Transcript Todd Martin`s Presentation

Economic Outlook:
Don’t Think Twice, It’s All Right
CFT Banks’ Forum
May 25, 2011
Todd P. Martin Economic Services
203-218-9825
[email protected]
TPMES
1
Economic Outlook
Source: WWW.investors.com/cartoons
TPMES
2
The Royal Wedding
Source: toledoblade.com
TPMES
3
Economic Outlook
Source: USA Today, The Columbus Dispatch
TPMES
4
US Economic Backdrop
• Moderate US economic recovery continues, but momentum
slowed in 1st Q 2011 due to weather, Middle-East, and oil
prices
• Positives: Strong corporate profits should = better job growth and
investment, extremely supportive Fed, Banking System and
household balance sheets improving slowly, Technology boom
boasting productivity
• Concerns: Rising commodity & oil prices, Housing market in
depression, European debt crisis worsening, massive US deficits &
Debt (political stalemate), S&L budgets drag on growth.
• Forecast for moderate growth to continue (i.e., 3% GDP 2011),
unemployment declines to 8% by 2012, Fed begins to tighten (fed
funds 1.5%) by 2012.
TPMES
5
Real GDP up for 7 quarters, slows 1st Q
Source: www.calculatedriskblog.com
TPMES
6
U.S. Economy added 244,000 jobs in April….
•
Source: Briefing.com, BLS
TPMES
7
….But recovery is still painfully slow
Source: Calculatedriskblog.com
TPMES
8
Trend in Initial Jobless Claims improving….
Source: Federal Reserve Bank of St. Louis, BLS
TPMES
9
…but long-term unemployment still very high
Source: Federal Reserve Bank of St. Louis, BLS
TPMES
10
Financial stress has eased dramatically
Based on bank stocks, stock option prices,
interest rates and other measures. Readings
below zero suggest stress in the financial
markets is below its long-run average.
Source: Federal Reserve bank of St. Louis, The Wall Street Journal
TPMES
11
Record low rates -- Steep yield curve
Source: The New York Times, Bloomberg.
TPMES
12
Strong profits should = more jobs
Source: Moody’s Analytics
TPMES
13
“Official” Inflation rates still quite low
•
Source: FR Bank of St. Louis, BLS
TPMES
14
Why 29% think we are in a Depression?
TODAY
$3.99
% chg
Source
Avg.. Retail price/gallon gas in U.S.
January 2009
$1.83
100%
1
Crude oil, European Brent (barrel)
$43.48
$114.90
150%
2
Crude oil, West TX Inter. (barrel)
$38.74
$91..38
135.9%
2
Gold: London (per troy oz.)
$853.25
$1,450
70%
2
Corn, No.2 yellow, Central IL
$3.56
$6.33
78.1%
2
Soybeans, No. 1 yellow, IL
$9.66
$13..75
42.3%
2
Sugar, cane, raw, world, lb.Fob
$13..37
$35..39
164.7%
2
Unemployment rate, non-farm, overall 7.6%
9.4%
23.7%
3
Unemployment rate, blacks
12.6%
15.8%
25.4%
3
Number of unemployed
11,616,000
14,485,000
24.7%
3
Number of fed. Employees, ex.
Military (curr = 12/10 prelim)
2,779,000
2,840,000
2.2%
3
Real median household income (2008
v 2009)
$50,112
$49,777
-0.7%
4
Number of food stamp recipients (curr 31,983,716
= 10/10)
43,200,878
35.1%
5
Number of unemployment benefit
recipients (curr = 12/10)
7,526,598
9,193,838
22.2%
6
Number of long-term unemployed
2,600,000
6,400,000
146.2%
3
Poverty rate, individuals (2008 v
2009)
13.2%
14.3%
8.3%
4
People in poverty in U.S. (2008 v
2009)
39,800,000
43,600,000
9.5%
4
U.S.. Rank in Economic Freedom
World Rankings
5
9
Present Situation Index (curr = 12/10)
29.9
Failed banks (curr = 2010 + 2011 to
date)
140
U.S.. Dollar versus Japanese yen
exchange rate
n/a
10
23.5
-21.4%
11
164
17.1%
12
89.76
82.03
-8.6%
2
U.S.. Money supply, M1, in billions
(curr = 12/10 prelim)
1,575.1
1,865.7
18.4%
13
U.S.. Money supply, M2, in billions
(curr = 12/10 prelim)
8,310.9
8,852.3
6.5%
13
National debt, in trillions
$10.627
$14.052
32.2%
14
Gold$/ounce
Corn/cents/bushel
Sources:(1) U.S. Energy Information Administration(2) Wall Street Journal(3) Bureau of Labor Statistics(4) Census Bureau(5) USD(6) U.S. Dept. Of Labor (7)
FHFA(8) Standard & Poor's/Case-Shiller(9) RealtyTrac(10) Heritage Foundation and WSJ(11) The Conference Board(12) FDIC; (13) Federal Reserve(14) U.S.
Treasury, New York Times
TPMES
15
Rise in Gas prices acts like a tax hike
$1.00 increase in Gas prices is
the equivalent of a $125 billion
tax hike
Source: GasBuddy.com
TPMES
16
Consumers feeling a bit better ….
