sbdc investors - an economic outlooksbdcinvestors.com/mediafiles/uploaded/e/0e2422103... · 2013....

Analysis. Answers. pg Springfield Business Development Corporation

Analysis. Answers

Beacon Economics, LLC

An Economic Outlook: What’s Next for the U.S. and the Region

Jordan G. Levine

Economist & Director of Economic Research

Beacon Economics


Bernanke is right… things are getting better.

2

The US economy is finishing its fourth year of expansion

Average growth 2.2%

Unemployment has fall by 1.5% in the last two years

US Economy in an industrial shift phase—IT revolution having an impact

Per capital real GDP is #1 among the largest 30 nations

The US expansion is keeping apace despite turbulence

First half growth roughly 1.7% pace, could be better in 2nd half

Consumers holding steady on better employment / income

Business Investment holding steady, corporate profits solid

Banking sector fundamentals continue to improve—particularly credit unions

State and local government starting to turn the corner

Interest rates still very low

Residential Real Estate remains on Fire—with many potential benefits

Analysis. Answers. pg Springfield Business Development Corporation 3

Everything fine? No….

US never had a ‘recovery’ in the classic sense of the word

Unwinding fiscal stimulus policies will continue to slow growth some in H2

2013: Blame the Right

A lack of credit is impeding potential home buyers and construction: Blame

the Left

Non-residential investment lagging residential: Blame the Internet

China is wobbly, Europe in a recession: Blame everyone

The big short term risks?

Politics: Debt ceilings and federal spending

Europe and China continue to have issues

Psychology and the Federal Reserve’s move to unwind monetary policy


GDP Update

4

2011 2012 Q1 2013

Old New Old New Old New

GDP 2.00 2.05 1.70 1.95 1.80 1.10

Personal consumption 1.39 1.38 1.30 1.39 1.83 1.54

Durable goods 0.44 0.40 0.62 0.56 0.58 0.43

Nondurable goods 0.23 0.12 0.14 0.25 0.45 0.43

Services 0.72 0.86 0.53 0.58 0.80 0.69

Gross investment 1.28 1.32 0.47 0.49 0.96 0.71

Structures 0.19 0.21 0.21 0.24 -0.26 -0.80

Equipment 0.77 0.59 0.34 0.25 0.31 0.09

Intellectual property 0.18 0.11 0.14

Residential 0.09 0.14 0.34 0.38 0.34 0.34

Change in inventories 0.23 0.20 -0.41 -0.49 0.57 0.93

Net exports -0.01 0.01 0.25 0.30 -0.09 -0.28

Exports 0.59 0.61 0.30 0.32 -0.15 -0.18

Imports -0.60 -0.59 -0.05 -0.02 0.06 -0.10

Government -0.67 -0.67 -0.35 -0.22 -0.93 -0.82

National defense -0.21 -0.23 -0.26 -0.26 -0.63 -0.57

Nondefense -0.13 -0.11 0.04 0.08 -0.06 -0.11

State and local -0.33 -0.34 -0.13 -0.04 -0.25 -0.14

14000

14500

15000

15500

16000

16500

17000

17500

20

06I

IV III II

20

09I

IV III II

20

12I

IV

Real GDP Trends

New Old Hyp


GDP: Q2

5

Initial Exp Rev

GDP 1.70 2.30

Personal consump. 1.22 1.26

Durable goods 0.48 0.54

Nondurable goods 0.31 0.30

Services 0.43 0.43

Gross investment 1.34 0.81

Structures 0.17 0.18

Equipment 0.23 0.24

Intellectual property 0.15 0.15

Residential 0.38 0.39

Change inventories 0.41 -0.14

Net exports -0.81 0.33

Exports 0.71 0.92

Imports -1.51 -0.59

Government -0.08 -0.08

National defense -0.02 -0.02

Nondefense -0.09 -0.09

State and local 0.04 0.04

-2

-1

0

1

2

3

4

5

6

GDP Growth


Trade and GDP Revisions

6

-60000

-50000

-40000

-30000

-20000

-10000

0

Ja

n-1

2

Ma

r-1

2

Ma

y-1

2

Ju

l-1

2

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Monthly Trade Deficit Nominal to June

