Economic Forecast May 13, 2014 Outline for Today Myths and - PowerPoint PPT Presentation

Babson Capital/UNC Charlotte Economic Forecast May 13, 2014

Outline for Today • Myths and Realities of this Recovery • Positive Economic Signs • Negative Economic Signs • Outlook for 2014 • The Employment Picture • Housing Trends

Headlines for 1914 • Ford Raises Daily Wage from $2.40 to $5.00 • Panama Canal Opens • Austria Declares War • Burnett-anti-immigration Law Passes

The Economy in1914 • U.S. GDP • $36.5 billion • Real Per Capita GDP • $4,799 (Honduras) • Federal Spending • $730 million ($17 bil.) • CPI • 10 • Unemployment Rate • 7.9%

Myths and Realities of this Recovery

Current Expansion • Began July 2009 • 58 months • 7 th longest of 33 total expansions since December 1854

2006 - 2013 U.S. GDP 4 2.8 2.7 2.5 3 1.9 1.8 1.8 2 1 0 -0.3 -1 -2 -3 -2.8 -4 2006 2007 2008 2009 2010 2011 2012 2013

2009 - 2014 U.S. Quarterly GDP 4.9 5 3.9 3.9 4.1 3.7 2.8 2.8 3.2 2.8 3 2.6 2.5 1.6 1.3 1.4 1.2 1.1 1 0.1 0.1 -1 -0.4 -1.3 -3 -5 -5.4 -7 2009 II III IV 2010 II III IV 2011 II III IV 2012 II III IV 2013 II III IV 2014 I I I I I I

2007-2013 United States Payroll Employment • Employment Decline: -8,710,000 • Employment Gain: 8,044,000 • Percent Recovered: 92.4%

What’s the Target? 3,000,000 Jobs per Year 250,000 Jobs per Month

US Job Growth 2012 2,193,000 jobs 182,750 per month (Second Largest Job Growth Since 1999)

US Job Growth 2013 2,186,000 jobs 182,150 per month (Third Largest Job Growth Since 1999)

U.S. Job Growth 1990 - 2013 3,844 4,000 3,391 3,014 3,170 2,810 2,810 2,484 3,000 2,193 2,157 2,071 2,186 2,019 1,944 2,103 2,000 1,168 1,115 1,022 1,000 62 0 -1,000 -532 -848 -2,000 -1,757 -3,000 -3,617 -4,000 -5,000 -5,052 -6,000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

2007 – 2013 Labor Force Participation Rates August US LFPR 63.2% 70 U.S. 68 66 64 62 60 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13

1947 – 2013 Labor Force Participation Rates 1998-2000 US LFPR 67.1% 2013 US LFPR 63.7% 70 68 66 64 62 60 58 56 54 52 50 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Labor Force Participation Rate # of People Employed + # of People Unemployed Noninstitutional Population 16 +

2010 Population By Age Group Age Group Count Under 5 years 20,201,362 5 to 9 years 20,348,657 10 to 14 years 20,677,194 15 to 19 years 22,040,343 20 to 24 years 21,585,999 25 to 29 years 21,101,849 30 to 34 years 19,962,099 35 to 39 years 20,179,642 40 to 44 years 20,890,964 45 to 49 years 22,708,591 50 to 54 years 22,298,125 55 to 59 years 19,664,805 60 to 64 years 16,817,924 65 to 69 years 12,435,263 70 to 74 years 9,278,166 75 to 79 years 7,317,795 80 to 84 years 5,743,327 85 years and over 5,493,433

NC Number of Unemployed per Job Opening (Not Seasonally Adjusted) 5 January 2010 3.97 Persons per Job Opening 4 November 2013 1.57 Persons per Job Opening 3 2 January 2008 1 1.21 Persons per Job Opening 0 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013

MSA Number of Unemployed per Job Opening (Not Seasonally Adjusted) 5 December 2009 3.09 Persons per Job Opening 4 3 November 2013 1.28 Persons per Job Opening 2 1 January 2008 0.84 Persons per Job Opening 0 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013

SC Number of Unemployed per Job Opening (Not Seasonally Adjusted) 5 November 2009 4.46 Persons per Job Opening 4 3 2 January 2008 November 2013 1 1.46 Persons per Job Opening 1.34 Persons per Job Opening 0 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013

Positive Indicators • Housing Stock/Prices • Interest Rates • Inflation • Consumer Credit • Consumer Confidence • Dollar • Gas Prices • Budget Deficit

U.S. Monthly New Home Inventory (Seasonally Adjusted) 16 January 2009 14 12.4 Months Supply December 2014 12 4.7 Months Supply 10 8 6 4 2 0 Apr Jul Oct Apr Jul Oct Apr Jul Oct Apr Jul Oct Apr Jul Oct Apr Jul Oct Apr Jul Oct Apr Jul Oct Apr Jul Oct Jan Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Monthly Federal Funds Rate 1996-2013 Current Rate 7 0 - .25% 6 5 4 3 2 1 0

Percentage Changes in CPI 1949-2013 15 Annual Increases 13 2009 -0.4% 2010 1.6% 2011 3.0% 11 2012 1.7% 2013 1.5% 9 7 5 3 1 -1