Source: Briefing.com, Conference Board
TPMES
17
….and spending more
Source: FR Bank of St. Louis, Census Bureau
TPMES
18
Stock prices up 100% from 2009 lows
Source: FR Bank of St. Louis, Dow Jones & Co.,TPM Economic Services
TPMES
19
Extremely accommodative monetary policy
"Information received since the Federal Open Market
Committee met in March indicates that the economic
recovery is proceeding at a moderate pace and overall
conditions in the labor market are improving gradually.
Household spending and business investment in
equipment and software continue to expand.
However, investment in nonresidential structures is still weak,
and the housing sector continues to be depressed.
Commodity prices have risen significantly since last
summer, and concerns about global supplies of crude oil
have contributed to a further increase in oil prices since
the Committee met in March.
Inflation has picked up in recent months, but longer-term
inflation expectations have remained stable and measures
of underlying inflation are still subdued.”
FOMC Press Release - 4/27/11
TPMES
20
Huge expansion of the Fed’s B/S
The Fed's balance sheet has more than doubled in size
since the Lehman bankruptcy. The focus of policy-makers
has been on the asset side of the balance sheet, socalled "Credit Easing".
Agency/MBS
Treasuries
Source: Federal Reserve, Stone & McCarthy Research
TPMES
21
Excess Reserves have exploded
The explosion on the
asset side of the
balance sheet was
matched by an
offsetting explosion
on the liability side of
the balance sheet,
especially an
explosion in bank
reserve balances
held at the Fed.
These reserve
balances represent
immediately available
funds.
Source: Federal Reserve, Stone & McCarthy Research
Reserve Balances
TPMES
22
Housing sector is still in depression
Source: FR Bank of St. Louis, Census Bureau,NAR, Stone & McCarthy Research
TPMES
23
Home inventories still high; prices still falling
Source: Stone & McCarthy Research, Zillow.com, Wall Street Journal
TPMES
24
Record level of foreclosures & delinquencies
Source: www.calculatedriskblog.com
TPMES
25
Home prices need lower unemployment rate
TPMES
Source: www.calculatedriskblog.com
26
Some signs of life in Commercial RE?
TPMES
Source: Wall Street Journal, AII, McGraw-Hill, Trepp LLC
27
Tax Revenues barely cover entitlements
Source: Heritage Foundation, Census Bureau & CBO
TPMES
28
Fiscal Policy is out of control
Source: Heritage.org, White House OMB, CBO
TPMES
29
European debt crisis continues
Source: Moody’s Analytics
TPMES
30
CT Economic Outlook
•
Connecticut Economy is slowly beginning to add back some of the
119,000 jobs lost during the recession. 31,600 net new jobs have been
created since the trough – a recovery rate of 27%. All jobs lost not expected to
be regained by 2015.
•
Unemployment rate at 9.1% in April (above the US rate of 9.0%). NEEP
expects rate to fall to 8.6% in 2012 – still historically very high.
•
$3.4 billion state budget gap solved by record tax hikes and “union
concessions” – overall spending continues to climb. General Assembly
avoids making tough choices – huge unfunded liabilities among the worst in
the U.S.
•
CT rated 47th worst tax climate for business: Large employers expanding
elsewhere (UTC, Pfizer, etc.)
•
CT housing market still depressed – prices down, marketing times up,
sales down, and permits off 88% from 1980s peak.
TPMES
31
CT has added 19,300 jobs year-over-year
CT has regained
31,600 of the
119,000 jobs it lost
during the
recession, or 27%.
US has regained
1.7 million of the
8.6 million of the
jobs it lost, or
20.4%
Source: BLS, FR Bank of St. Louis
TPMES
32
CT Unemployment rate higher than US rate
CT = 9.1% as of April 2011
US = 9.0% as of April 2011
Source: BLS, FR Bank of St. Louis
TPMES
33
Construction lost 20,500 jobs or 30% peak to trough
Up 1,300 jobs
(2.7%) from
Dec. 2010.
Source: BLS, FR Bank of St. Louis
TPMES
34
CT Financial jobs are still trending lower
CT has lost 10,800
Financial Activities
jobs during the
recession, a drop of
7.4%.
Source: BLS, FR Bank of St. Louis
TPMES
35
Health & Ed. the strongest job sectors in CT
Health & Ed. jobs
have increased
steadily from 1990,
growing by 122100 or
63% since 2/90.
Source: BLS, FR Bank of St. Louis
TPMES
36
CT Mfg. jobs cut in half; Gov. jobs +23% since 1990s
CT Gov. jobs
(including casinos)
rose 47,600, or
23.2% from 7/91 –
5/08.
Since then, 11,200
(4.6%) Gov. jobs
have been lost.
CT has lost
140,200
manufacturing
jobs since 1/90,
or 45%
Source: BLS, FR Bank of St. Louis
TPMES
37
Where CT has lost jobs over the last 12 months
Change in CT Non-Farm Employment April 2011 vs. April 2010 ( Not SA)
Arts, Ent. & Recreation
0
Utilities
0
Chemicals
0
-100
Machinery
-300
Information
-400
Building Materials
-500
Local Gov.