170000

180000

190000

200000

210000

220000

230000

240000

Trade Trends: Real

Export Imports

Exports Imports

Total 2,096,819 Total -7,563,278

Transportation Equipment 2,475,708 Oil & Gas -3,640,189

Miscellaneous Manufactured Commodities 986,363 Chemicals -1,306,897

Petroleum & Coal Products 686,433 Petroleum & Coal Products -1,173,878

Oil & Gas 618,241 Primary Metal Mfg -1,080,433

Food & Kindred Products 416,329 Machinery, Except Electrical -898,845

Change June

12 to June

13 Nominal


US Consumer Spending

7

12500

13000

13500

14000

14500

15000

15500

16000

16500

270000

275000

280000

285000

290000

295000

300000

Ja

n-1

2

Ap

r-12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-13

Ju

l-1

3

Spending to July

New Vehicle Sales: SAAR

Retail Sales x Auto / Gas

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

10400

10450

10500

10550

10600

10650

10700

10750

Real Month Spending

Total 3 Mnt Gr


Employment

8

0

50

100

150

200

250

300

350

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

Jul-1

3

Change In Payrolls Y-o-Y Ch

Jun-Jul Mo Avg %

Total nonfarm 162 190 1.7%

Administrative 7.6 28.7 4.3%

Leisure and hospitality 23.0 38.8 3.4%

Professional servicess 21.1 19.6 3.0%

Construction -6.0 13.8 3.0%

Mining and logging 4.0 1.9 2.7%

Retail trade 46.8 29.3 2.4%

Real estate 3.2 3.2 2.0%

Health care 8.3 27.5 1.9%

Wholesale trade 13.7 6.9 1.5%

Finance and insurance 12.0 6.8 1.4%

Transportation 4.6 4.7 1.3%

Other services -2.0 3.5 0.8%

Information 9.0 1.3 0.6%

Educational services 5.0 1.2 0.4%

Local government 6.0 3.1 0.3%

Manufacturing 6.0 1.5 0.2%

State government -3.0 -1.4 -0.3%

Federal 0.8 -3.1 -1.7%

300000

320000

340000

360000

380000

400000

420000

1/4

/12

4/4

/12

7/4

/12

10

/4/1

2

1/4

/13

4/4

/13

7/4

/13

Initial Claims 4 Wk MA to Aug


Unemployment

9

63.0%

63.2%

63.4%

63.6%

63.8%

64.0%

64.2%

7.2%

7.4%

7.6%

7.8%

8.0%

8.2%

8.4%

Jan-1

2

Mar-

12

May-1

2

Jul-1

2

Sep-1

2

Nov-1

2

Jan-1

3

Mar-

13

May-1

3

Jul-1

3

Unemployment and Participation

Unemployment Participation

Jul-12 Jul-13 Ch

Total 140,013 142,165 2,152

Full Time 113,390 115,285 1,895

PT Economic 8,104 8,101 (3)

PT Non-Econ 18,519 18,779 260

Part Time Employment


Labor Markets Not Great, But Doing Well

10

Indicator Nonfarm

Employment Household

Employment

Peak Month Jan-08 Nov-07

Peak Employment (000s) 138,056.0 146,595.0

Trough Month Feb-10 Dec-09

Trough Employment (000s) 129,320.0 138,025.0

Peak to Trough (000s) -8,736.0 -8,570.0

Peak to Trough (%) -6.3 -5.8

Current Month Jul-13 Jul-13

Current Employment (000s) 136,038.0 144,285.0

Trough to Current (000s) 6,718.0 6,260.0

Trough to Current (%) 5.2 4.5

Remaining to Peak (000s) -2,018.0 -2,310.0

Remaining to Peak (%) -1.5 -1.6


Personal Income

11

11000

11500

12000

12500

13000

13500

14000

14500

15000

15500

16000

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

Personal Income: Revised Up 2%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Jan-1

0

Jul-1

0

Jan-1

1

Jul-1

1

Jan-1

2

Jul-1

2

Jan-1

3

Savings Rates

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Jan-1

2

Mar-

12

May-1

2

Jul-1

2

Sep-1

2

Nov-1

2

Jan-1

3

Mar-

13

May-1

3

Y-o-Y Growth Real PI


Consumer Finances: Better but not borrowing

12

9.0

10.0

11.0

12.0

13.0

14.0

15.0

19

80Q

1

19

83Q

4

19

87Q

3

19

91Q

2

19

95Q

1

19

98Q

4

20

02Q

3

20

06Q

2

20

10Q

1

Household Debt Service (% DPI)

2080

2100

2120

2140

2160

2180

2200

2220

2240

2260

Ja

n-1

1

Ju

n-1

1

No

v-1

1

Ap

r-12

Se

p-1

2

Fe

b-1

3

Private Consumer Credit to May

40

45

50

55

60

65

70

20

06Q

1

20

07Q

1

20

08Q

1

20

09Q

1

20

10Q

1

20

11Q

1

20

12Q

1

20

13Q

1

Household Real Net Worth


Q2 Consumer Debt Data

13

0

5

10

15

0

5

10

15

03:Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 13:Q1

Credit Card

Mortgage

Auto Loan

HE Revolving

Percent of Balance 90+ Days Delinquent by Loan Type

Source: FRBNY Consumer Credit Panel/Equifax

Student

Loan


Corporate Income

14

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

19

82I II III

IV

19

91I II III

IV

20

00I II III

IV

20

09I II

Corporate Profits as % National Income

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

19

95.0

2

19

96.0

4

19

97.0

6

19

98.0

8

19

99.1

20

00.1

2

20

02.0

2

20

03.0

4

20

04.0

6

20

05.0

8

20

06.1

20

07.1

2

20

09.0

2

20

10.0

4

20

11.0

6

20

12.0

8

Implied Equity Premium Over Treasuries


The Disappointing Recovery

Beacon Economics

65%

66%

67%

68%

69%

70%

71%

72%

Q1-9

8

Q3-9

9

Q1-0

1

Q3-0

2

Q1-0

4

Q3-0

5

Q1-0

7

Q3-0

8

Q1-1

0

Q3-1

1

Consumer Spending as % GDP

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

20.0%

21.0%

22.0%

19

69I

19

74I

19

79I

19

84I

19

89I

19

94I

19

99I

20

04I

20

09I

Taxes as share income

11000

11500

12000

12500

13000

13500

14000

14500

15000

15500

20

00I

20

01II

20

02III

20

03IV

20

05I

20

06II

20

07III

20

08IV

20

10I

20

11II

20

12III

US GDP

Hypothetical Actual


Where are those jobs?

