dr. bruce yandle's quarterly economic update
TRANSCRIPT
Robert Arial has generously granted permission to use his cartoons in my presentations.
Is it Morning in America?
September 2009
• The Great Recession & Recovery
• Walking on Bottom
• The Recovering Economy
Bruce Yandle
V U W
Recovery? What Shape?
December 2007
September2009
The Recession ends when we hit bottom. That looks like August or September
2009.
U.S. Recessions 1948 - 2009 DATE DURATION (Months)
1948-49 11
1953-54 10
1957-58 8
1960-61 10
1968-70 11
1973-75 16
1980-80 6
1981-82 16
1990-91 8
2001-2002 8
2007- ? 20 … and holding
Average 1945-2001 10
Employment & UnemploymentIn August, payroll employment fell by 216,000, compared to declines of 276,000 in
July and 410,000 in June. Since December 2007, payroll employment has fallen by 6,929,000 workers. The level of total employment now compares with that of May 2004.
In August, there were:
139,649,000 employed.
14,900,000 unemployed.
9,100,000 marginally attached.
2,300,000 discouraged workers.
Each month, 100,000 new jobs are needed to accommodate new entrants to the labor force.
The unemployment rate for workers aged 16-19 is 25.5%, the highest level since World War II. The new $7.25 minimum wage went into effect on July 24, 2009. The teen unemployment rate was 23.8% in July, down from 24.0 in June. The 7.1% increase was the largest in a year, which was the point where the minimum had increased previously from $5.85 to $6.55. Teen unemployment rose 22% that month.
Sullivan’s Metropolitan Grill to close.
“We just can’t ‘hang on’ any longer,” Nickas said. “Between the stock market and real estate crash, the opening of a multitude of new restaurants downtown, I have put every dime I have and borrow into this business. I am in insurmountable debt.”
He said the restaurant has had a dramatic drop in sales, more than 40 percent since 2007. He was hoping the economy would turn around quickly enough that he could recover the loss of thousands of dollars a month.
Nickas and his wife, Sabra, opened the restaurant in February 1999, in what was then a struggling downtown business district.
By Titus Ledbetter, Alison Newton and Charmaine Smith-Miles. Anderson Independent Mail, September 4, 2009: 7A.
2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q20
100
200
300
400
500
600
700
800
U.S. Personal Savings, Annual LevelBi
llion
Dol
lars
WASHINGTON (CNNMoney.com) -- President Obama on Saturday announced changes that the IRS plans to make to encourage workers to save more of their paychecks."Even before this recession hit, the savings rate was essentially zero, while borrowing had risen and credit card debt had increased," Obama said in his weekly radio and Internet address. "More broadly, tens of millions of families have been, for a variety of reasons, unable to put away enough money for a secure retirement. ... We cannot continue on this course."
Obama to workers: We'll help you savePresident announces measures to make it easier to save more. One new idea: Turn tax refunds into savings bonds.
http://money.cnn.com/2009/09/05/news/economy/Obama_retiremetn/index.htm?postversion=2009090506. Visited 9/08/09
TWO KEY U.S. INDICATORS
2006M1
2006M3
2006M5
2006M7
2006M9
2006M11
2007M1
2007M3
2007M5
2007M7
2007M9
2007M11
2008M1
2008M3
2008M5
2008M7
2008M9
2008M11
2009M1
2009M3
2009M5
2009M70
10
20
30
40
50
60
70
Diffusion Index, 1/2006-8/2009271 Industries over 1-month Span
2004
Q1
2004
Q2
2004
Q3
2004
Q4
2005
Q1
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
-8
-6
-4
-2
0
2
4
6
Real GDP Growth, 2004-2009
An
nu
al G
row
th
1990
Q1
1990
Q4
1991
Q3
1992
Q2
1993
Q1
1993
Q4
1994
Q3
1995
Q2
1996
Q1
1996
Q4
1997
Q3
1998
Q2
1999
Q1
1999
Q4
2000
Q3
2001
Q2
2002
Q1
2002
Q4
2003
Q3
2004
Q2
2005
Q1
2005
Q4
2006
Q3
2007
Q2
2008
Q1
2008
Q4
-25
-20
-15
-10
-5
0
5
10
15
20
Dow-Jones & GDP Growth: 1Q1990-2Q2009
Dow-Jones annual growth, 4-quarter moving average. GDP quarterly annuallized growth.
