-6-5-4-3-2-101234
Actual federal deficit
Cyclically-adjusted federal deficit (excludes impact of fiscal initiatives and automatic stabilizers)
Cyclically-adjusted federal deficit (excludes automatic stabilizers
2010
2011
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
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UA
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 62
Appendix 4. Fiscal Red Storm Rising
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Healthcare entitlement costs … OMG!Long-term projections (percent of GDP)
Source: Congressional Budget Office
0
5
10
15
20
25
30
35
40
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 20800
5
10
15
20
25
30
35
40
Debt service
Other
Coverage of uninsured
Medicare and Medicaid
Social Security
Revenues (historical average of 18.1%)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Ultimately all about economics, economic growth, …Long-term projections (billions of dollars, fiscal year basis)
Source: Congressional Budget Office
-15
-10
-5
0
5
10
15
20
1851 1876 1901 1926 1951 1976 2001 2026 2051 2076-15
-10
-5
0
5
10
15
20
Average historical growth = 3.75% annually
CBO assumption
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
… which can bend the curve …Long-term projections (percent of GDP)
Sources: Congressional Budget Office; JPMorgan Chase & Co.
0
5
10
15
20
25
30
35
40
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 20800
5
10
15
20
25
30
35
40
Revenues
Debt service
Other
Medicare and MedicaidSocial Security
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 66
… and basic economic principles
Three Questions
(1)You know the price of 87-octane gasoline at the local gas station. How much did your annual physical cost? How much does your employer contribute to your health insurance coverage? Right.
(2) You can arrange air travel and get your boarding pass from your home computer. Why do doctors need to be told to automate records? No financial incentive to do this.
(3) We’ve known about smoking risks for 50 years; why only in the last two years are non-smoker discounts offered on health insurance premiums? Why are there no incentives to reduce other post-65 risks?
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ECO
NO
MIC
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TLO
OK
UPD
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, AFP
OF
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N N
EW Y
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 67
Appendix 5. QE, not a textbook’s story
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ECO
NO
MIC
OU
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OK
UPD
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, AFP
OF
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 68
The Fed buys assets to dampen rates …Assets held by the Federal Reserve (billions of dollars)
Source: Federal Reserve Board
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
Aug 2007 Feb 2008 Aug 2008 Feb 2009 Aug 2009 Feb 2010 Aug 2010
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500Loans to
depositories
Mortgage backed
securities
GSE debt
Treasuries
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 69
… pays for that by creating reserves … Liabilities issued by the Federal Reserve (billions of dollars)
Source: Federal Reserve Board
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
Aug 2007 Feb 2008 Aug 2008 Feb 2009 Aug 2009 Feb 2010 Aug 2010 Feb 2011 Aug 2011 Feb 2012
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500Deposits at the Fedother than those ofdepository institutions,including the Treasury'ssupplementary financingaccountReverse RPs, Treasurycash, and other liabilitiesand capital
Excess reserves
Required reserves(includes vault cashused to satisfy reserverequirements)
Currency in circulationexcluding surplus vaultcash held by depositoryinstitutions
Series5
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
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UA
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 70
… but the reserves remain quarantined (excess) …Selected components of the monetary base (billions of dollars)
Source: Federal Reserve Board
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
1970 1975 1980 1985 1990 1995 2000 2005 20100
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
Key components of the monetary base =currency in circulation + required reserves + excess reserves
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
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UA
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 71
… i.e., the Fed isn’t “monetizing” debt … not QEingMonetary base (billions of dollars) M2 (billions of dollars)
Source: Federal Reserve Board
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
1970 1975 1980 1985 1990 1995 2000 2005 20100
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
Monetary base (left scale)
M2 (right scale)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 72
Desperately seeking a proper label …
Comment
QE (Quantitative Easing) Not
CE (Credit Easing) Sort of
DE (Duration Easing) Better
EE (Expectations Easing) Best answer
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 73
Appendix 6. On inflation … zzzzzzzz
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
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26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 74
WhateverCore PCE inflation (percent change from 12 months earlier) Gold ($/ Troy ounce)
Sources: NBER recession bars; US Department of Commerce; Bloomberg
0
2
4
6
8
10
1970 1975 1980 1985 1990 1995 2000 2005 20100
100
200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
Gold (London
Core PCE
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 75
Inflation is below target ... and this isn’t the final answerSelected core consumer price indexes (percent change from 12 months earlier)
Sources: NBER recession bars; US Department of Commerce; US Department of Labor
0
2
4
6
8
10
12
14
16
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 20200
2
4
6
8
10
12
14
16
Core CPI
Core chain PCE price index
The Federal Reserve's long-run inflation
target (for chain core PCE price inflation)¹
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
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JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 76
A strict interpretation of the Nairu “model” …Core PCE inflation (percent change from 12 months earlier)