16

1 Idaho 2.98% 19 Maryland 1.66% 36 New York 0.94%

2 Texas 2.79% 20 New Hampshire 1.66% 37 Nebraska 0.90%

3 Colorado 2.71% 21 Iowa 1.65% 38 Wisconsin 0.88%

4 North Dakota 2.62% 22 North Carolina 1.52% 39 Oklahoma 0.82%

5 Mississippi 2.52% 23 Indiana 1.40% 40 Illinois 0.80%

6 Utah 2.25% 24 Kansas 1.34% 41 Kentucky 0.78%

7 Montana 2.00% 25 Virginia 1.33% 42 Arkansas 0.72%

8 Washington 2.00% 26 Delaware 1.27% 43 Connecticut 0.65%

9 Nevada 1.96% 27 Hawaii 1.26% 44 Pennsylvania 0.57%

10 Arizona 1.96% 28 Michigan 1.26% 45 Rhode Island 0.43%

11 New Jersey 1.92% 29 Massachusetts 1.23% 46 West Virginia 0.41%

12 Georgia 1.90% 30 Tennessee 1.18% 47 District of Columbia 0.38%

13 California 1.76% 31 Alabama 1.16% 48 Ohio 0.31%

14 Florida 1.72% 32 Louisiana 1.13% 49 Wyoming 0.28%

15 South Carolina 1.70% 33 Vermont 1.12% 50 Maine 0.10%

16 Minnesota 1.69% 34 South Dakota 1.01% 51 Alaska -0.42%

17 Missouri 1.69% 35 New Mexico 1.01%

18 Oregon 1.67%


Regional Growth


Why The Disappointing Recovery?

18

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1998I

19

99IV

20

01III

2003II

2005I

20

06IV

20

08III

2010II

2012I

Net Trade % GDP

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

19

99I II III

IV

20

04I II III

IV

20

09I II III

IV

Construction as % of GDP: Real


Good News: Trade Trends and GDP Revisions

19

-60000

-50000

-40000

-30000

-20000

-10000

0

Ja

n-1

2

Ma

r-1

2

Ma

y-1

2

Ju

l-1

2

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Monthly Trade Deficit Nominal to June

170000

180000

190000

200000

210000

220000

230000

240000

Trade Trends: Real

Export Imports


US Production, Not Bad

20

88

90

92

94

96

98

100

Ja

n-1

1

Ap

r-11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Ap

r-12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-13

Ju

l-1

3

Industrial Production

IP Total IP Manufacturing

73

74

75

76

77

78

79

Ja

n-1

1

Ap

r-11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Ap

r-12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-13

Ju

l-1

3

Capacity Utilization

CU Total CU Manufacturing


US Affordability: Opportunity for Manufacturing & Tourism

70

75

80

85

90

95

100

105

110

115

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

$US Broad (real) NUMBER %

ARRIVALS Ch

CANADA 17,817,851 5.8

MEXICO 10,221,924 6.2

UNITED KINGDOM 2,848,912 -1.5

JAPAN 2,778,790 14.0

GERMANY 1,444,598 4.7

BRAZIL 1,260,707 17.5

PRC (EXCL HK) 1,179,620 38.6

FRANCE 1,150,739 -1.5

KOREA, SOUTH 940,118 7.2

AUSTRALIA 847,604 7.3

ITALY 642,349 -6.1

INDIA 587,783 8.5

ARGENTINA 474,531 20.7

SPAIN 466,641 -13.0

NETHERLANDS 457,456 -0.6

VENEZUELA 444,653 21.3

COLOMBIA 407,578 17.4


Europe: Turning? GDP and IP

22

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

GDP Growth (SA)

United Kingdom United States

Euro area

90

92

94

96

98

100

102

104

106

108

110


European Union (28 countries)