Unemployment rates by state,
1983 annual averages
1.9% or below
10.0% or over
7.0% to 9.9% 6.0% to 6.9% 5.0% to 5.9% 4.0% to 4.9%
3.0% to 3.9% 2.0% to 2.9%
(U.S. rate = 9.6 percent)
SOURCE: Bureau of Labor Statist ics
Local Area Unemployment Statist ics
March 2005
1980M1 1982M1 1984M1 1986M1 1988M1 1990M1 1992M1 1994M1 1996M1 1998M1 2000M1 2002M1 2004M1 2006M1 2008M1
-20
-15
-10
-5
0
5
10
15
Employment Growth, Total & Construction , Year/Year1/1980 - 8/2009
Construction Total
Ye
ar
ov
er
Ye
ar
Gro
wth
Economy.com, 09.30.08
States in Recession, August 2008
Economy.com, August 2009
Economy.com, June 2009
Germany, Europe's biggest economy, grew at an annualized pace of 1.3% in the second quarter, while France, the region's second-biggest economy, expanded at an annualized rate of 1.4%. Both countries recorded contractions for the previous four quarters, and bounced back earlier than other advanced economies including the U.S. and the U.K. August 13, 2009. online.wsj.com/article/SB125014420293928457.html
China's government has turned around its economy far faster than most thought possible, to 7.9% in the second quarter. Even if the surge moderates in coming quarters, many analysts say China will very nearly meet its target of an 8% expansion for all of 2009. In the first quarter, gross domestic product grew 6.1% from a year earlier. August 31, 2009. http://www.examiner.com/x-20010-NY-Business-Investment-Examiner~y2009m8d31-Economy-Worlds-largest-economies-returning-to-positive-growth
Which Countries will be the Economic Engine?
19871988
19891990
19911992
19931994
19951996
19971998
19992000
20012002
20032004
20052006
20072008
2009-5
-4
-3
-2
-1
0
1
2
3
Federal Budget Deficit/Surplus% of GDP
Deficit/SurplusProjected
Perc
ent
FY2009 estimate by CBO, 9/2008.
198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010-14
-12
-10
-8
-6
-4
-2
0
2
4
Federal Budget Deficit/Surplus% of GDP
Deficit/SurplusProjected
Perc
ent
CBO, August 2009
Cash-for-Clunkers: A Good Idea?
Can Manufacturing Take Us over the Mountain?
Natural Resources1%
Construction5%
MFG10%
Trade15%
Trans Util Ware4%
Information2%
Financial6%
Prof. & Bus. Serv13%
Ed. & Health14%
Leisure10%
Other Svc.4%
Government17%
U.S. Employment Sectors, 2008
1919M1 1924M7 1930M1 1935M7 1941M1 1946M7 1952M1 1957M7 1963M1 1968M7 1974M1 1979M7 1985M1 1990M7 1996M1 2001M7 2007M10
20
40
60
80
100
120f(x) = 5.13160803663206 exp( 0.00309237283809122 x )R² = 0.963914557919326
Industrial Production Index1919-7/2009
Industrial Production Exponential Estimate
Inde
x ,2
002=
100
Total Employment, Manufacturing Production Workers, 1970-2009
Total Employment, Manufacturing Production Workers, 1970-2009
USA27%
China16%
Japan14%
Germany10%
Russian Federa-tion5%
Italy5%
United Kingdom5%
France4%
Korea4% Canada
3%Spain
3%
Brazil3%
Top 12 Countries: Share of Manufacturing Output, 2007
United Nations Industrial Development Directorate
1972 1980 1990 2000 2004 2006 2009
Iron/Steel Iron/Steel Printing Comp/El Comp/El Comp/El Comp/El
Apparel Apparel Apparel Autos Autos Machinery Aircraft
Machinery Machinery Paper Food Food Aircraft Tobacco
Food Fab, Met Food Fab. Met Chemicals Pet/Coal Pet/Coal
Paper Paper Chemicals Machinery Iron/Steel Food Chemicals
Fab.Met Food Iron/Steel Plas/Rub Plas/Rub Chemicals Elec. Eqt.
Chemicals Chemicals Fab. Metal Chemicals Machinery Fab.Met Fab. Met
Autos Printing Machinery Printing Fab.Met Minerals Plas/Rub
Printing Autos Plas/Rub Paper Paper Elec.Eqt. Machinery
Plas/Rub Plas/Rub Autos Iron/Steel Printing Iron/Steel Minerals
Production Rated Industry Rankings: What’s Hot and What’s Not
Which Cities will be Players in the Knowledge Economy?
