Transcript Slide 1
Greece, Deficits, Recovery, & the States Capital Hill Campus June 15, 2010 8.0 Real GDP Growth, 2004-2010E 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 -8.0 2001M1 2001M4 2001M7 2001M10 2002M1 2002M4 2002M7 2002M10 2003M1 2003M4 2003M7 2003M10 2004M1 2004M4 2004M7 2004M10 2005M1 2005M4 2005M7 2005M10 2006M1 2006M4 2006M7 2006M10 2007M1 2007M4 2007M7 2007M10 2008M1 2008M4 2008M7 2008M10 2009M1 2009M4 2009M7 2009M10 2010M1 TOTAL PERSONAL SAVINGS: 2001-2010 $Billion 800 700 600 500 400 300 200 100 0 TWO KEY U.S. INDICATORS Diffusion Index, 1/2006-5/2010 271 Industries over 1-month Span 70 60 50 40 30 20 10 0 Unemployment Rates, 4/2010 10.6% High School Diploma 8.3% Associate Degree 4.9% Bachelors and higher. Total Employed, 16 and Over, Seasonally Adjusted Household Survey, with Trend 1/1991 - 5//2010 150000 145000 140000 Thousand 135000 130000 125000 120000 115000 110000 105000 Federal Deficit: 1940-2010e Billions of 2009 Dollars , $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 1940 1950 1960 1970 -$200 -$400 Source: Author's calculations based on OMB (2010, Table 1.3). 1980 1990 2000 Federal Receipts and Outlays 19-year Increments 60 Trillion 2009 Dollars 50 40 30 20 10 0 Source: Author's calculations based on OMB (2010, Table 1.3). The chickens have come home to roost. Deficits, %GDP, G-20 Countries 2007, 2010E, 2014E 18 15 12 9 % of GDP 6 3 0 2007 2010E -3 -6 -9 -12 -15 2014E Tennessee Texas Nebraska Georgia Nevada Minnesota Wyoming Arizona Alabama Arkansas North Carolina Kansas Florida Virginia Iowa Idaho Ohio Utah Oklahoma Colorado California North Dakota Mississippi Louisiana U.S. Total Washington Pennsylvania Kentucky Maryland Oregon Indiana Missouri Delaware Michigan Illinois Wisconsin South Dakota New Mexico West Virginia Hawaii South Carolina New York New Jersey Maine Connecticut Vermont New Hampshire Montana Alaska Rhode Island Massachusetts State Debt as Percent of State GDP, FY2007 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% $12,000 2008 State per capita Debt & 2007 per capita Personal Income Tax MA $10,000 AK $8,000 RI TAX CT DE $6,000 NH NJ MT WA ND WY FL $2,000 VT NM LA IN PA MS AZ AL WI MO WV OK NV TX SC HI ME IL SD $4,000 NY OH CO KY IA ID AR MD CA OR VA NC KS MN NE GA TN $0 $0 $500 $1,000 DEBT $1,500 $2,000 $2,500 State Debt, 2007 Share of GDP & Average Real GDP Growth, 2001-2005 25 MA 20 RI Share of GDP AK 15 MT NH ME VT CT NJ NY HI 10 WV SC WI NM IL MO IN MI MD CO OH MS 5 SD DE WA IA KS WY GA ND CA MN NC NE OR ID UT NV FL AZ TX TN 0 0 1 2 3 GDP Growth 4 5 6 State Personal Income Tax Growth, 2008-09, & March 2010 Unemployment Rate 16 MI 14 SC CA NH RI 12 TN AZ Unemployment Rate GA OH OR NC NE 10 MO NM ID MA 8 WV WI NJ AR UT 6 NY MN VT IA KS ND 4 2 0 -60 -50 -40 -30 -20 -10 Personal Income Tax Growth 0 10 20 1400 140 1200 120 1000 100 800 80 600 60 400 40 200 20 0 0 Gold Oil Oil Price per Barrell Gold Price per Ounce Oil and Gold, 2004-2010 Next Three Months? 1. Whew!! I feel like we are getting out of the woods. But that’s not saying we are on the Yellow Brick Road, at least not yet. By June unemployment should have peaked, perhaps at 10.8 percent and then be in the 9.5% range Retail Sales will be nudging up. Housing will be firmer. But the price of oil will be nudging up too. Inflation, oil included, will be troublesome. 1Q2010 GDP growth will surprise the pessimists. It will be above 2.5%. Dow –Jones? I am still counting on 10,900 by June. 28 2. I am not ready to join the ranks of raving optimists yet. I’m not even sure there is a Yellow Brick Road any more. As they say, the light at the end of the tunnel has been turned off to save energy. That said, I think we will see the expected pale 2.0-2.5% GDP growth in 1Q2010. The unemployment rate will be hanging at 10.5 percent. Bank lending will still be in the doldrums. In short, the economy will still be in the pits, just going nowhere. 14 Next Three Months? 1. Europe’s credit earthquakes will continue to disturb world economic activity. The dollar will be strengthened by the sick euro. U.S. exports will suffer because of currency movements and weaker global growth. Inflation will be tame, but oil prices will still be creeping up. U.S. employment growth will continue apace; even construction employment will show stronger growth. Look for a 9.2% U.S. unemployment rate. The nervous DowJones will still be trying to reclaim 11,000 territory. 2. It is just one crisis after another. First it was Greece, then Spain. Now it is Italy. Even worse, three U.S. states are threatening to default on bonds, and three cities—Detroit, Harrisburg, and Birmingham are playing footsie with bankruptcy. As a result of this, more default problems, and the end of the big stimulus spending, U.S. unemployment is rising again . Meanwhile the BP oil spill has taken off the edge of economic growth along the U.S. gulf. While 2Q2010 GDP growth is already in the oven, the prospects for the rest of 2010 are being revised down. Unemployment is ticking up toward 10%. The Dow is ticking down toward 9,500.