Germany

Spain

90

92

94

96

98

100

102

104


France Italy United Kingdom


China: Official Statistics

23

0

2

4

6

8

10

12

14

16

Jan-1

1

Apr-

11

Jul-1

1

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

Industry Value Added: Y-o-Y Growth

10000

12000

14000

16000

18000

20000

22000

Jan-1

1

May-1

1

Sep-1

1

Jan-1

2

May-1

2

Sep-1

2

Jan-1

3

May-1

3

Real Retail Spending

95

97

99

101

103

105

107

109

111

113

115

Jan-1

1

May-1

1

Sep-1

1

Jan-1

2

May-1

2

Sep-1

2

Jan-1

3

May-1

3

Real Estate Prices

Bejing Shanghai

Guangzhou


Domestically, Forward Indicators Looking Up

24

48

50

52

54

56

58

60

62

64

66

Ja

n-1

1

Ap

r-11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Ap

r-12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-13

Ju

l-1

3

ISM Surveys to July

ISM Manufacturing

ISM Non-Manufacturing

180000

190000

200000

210000

220000

230000

240000

250000

Ja

n-1

1

Ap

r-11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Ap

r-12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-13

Ju

l-1

3

Durables

Durables: Orders Durables: Shipments


Residential Markets: Housing Is Hot

25

4.0

5.0

6.0

7.0

8.0

9.0

10.0

3,000

3,200

3,400

3,600

3,800

4,000

4,200

4,400

4,600

4,800

Jan-1

1

Apr-

11

Jul-1

1

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

Nar Stats to June

Sales Month's Supply

0

100

200

300

400

500

600

Jan-1

1

Apr-

11

Jul-1

1

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

New Home Sales


Residential Markets

26

130

135

140

145

150

155

160

165

170

150,000

160,000

170,000

180,000

190,000

200,000

210,000

Jan-1

1

Apr-

11

Jul-1

1

Oct-

11

Jan-1

2

Apr-

12

Jul-1

2

Oct-

12

Jan-1

3

Apr-

13

Prices

Median Price Core Logic


Consequences

27

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Home Equity Extraction % DPI to Q1: smoothed

• Wealth Effects

• Positive equity

withdrawal

• Financial

• Underwater can now refi

• Sell instead of foreclose

• Strategic Defaults: No

• Construction

• Jobs and Multipliers


Mortgage Bankers Data: Missouri Doesn’t Make the List

0

1

2

3

4

5

6

7

Q1-7

9

Q1-8

1

Q1-8

3

Q1-8

5

Q1-8

7

Q1-8

9

Q1-9

1

Q1-9

3

Q1-9

5

Q1-9

7

Q1-9

9

Q1-0

1

Q1-0

3

Q1-0

5

Q1-0

7

Q1-0

9

Q1-1

1

Q1-1

3

Share of Outstanding Mortgages

Foreclosure Inventory

Serious Delinquency

Florida 15.98 South Carolina 7.46

New Jersey 14.28 Massachusetts 7.44

Nevada 11.52 Louisiana 7.41

New York 10.91 Arkansas 7.13

Illinois 10.12 Hawaii 7.05

Maine 9.78 DC 6.93

Maryland 9.58 Kentucky 6.89

Connecticut 9.42 Alabama 6.79

Mississippi 8.97 Washington 6.7

Rhode Island 8.66 New Mexico 6.65

Ohio 8.5 Oklahoma 6.64

Delaware 8.34 Tennessee 6.62

Indiana 8.2 North Carolina 6.39

Pennsylvania 7.99 Vermont 6.27

Georgia 7.63 Michigan 6.25

Total Share by State


Updated Affordability: Through July—Operation Rate Watch

Beacon Economics

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Jan-8

7

Sep-8

8

May-9

0

Jan-9

2

Sep-9

3

May-9

5

Jan-9

7

Sep-9

8

May-0

0

Jan-0

2

Sep-0

3

May-0

5

Jan-0

7

Sep-0

8

May-1

0

Jan-1

2

Estimate Monthly Payments as Share Median income with Tax

Adjustment

Rate 4.00 4.50 5.00 5.50

Price Gain

$200,000 29.2% 30.5% 31.9% 33.3%

$210,000 5% 30.6% 32.0% 33.4% 34.9%

$220,000 10% 32.1% 33.5% 35.0% 36.6%

$230,000 15% 33.5% 35.1% 36.6% 38.2%

$240,000 20% 35.0% 36.6% 38.2% 39.9%

$250,000 25% 36.5% 38.1% 39.8% 41.6%

$260,000 30% 37.9% 39.6% 41.4% 43.2%

$270,000 35% 39.4% 41.2% 43.0% 44.9%

$280,000 40% 40.8% 42.7% 44.6% 46.6%


Housing Construction

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Jan-0

6

Jul-0

6

Jan-0

7

Jul-0

7

Jan-0

8

Jul-0

8

Jan-0

9

Jul-0

9

Jan-1

0

Jul-1

0

Jan-1

1

Jul-1

1

Jan-1

2

Jul-1

2

Jan-1

3

Single Family to June

Permits Starts

0

100

200

300

400

500

600

Jan-0

6

Jul-0

6

Jan-0

7

Jul-0

7

Jan-0

8

Jul-0

8

Jan-0

9

Jul-0

9

Jan-1

0

Jul-1

0

Jan-1

1

Jul-1

1

Jan-1

2

Jul-1

2

Jan-1

3

Multi Family to June-Smoothed

Permits Starts


Tight Credit…

0

100

200

300

400

500

600

700

800

900

19

97 -

Q1

19

98 -

Q1

19

99 -

Q1

20

00 -

Q1

20

01 -

Q1

20

02 -

Q1

20

03 -

Q1

20

04 -

Q1

20

05 -

Q1

20

06 -

Q1

20

07 -

Q1

20

08 -

Q1

20

09 -

Q1

20

10 -

Q1

20

11 -

Q1

20

12 -

Q1

20

13-

Q1

MBA Estimates Mortgage Originations to Q1

Mortgage Originations: 1-4 Family: Purchase (Bil.$)