Anderson
SenecaGreenwood
ColumbiaMyrtle Beach
Wilmington
Raliegh
Durham
Hilton HeadCharlotte
Charleston
GreenvilleAugusta
FlorenceOrangeburg
Spartanburg
Sumter
Lumberton
N. Wilksboro
Asheville
MSA State Rank
Austin Texas 1Charlottesville Virginia 2Lexington Kentucky 3Raleigh-Durham-Chapel Hill North Carolina 4Atlanta Georgia 5Huntsville Alabama 6Gainesville Florida 7Tallahassee Florida 8Charlotte-Gastonia-Rock Hill North & South Carolina 9
Richmond-Petersburg Virginia 10Fort Walton Beach Florida 11Columbia South Carolina 12Naples Florida 13Dallas-Fort Worth-Arlington Texas 14Jackson Mississippi 15Norfolk-Virginia Beach-Newport News Virginia 16
Orlando Florida 17Melbourne-Titusville-Palm Bay Florida 18
Asheville North Carolina 19Sarasota-Bradenton Florida 20Auburn-Opelika Alabama 21Charleston-N. Charleston South Carolina 22Houston-Galveston-Brazoria Texas 23Wilmington North Carolina 24Cincinnati-Hamilton Ohio 25
Southern MSA Knowledge Economy Index
State RankRaleigh-Durham-Chapel Hill NC 1Huntsville AL 2Atlanta GA 3Charlotte-Gastonia-Rock Hill NC-SC 4Columbia SC 5Auburn-Opelika AL 6Asheville NC 7Charleston-North Charleston SC 8Wilmington NC 9Greenville NC 10Savannah GA 11Nashville TN 12Knoxville TN 13Athens GA 14Birmingham AL 15Tuscaloosa AL 16Greenville-Spartanburg-Anderson SC 17Montgomery AL 18Memphis TN-AR-MS 19Fayetteville NC 20
Regional MSA Index Ranking
Next Three Months?1. There is no doubt about it. We are in the trough of the Great Recession. 2Q2009 GDP
growth is in at minus 3.0%. Powered by recovery of profits, the Dow breaks 8750. But auto industry shuffling causes the unemployment rate to bump 9.5%. There is a whiff of inflation in the air. Mortgage and 10 year bond rates are rising again.
24
2. Ooooops! A double-dip recession is on the way. Auto industry problems and severe banking problems caused by commercial defaults put the economy on the roller coaster headed south. The Dow falls to 6500. Unemployment rises to 10%. To make matters worse, inflation picks up. The CPI shows 3.5%
11
3. Early September data bring positive news that the Obama Administration’s efforts to stabilize and stimulate the economy are paying off. 2Q2009 GDP growth breaks positive ground, just as the Obama team predicted. ISM indicators break through 50. And the Dow joins the happy chorus, breaking 9000. Unemployment still seems hung at 8.9%. From all indications, it appears there is a good chance that 2009 GDP growth will indeed show negative 1.2%.
0
Next Three Months?1. We keep getting positive news, but there are new concerns about the exploding deficit.
Cash for Clunkers raises 3Q2009 GDP growth to plus 2.0%. The Dow continues to crawl ahead. We see 9900 in November. But the deficit prospects seem to be pushing interest rates higher as the government hits credit markets for more cash. Mortgage rates and bond yields are rising again. Consumer savings continues to augur for a slow recovery. It is surely not a Goldilocks economy, with everything beginning to feel just right, but we are at last on the recovery road.
2. While 3Q2009 GDP growth is artificially high, 2% or better, there is a soft under belly developing in the economy. The unemployment rate is hanging high at 9%. People are not buying, unless huge government giveaways push them to buy. Construction spending is a bit better but still in the cellar. The Dow reflects this. A market correction has the Dow hitting 9,000. Once again, it begins to feel like a double dip.
3. This is no double-dip recession. It is a caterpillar economy. One month looks good; the next not so good. But in spite of all the ups and downs, the economy does seem to be generating positive growth. But the world is flat. The Dow seems hung at 9500. The unemployment rate is stuck at 9.5%. Back to school spending was in the basement, and the prospects for Christmas spending are bleak. Banks are struggling with bad commercial debt. And bank failures continue to plague the economy. Forecasters are revising their 2010 forecasts….downward.
Questions?