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
0
1
2
3
4
5
6
7
8
9
10
11
-6 -5 -4 -3 -2 -1 0 1 2 3
74
73
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Core PCE inflation (percent change from 12 months earlier)
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
77
… which comes from the observed short-term tradeoff …
0
1
2
3
4
5
6
7
8
9
10
11
-6 -5 -4 -3 -2 -1 0 1 2 3
78
7776
75
74
79
73
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Core PCE inflation (percent change from 12 months earlier)
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
78
… between inflation and slack …
0
1
2
3
4
5
6
7
8
9
10
11
-6 -5 -4 -3 -2 -1 0 1 2 3
80
78
7776
75
74
84
83
82
81
90
88
8786
79
89
85
73
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Core PCE inflation (percent change from 12 months earlier)
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
79
… (inflation rises as the economy surpasses Nairu …
0
1
2
3
4
5
6
7
8
9
10
11
-6 -5 -4 -3 -2 -1 0 1 2 3
80
78
7776
75
74
9596
92
84
83
82
81
9899
90
87
93
86
79
97
8594
91
0004
05
0607
73
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Core PCE inflation (percent change from 12 months earlier)
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
80
… and falls as the economy falls below it) …
0
1
2
3
4
5
6
7
8
9
10
11
-6 -5 -4 -3 -2 -1 0 1 2 3
80
78
7776
75
74
9596
92
84
83
82
81
9899
90
87
93
86
79
97
8594
91
0004
03
02
01
05
0607
73
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
Core PCE inflation (percent change from 12 months earlier)
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
81
… should say “deflation”
0
1
2
3
4
5
6
7
8
9
10
11
-6 -5 -4 -3 -2 -1 0 1 2 3
80
78
7776
75
74
9596
92
84
83
82
81
9899
90
87
93
86
79
97
8594
91
0004
03
02
01
05
06
08
0709
73
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 82
Appendix 7. Trauma at the grocery store
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 83
Corn pricesPrice of corn (dollars per bushel)
Source: US Department of Agriculture
0
1
2
3
4
5
6
7
8
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 20110
1
2
3
4
5
6
7
8
Energy Policy Act of 2005 (August 8, 2005)
Energy Independence and Security Act of 2007 (December 19, 2007)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 84
Corn and grocery billsChange in the relative price of corn and food ratio of price indexes to 2005 prices)
Sources: US Department of Agriculture; US Department of Commerce
-2
-1
0
1
2
3
4
5
6
7
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011-2
-1
0
1
2
3
4
5
6
7
Corn's estimated contribution to the relative price of retail food, assuming corn comprises 3% of the typical grocery bill
Relative retail price of food (ratio of chain price index for personal consumption expenditures of food and beverages that werepurchased for off-premises consumption,i.e., groceries and not restaurants tochain price index)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 85
Appendix 8. Global awakening …
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 86
A Copernican story …External balance (percent of GDP)
Source: US Department of Commerce
-7
-6
-5
-4
-3
-2
-1
0
1
2
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010-7
-6
-5
-4
-3
-2
-1
0
1
2
US nominal net exportsUS current account balance
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 87
... a reflection of an economic awakening …Real GDP (chained 2005 US dollars)
Sources: US Department of Commerce; J.P. Morgan
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1990 1995 2000 2005 20100
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Developing economies in Eastern Europe, Latin America, and Asia
US real GDP
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 88
… as impoverished areas manage out of poverty ...GDP per capita
(Ratio to 2010 US level) US level (dollars per person)
Sources: US Department of Commerce; J.P. Morgan
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1877 1887 1897 1907 1917 1927 1937 1947 1957 1967 1977 1987 1997 20070
7,000
14,000
21,000
28,000
35,000
42,000
Chin
a's p
er c
apita
real
GDP
Indi
a's p
er c
apita
real
GDP
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 89
America sponsors this and …After-tax GDP profits (percent of nominal Gross Domestic Income)
Source: US Department of Commerce
0
50
100
150
200
250
300
350
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 20120
50
100
150
200
250
300
350
US goods imports from China
US goods exports to China
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 90
… America benefits from brand new export marketsUS goods exports to China (percent of all US exports)
Source: US Department of Commerce
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 20120.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
… with decades to go …China’s real GDP per capita (ratio to US level)
Source: US Department of Commerce
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 20500.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
… for two sleeping giantsChina and India’s real GDP per capita (ratio to US level)
Source: US Department of Commerce
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 20500.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
China
India
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
52% of growth here to 2050 will come in China and IndiaReal GDP in selected regions (percent change from four quarters earlier)
Sources: US Department of Commerce; JPMorgan Chase & Co.
0
100,000
200,000
300,000
400,000
500,000
600,000
1990 2000 2010 2020 2030 2040 2050
OtherIndiaChinaCurrent developed (North America, Japan, Western Europe)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
How global GDP will evolve …Distribution of real GDP (percent of global output)
Sources: NBER recession bars; US Department of Commerce; various academic sources
0.00
0.20
0.40
0.60
0.80
1.00
2007 2017 2027 2037 2047
Other
India
China
Current developed (North America, Japan, Western Europe)
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ECO
NO
MIC
OU
TLO
OK
UPD
ATE
, AFP
OF
WES
TER
N N
EW Y
OR
K, J
AN
UA
RY
26, 2
011
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
… kind of an Asia storyDistribution of real GDP (percent of global output)
Sources: NBER recession bars; US Department of Commerce; various academic sources
0%
20%
40%
60%
80%
100%
2007 2012 2017 2022 2027 2032 2037 2042 2047
Asia
United States
EuropeLatin AmericaMIddle East and Africa