Mortgage Originations: 1-4 Family: Refinance (Bil.$)

0

200

400

600

800

1,000

1,200

03:Q1 05:Q1 07:Q1 09:Q1 11:Q1 13:Q1

Newly Originated Installment Loan

Balances Billions

Source: FRBNY Consumer

Credit Panel/Equifax


Senior Loan Officer Survey to Q3: Good for Businesses

32

-40

-20

0

20

40

60

80

100

20

07Q

1

20

07Q

3

20

08Q

1

20

08Q

3

20

09Q

1

20

09Q

3

20

10Q

1

20

10Q

3

20

11Q

1

20

11Q

3

20

12Q

1

20

12Q

3

20

13Q

1

20

13Q

3

Net % Banks Reporting Increases

Standard Commercial RE

Standards C&I

-40

-20

0

20

40

60

80

100

Net % Banks Reporting Increases

Standards: Not Traditional Mortgages

Standards Prime


Banking Data

33

0

1

2

3

4

5

6

7

8

19

85Q

1

19

86Q

4

19

88Q

3

19

90Q

2

19

92Q

1

19

93Q

4

19

95Q

3

19

97Q

2

19

99Q

1

20

00Q

4

20

02Q

3

20

04Q

2

20

06Q

1

20

07Q

4

20

09Q

3

20

11Q

2

20

13Q

1

Delinquencies: All Loans Q2 12 Q2 13

Ag 1.65 1.27

Business 1.53 1.08

Real Estate 8.23 7.16

Consumer 2.92 2.53

SF Res 10.35 9.72

Receivables 0.84 0.82

Credit Cards 3.07 2.65

Other Consumer 2.77 2.42

Delinquency by Loan

Type

Loan Type 6 M Ar 6 M AR

RE: Revolving -8.9% -8.7%

RE: Closed-end 4.7% -2.6%

RE: Commercial 1.7% 3.0%

Consumer loans 1.9% 4.8%

Consumer: Credit cards 0.3% 0.7%

Consumer loans: Other 3.8% 9.7%

Fed funds / reverse RP 15.8% -14.0%

Other loans 4.6% 6.7%

Growth by Loan Type


CUs Outperform Banks: Potential for Opportunities

1,500

2,000

2,500

3,000

3,500

4,000

100

150

200

250

300

350

Ban

ks

($

Billio

ns)

Cre

dit

Un

ion

s (

$ B

illi

on

s)

Mortgage Lending Credit Unions vs. Banks

Credit Unions Banks

1.0

1.3

1.5

1.8

2.0

2.3

50

100

150

200

250

300

Nu

mb

er

of

Lo

an

s (

Mil

lio

ns)

Lo

an

Vo

lum

es (

$ B

illio

ns)

First Mortgage Loans

Mortgage Loan Volume

Number of Mortgage Loans


Household Formation Picking Up

35

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

95

100

105

110

115

120

125

20

00 0

1

20

00 1

2

20

01 1

1

20

02 1

0

20

03 0

9

20

04 0

8

20

05 0

7

20

06 0

6

20

07 0

5

20

08 0

4

20

09 0

3

20

10 0

2

20

11 0

1

20

11 1

2

20

12 1

1

Ho

useh

old

Fo

rmati

on

(M

illi

on

s)

To

tal

U.S

. H

ou

se

ho

lds (

Mil

lio

ns)

U.S. Household Formation: Current Population Survey

U.S. Total Household Formation (Annual)