10 15 20 0 5 1/1/1980 10/1/1980 7/1/1981 4/1/1982 1/1/1983 10/1/1983 7/1/1984 4/1/1985 1/1/1986 10/1/1986 Payments as a Percent of Income 7/1/1987 4/1/1988 1/1/1989 10/1/1989 7/1/1990 4/1/1991 1/1/1992 10/1/1992 7/1/1993 4/1/1994 1/1/1995 10/1/1995 7/1/1996 4/1/1997 1/1/1998 10/1/1998 7/1/1999 4/1/2000 1/1/2001 10/1/2001 7/1/2002 4/1/2003 Household Debt Peak 2007 III 13.18% 1/1/2004 10/1/2004 1980-2013 U.S. 7/1/2005 4/1/2006 1/1/2007 10/1/2007 7/1/2008 4/1/2009 Current 9.93% 1/1/2010 10/1/2010 7/1/2011 4/1/2012 1/1/2013

Consumer Confidence • October 1992 • March 2009 • April 2014 120 112.6 54.6 25.0 82.3 95.2 100 81.5 81.7 80 70.4 69.6 63.3 65.4 62.8 64.9 59.2 57.7 56.9 60 54.1 51.053.5 46.0 47.4 44.9 40.8 38.0 40 25.0 20 0 Jul 07 Apr 08 Sep 08 Dec 08 May 09 Jan 10 Apr 10 Aug 10 Mar 11 Jul 11 Jan 12 Aug 12 Feb 13 13-Dec

2000-2013 Dollar Price of Euro 1.7 1.5 1.3 $1.36 1.1 0.9 0.7 0.5 $0.87

0.00 1.00 2.00 3.00 4.00 5.00 3.44 January 3.64 February 3.91 3.96 March 2012 April 2012 3.79 May 2012 3.60 3.50 June 2012 July 2012 3.78 August 2012 3.91 3.81 September 2012 October 2012 3.52 November 2012 3.38 3.39 December 2012 January 2013 3.74 3.78 February 2013 March 2013 3.64 3.68 3.69 Monthly Gas Prices April 2013 May 2013 June 2013 3.66 3.64 July 2013 August 2013 3.60 September 2013 3.42 3.32 3.36 3.39 3.43 October 2013 2012-2014 November 2013 December 2013 January February

Effect of Energy Price Increase on U.S. Economy • Annual Transportation Usage – 187 billion gallons per year • Annual Total Usage – 288 billion gallons per year • Effect of a $.50 increase in price – Transportation $93.5 billion per year – Total $144.0 billion per year

1980 – 2023 U.S. Budget Deficit 1000 2013 Budget Deficit 2015 Budget Deficit $672 billion $388 billion 500 0 -500 -1000 -1500 Year 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 f 2015 f 2017 f 2019 f 2021 f 2023 f

Negative Indicators • Excess Reserves • Trade Deficit • Tax Increases

1000 1200 1400 1600 1800 2000 2200 2400 2600 200 400 600 800 0 1/1/2008 3/1/2008 5/1/2008 7/1/2008 9/1/2008 11/1/2008 1/1/2009 Banking System Excess Reserves 3/1/2009 5/1/2009 7/1/2009 9/1/2009 11/1/2009 1/1/2010 3/1/2020 5/1/2010 7/1/2010 9/1/2010 11/1/2010 1/1/2011 3/1/2011 5/1/2011 7/1/2011 9/1/2011 11/1/2011 1/1/2012 3/1/2012 5/1/2012 7/1/2012 $2,545 billion March Excess Reserves 9/1/2012 2008 – 2014 11/1/2012 1/1/2013 3/1/2013 5/1/2013 7/1/2013 9/1/2013 11/1/2013 1/1/2014 3/1/2014

1992-2013 U.S. Trade Deficits 0 -100000 2009 Trade Deficit -200000 $382 Billion -300000 -400000 2008 Trade Deficit $681 Billion -500000 -600000 2013TradeDeficit 2006Trade Deficit $475 Billion $799 Billion -700000 -800000 -900000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Spending Cuts 2014 - 2015 • Fiscal Year 2014 • Fiscal Year 2015 • Original Sequestration • Original Sequestration – $100 billion – $100 billion • New Sequestration • New Sequestration – $50 billion – $75 billion

Outlook for 2014

Employment Picture

U.S. Jobs Lost Jobs Gained 2240 1428 1500 1356 987.9 1000 790 568 392.9 500 364.2 311 216 82 191 185 0 -62 -71 -207 -292 -500 -408.3 -551 -621 -591.4 -607 -1000 -1173.3 -1500 -1488 -2000 -1954 -2265 -2500 Mining Construction Manufacturing Wholesale Trade Retail Trade TWU Information FIRE B&P Services H&E Services Leisure Services Other Services Government

The North Carolina Experiment

NC Unemployment Benefit Changes New Benefit Old Benefit • 26 Weeks • 12-20 Weeks • $350/week max benefit • $535/week max benefit

July 2013 Unemployment Rates State Rate NEVADA 9.5 ILLINOIS 9.2 NORTH CAROLINA 8.9 RHODE ISLAND 8.9 GEORGIA 8.8 MICHIGAN 8.8 CALIFORNIA 8.7 NEW JERSEY 8.6 MISSISSIPPI 8.5 TENNESSEE 8.5