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

By Region: Smoothed

Midwest Northeast South West


Kids Still Living with Mom and Dad… Even With a Job

36

19

21

23

25

27

29

31

33

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

United States % of 18-34 Year Olds Living

with Parents

Total With Job

2.40

2.45

2.50

2.55

2.60

2.65

2.70

2.75

2.80

2.85

Pers

on

s p

er

Ho

useh

old

U.S. Avg. Household Size

Persons Per Household


Construction

37

0

200000

400000

600000

800000

1000000

1200000

1400000Ja

n-0

6

Ju

n-0

6

No

v-0

6

Ap

r-07

Se

p-0

7

Fe

b-0

8

Ju

l-0

8

De

c-0

8

Ma

y-0

9

Oct-

09

Ma

r-1

0

Au

g-1

0

Ja

n-1

1

Ju

n-1

1

No

v-1

1

Ap

r-12

Se

p-1

2

Fe

b-1

3

Construction Spending to June

Public Non-Residential Residential


Government

4900

4950

5000

5050

5100

5150

5200

5250

13700

13800

13900

14000

14100

14200

14300

14400

14500

14600

14700

Jan-0

8

Aug-0

8

Mar-

09

Oct-

09

May-1

0

Dec-1

0

Jul-1

1

Feb-1

2

Sep-1

2

Apr-

13

Employment

Local State

2012 2013

Federal I IV I Ch y-o-y

Current receipts 2664.9 2735.8 2947.3 282.4

Current expenditures 3723.6 3771.6 3728.5 4.9

Consumption

expenditures 1055.6 1041.9 1032.7 -22.9

Net lending -1172.5 -1168.9 -864.3 308.2

National defense 806.4 787.9 768.8 -37.6

Services 230.2 206.5 201 -29.2

Gross investment 102.9 106.1 96.8 -6.1

Fed Non-Defense

Consumption 352.1 360.1 360.7 8.6

State and Local

Current receipts 2050.4 2091.9 2113.2 62.8

Current tax receipts 1391.2 1408.9 1444 52.8

Federal grants-in-aid 455.3 479.4 464.8 9.5

Current expenditures 2178.1 2216.4 2223.6 45.5

Net lending -166.6 -156.2 -141.1 25.5


Social Insurance: Unsustainable

39

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

19

70

19

73

19

76

19

79

19

82

19

85

19

88

19

91

19

94

19

97

20

00

20

03

20

06

20

09

20

12

Real Public Spending Per Retiree Source: Census, BEA

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Wo

rkin

g A

ge /

Reti

rem

en

t A

ge

US Support Ratio and Projections Source: Census

1970 2010 2050*

Cost / Working Age Person $2,059 $8,795 $29,823

* Based on per capita growth half the rate from 1970 to 2010


State Pension Problems

40

Adjusted Net Pension

Liabilities as % of

Revenue

Moody’s June 2013

report with updated

methodologies


Inflation

41

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Ja

n-1

1

Ap

r-11

Ju

l-1

1

Oct-

11

Ja

n-1

2

Ap

r-12

Ju

l-1

2

Oct-

12

Ja

n-1

3

Ap

r-13

6-Month Inflation (SAAR)

All All Less Energy

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Ja

n-9

4

No

v-9

5

Se

p-9

7

Ju

l-9

9

Ma

y-0

1

Ma

r-0

3

Ja

n-0

5

No

v-0

6

Se

p-0

8

Ju

l-1

0

Ma

y-1

2

M2 Growth SAAR to June

1 Year 3 Year


How About In Missouri and in Springfield?

42


Labor Markets Are Growing

43

Location Feb-10

Employment June-13

Employment Diff. (000s) Diff. (%)

St. Joseph 55.9 63.0 6.1 12.7

Columbia 92.1 98.2 5.1 6.6

Springfield 191.1 200.5 8.4 4.9

Kansas City 966.5 1,007.7 40.2 4.3

Joplin 77.8 80.1 1.3 3.0

St. Louis 1,285.4 1,314.9 28.5 2.3

Jefferson City 76.8 76.1 -1.7 -0.9

Missouri 2,648.2 2,705.4 56.2 2.2

United States 129,320.0 135,876.0 6,555.0 5.1


Slower out of Gate, but Gaining Steam

• Nearly 8,400 jobs created

• Only 0.5% from peak

• Unemployment rate:

• 6.0% in Jun-13

• Down from over 9.0%

• Outpacing state overall

• Keeping pace with nation

• Unemployment up?

44

0

1

2

3

4

5

6

7

8

9

10

160

165

170

175

180

185

190

195

200

205

Un

em

plo

ym

en

t R

ate

(%

, S

A)

No

nfa

rm (

000

s, S

A)

Springfield Labor Market

Total Nonfarm Unemployment Rate


Unemployment Can be Misleading

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

215

216

217

218

219

220

221

222

223

224

225

226

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

May-1

1

Sep-1

1

Jan-1

2

May-1

2

Sep-1

2

Jan-1

3

May-1

3

Un

em

plo

ym

en

t R

ate

(%

, S

A)

Lab

or

Fo

rce (

00

0s

, S

A)

Springfield Unemployment

Labor Force Unemployment Rate

45

0

2

4

6

8

10

12

Jan-9

0

Jul-9

1

Jan-9

3

Jul-9

4

Jan-9

6

Jul-9

7

Jan-9

9

Jul-0

0

Jan-0

2

Jul-0

3

Jan-0

5

Jul-0

6

Jan-0

8

Jul-0

9

Jan-1

1

Jul-1

2

Un

em

plo

ym

en

t R

ate

(%

, S

A)

Springfield Missouri United States


Springfield: A Growth Region

Annual Average Employment Growth

Decade Springfield Missouri United

States

1990-2000 3.20 1.70 1.86

2000-2010 0.81 -0.25 -0.07

2010-2013(6) 1.07 -0.01 0.86

46

85

90

95

100

105

110

115

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

Ind

ex (

20

00

=10

0, S

A)

Nonfarm Employment

Springfield Missouri United States


Structure of the Economy: Employment

47

Share of Employment by Industry

Variable Springfield Missouri United States Diff. (%)

Education/Health 18.4 15.5 15.2 3.2

Transport,Warehouse,Util. 4.8 3.4 3.7 1.1

Retail Trade 12.1 11.4 11.1 0.9

Wholesale Trade 4.9 4.5 4.2 0.7

Other Services 4.5 4.2 4.0 0.5

Financial Activities 6.2 6.2 5.8 0.4

Information 2.0 2.1 2.0 0.0

NR/Construction 4.0 4.2 4.9 -0.9

Leisure and Hospitality 9.5 10.6 10.4 -1.0

Government 14.4 16.1 16.1 -1.7

Professional/Business 11.9 12.6 13.7 -1.7

Manufacturing 6.9 9.3 8.8 -1.9

Total Nonfarm 100.0 100.0 100.0 0.0


Structure of the Economy: Gross Output

48

Share of Real Gross Product by Industry

Industry

Springfield

2011

RGDP

Share of GDP

Diff. (%) Springfield Missouri United

States

Education/Health 1,824 13.6 9.7 8.4 5.2

Retail Trade 1,268 9.5 7.0 6.5 3.0

Administrative 676 5.1 3.4 3.1 1.9

Transportation/Utilities 738 5.5 5.5 4.8 0.7

Other services 392 2.9 2.5 2.3 0.7

Manufacturing 1,678 12.5 12.2 12.1 0.4

Construction 417 3.1 3.5 3.4 -0.3

Leisure/Hospitality 440 3.3 4.3 3.9 -0.6

Information 546 4.1 6.6 5.1 -1.1

Government 1,433 10.7 12.2 11.8 -1.1

Natural Resources/Mining 36 0.3 1.2 2.7 -2.5

Management/Professional 837 6.3 9.0 9.3 -3.0

Financial activities 2,210 16.5 17.3 21.1 -4.6

All industry total 13,383 100.0 100.0 100.0 0.0


Springfield in Recovery Mode

49

-6

-4

-2

0

2

4

6

8

10,500

11,000

11,500

12,000

12,500

13,000

13,500

14,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Gro

wth

(%

)

Real

GM

P (

$ M

illi

on

s)

Economic Growth

RGDP Growth


Where Are the Jobs?

50

Industry

Jun-13

Empl’t

(000s, SA)

YoY

Change

(000s, SA)

YoY

Change

(%, SA)

Missouri

YoY

Change

(%, SA)

U.S. YoY

Change

(%, SA)

Professional/Bus. 23.9 1.8 8.1 0.9 3.6

NR/Construction 8.0 0.6 7.7 5.4 3.0

Information 4.0 0.2 5.3 -3.1 0.6

Other Services 9.1 0.4 4.5 0.2 1.0

Education/Health 37.0 1.2 3.4 2.0 1.8

Leisure/Hospitality 19.0 0.6 3.2 5.0 3.4

Financial Activities 12.4 0.1 0.9 2.6 1.3

Government 28.9 0.2 0.8 -0.9 -0.3

Wholesale Trade 9.9 0.0 0.0 3.3 1.4

Retail Trade 24.2 -0.2 -0.8 2.1 2.1

Manufacturing 13.8 -0.2 -1.5 1.2 0.3

Transport,Warehous. 9.7 -0.2 -2.0 -1.1 1.3

Total Nonfarm 200.5 5.3 2.7 1.6 1.7


Construction First—Business is Booming

Residential Building Permits

State 2012 2012

YTD 2013

YTD Diff. (%)

Kansas 6,300 2,805 4,174 48.8

Nebraska 6,637 3,078 4,169 35.4

Kentucky 8,052 3,953 5,052 27.8

Missouri 11,593 4,872 6,032 23.8

Illinois 13,510 5,686 6,980 22.8

Tennessee 18,800 9,456 11,267 19.2

Arkansas 7,147 3,274 3,476 6.2

Iowa 9,876 4,267 4,375 2.5

U.S. Total 805,437 377,288 474,883 25.9

Trough-Current Construction Employment

Location Jun-13

Empl’t

T2C

Diff.

(000s) T2C

Diff. (%)

Iowa 68.6 6.8 12.8

Missouri 111.0 9.7 10.7

Kansas 52.8 -0.1 1.7

Arkansas 46.7 -1.0 0.0

Kentucky 66.7 -1.1 -0.1

Illinois 188.5 -10.5 -4.8

U.S. Total 5,793.0 357.0 6.6

51


The Blossoming Professional/Business Sector

52

Industry 2011 2012 Change

Share of

Job Growth

(%)

Share of

Industry (%)

Computer Systems Design and Related

Services 447 1,079 632 36.2 5.3

Accounting, Tax Preparation, Bookkeeping, and

Payroll Services 1,247 1,585 338 19.3 7.7

Management of Companies and Enterprises 3,119 3,311 192 11.0 16.2

Office Admin./Facilities Support 3,554 3,741 187 10.7 18.3

Employment Services 3,104 3,271 167 9.6 16.0

Legal Services 1,255 1,352 97 5.5 6.6

Mgmt. Consulting, R&D, Architects/Engineers 1,260 1,335 75 4.3 6.5

Business Support Services 3,253 3,309 56 3.2 16.2

Waste Management and Remediation Services 340 350 10 0.6 1.7

Other Professional, Scientific, and Technical

Services 694 703 9 0.5 3.4

Specialized Design Services 66 73 7 0.4 0.4

Advertising, Public Relations, and Related

Services 389 367 -22 -1.3 1.8

Professional and Business Services 18,728 20,476 1,748 100.0 100.0


Economic and Workforce Perspective on Education

• Education is more important than ever

Better individual outcomes

More enhanced quality of life

Better job prospects

• Not all education was created equal

Benefits, both personal and social

STEM education has better payoffs

As a grad, better to be STEM

Future STEM needs in the workforce

Forecast of job growth for key sectors


Why Bring this up? Better Outlook for Grads—Better for Springfield

Education

New Jobs

by 2020

Growth

(%)

Share of

All Jobs (%)

Doctoral or professional degree 876.6 19.9 3.1

Master's degree 431.2 21.7 1.6

Bachelor's degree 3,656.1 16.5 15.6

Associate's degree 1,440.0 18.0 5.4

Postsecondary non-degree award 1,100.9 16.9 4.4

Some college, no degree 142.2 17.5 0.7

Some Post-Secondary 7,647.0 17.5 30.8

High school diploma or equivalent 7,576.1 12.2 39.7

Less than high school 5,245.7 14.1 29.5

Total, all occupations 20,468.9 14.3 100.0

Source: Bureau of Labor Statistics, Employment Projections 2010-2020


Better for Local Businesses—Multiplier Effects

Education

Springfield MSA Rest of Missouri

Personal

Income Hhld.

Income Personal

Income Hhld.

Income

Less Than High

School

13,100

38,000

12,500

32,400

High School

Graduate

21,000

41,000

24,000

48,500

Some College

20,000

44,800

26,000

52,500

Bachelors

Degree

34,000

63,000

41,200

76,000

Grad./Prof.

Degree

44,000

74,800

52,000

95,100

Total

22,700

47,200

29,500

57,500

55


Current Educational Mix

56

8.2%

27.4%

34.2%

18.9%

11.3%

Less Than High School High School Graduate Some College

Bachelors Degree Grad./Prof. Degree


Current Educational Mix, Continued

57

0

10

20

30

40

50

60

70

80

90

100

0 100,000 200,000 300,000 400,000 500,000 600,000 700,000

% P

ost-

Seco

nd

ary

Number of Jobs

Employment and Education


Clearer Picture in Terms of Growth

58

Industry Post-

Secondary Total % Post-

Secondary

Job

Growth

(%)

Professional/Business 184,994 248,041 74.6 8.1

NR/Construction 92,162 219,189 42.0 7.7

Information 42,658 52,588 81.1 5.3

Other Services 75,738 129,205 58.6 4.5

Education/Health 527,716 664,438 79.4 3.4

Leisure/Hospitality 127,995 259,459 49.3 3.2

Financial Activities 140,089 185,076 75.7 0.9

Government 106,353 133,899 79.4 0.8

Wholesale Trade 47,738 76,776 62.2 0.0

Retail Trade 184,678 321,926 57.4 -0.8

Manufacturing 157,564 310,932 50.7 -1.5

Transport/Warehouse 78,943 142,404 55.4 -2.0

Total 1,766,628 2,743,933 64.4 2.7


Tightest Where we Need it Most

59

Missouri Springfield MSA

Education # Unemployed

Unemp. Rate

(%) # Unemployed

Unemp. Rate

(%)

> High School 67,924 23.2 5,675 21.8

High School Graduate 99,437 11.7 8,555 10.9

Some College 87,659 8.5 8,307 8.1

Bachelors Degree 23,350 4.3 2,070 4.7

Grad./Prof. Degree 7,962 2.5 393 1.7

Grand Total 286,332 9.4 25,000 9.1


So what does it mean?

60

2013: The Unwinding Continues

H2: 2% to 2.5%

2014—should be better

Big Themes for the Year

Consumers will continue to spend—after small Q2 hit on from Payroll tax

Housing recovery to accelerate (look out for apt bubble)

Commercial will continue slow recovery

Exports, business spending to grow slowly

Treasuries to stabilize, settle down more

Look for Fed to continue to make noise, start moving later in the year

Gains in state and local to have some modest offset for Fed

Future issues remain

Policy uncertainty in 2nd half is a big issue

We still have to deal with national / state entitlement reform

European situation could heat up next year


Local Round Up

61

Springfield Is In Recovery Mode

Employment is growing, just 0.5% below peak

Unemployment is low in absolute and relative terms

Local construction sector benefitting from housing rebound

The Outlook

Headwinds from federal policy, but private growth will offset

Housing market will drive continued gains in construction

Professional, Healthcare, and domestic sources of growth (restaurants and service sector)

Try to capitalize on global trends and local logistics assets to lure manufacturing

Education Critical for the Future

Educated residents are good for the community, but they are critical for the economy

Significant portion of job growth in high-skilled sectors

Already in relatively short supply, have added over 3,000 since hitting bottom

Analysis. Answers. pg Springfield Business Development Corporation 62

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