-1,200
Insurance
-1,300
Construction & Mining
Federal Gov.
-2,000
-1,800
-1,800
-1,600
-1,400
Source: CT Labor Department, TPM Economic Services
-1,200
-1,000
-800
-600
-400
-200
TPMES
0
38
Where jobs were created last year
Change in CT Non-Farm Employment April 2011 vs. April 2010 ( Not SA)
8,200
H ealth C are & So cial A ssistance
5,800
P ro fessio nal & B usiness Services
1,800
F o o d & B everage Sto res
1,700
State Go v.
A cco mmo datio n & F o o d Services
1,400
Who lesale T rade
1,400
1,200
Securities & C o mmo dity
1,100
Other R etail
T ranspo rtatio n & Wareho using
900
Other N o n-D urable Go o ds
900
Other D urable Go o ds
600
T ranspo rtatio n Equipment
600
Other Services
400
C o mputer & Electro nic P ro duct
400
300
M o to r Vehicle & P arts D ealers
Educatio nal Services
200
F abricated M etal
200
Other F inancial
100
R eal Estate & R ental & Leasing
100
C redit Intermediatio n
100
General M erchandise
100
0
1,000
2,000
3,000
Source: CT Labor Department, TPM Economic Services
4,000
5,000
6,000
7,000
8,000
TPMES
9,000
39
Housing permits in CT still very depressed
32,000
30,000
28,000
26,000
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
20
15
20
13
20
11
20
09
20
07
20
05
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
Down 88% from cycle
peak in 1986.
19
85
19
83
Housing Permits Authorized
CT Home Permits Authorized
2011-2015 is forecast
Source: CT DECD, New England Economic Partnership, Economy.com, TPM Economic Services
TPMES
40
CT Home Prices still trending lower
Source: FHFA, FR Bank of St. Louis
TPMES
41
CT Homes taking longer to sell in 2011….
CT Single Family Home Sales - Days on Market - 1st Q 2010 vs. 1st Q 2011
0
20
40
60
80
100
120
140
160
170
128
147
177
Litchfield
188
171
Middlesex
New Haven
New
London
Tolland
200
158
Fairfield
Hartford
180
183
143
152
154
170
147
150
155
159
Windham
Days on Mkt 2010
Days on Mkt 2011
CT
Source: Prudential CT Realty CT RE Market Report, TPM Economic Services
148
161
TPMES
42
….and prices are a bit softer
CT Single Family Median Home Prices - 1st Q 2010 vs. 1st Q 2011
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$450,000
$220,000
$214,500
Hartford
$230,000
$225,750
Litchfield
$260,000
$267,500
Middlesex
$210,000
$210,000
New Haven
$223,000
$200,000
$230,000
$223,500
Tolland
Windham
$400,000
$425,000
$420,000
Fairfield
New
London
$350,000
$170,000
$150,000
Median Price 2010
Median Price 2011
CT
Source: Prudential CT Realty CT RE Market Report, TPM Economic Services
$245,000
$240,000
TPMES
43
Home sales continued to fall in the 1st Q….
CT %Change in Single Family Median Home Sales - 1st Q 2010 vs. 1st Q 2011
-25.0%
-20.0%
-15.0%
Fairfield
-10.0%
-11.0%
Litchfield
-11.3%
Middlesex
-14.8%
-20.1%
New London
-8.2%
Tolland
-11.1%
Windham
CT
0.0%
-11.8%
Hartford
New Haven
-5.0%
-5.4%
-13.0%
Source: Prudential CT Realty CT RE Market Report, TPM Economic Services
TPMES
44
…. And so did prices (ex Middlesex & NH)
CT % Change in Single Family Median Home Prices - 1st Q 2010 vs. 1st Q 2011
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
Fairfield
0.0%
4.0%
-1.2%
Hartford
-2.5%
Litchfield
-1.8%
Middlesex
2.9%
New Haven
0.0%
New London
-10.3%
Tolland
Windham
2.0%
-2.8%
-11.8%
CT
Source: Prudential CT Realty CT RE Market Report, TPM Economic Services
-2.0%
TPMES
45
CT Spending outpaces GSP, Inflation & Pop
Sources: Wall Street Journal, Hartford Courant, CT OPM, Yankee Institute
TPMES
46
Summary
• Moderate US Economic recovery still underway
– GDP should average 3% in 2011 but unemployment remains high,
Future growth likely to remain sub-par
– Good News: Job growth slowly improving, financial stress easing,
corporate profits strong, Fed accommodative, large banks profitable,
productivity gains
– Bad News: Rising oil prices, Middle-East unrest, European debt crisis,
continued slide in home values – rise in foreclosures, massive US
deficits & debt
• Fed on hold (fed funds @ 0% - 0.25%) until late 2011 – 1.5% by
year end 2012? How will unwinding QE2 play out?
• Watch: Jobless Claims – Purchasing Managers Index – Housing
Inventories & Prices – Oil Prices -- Stock Prices – Auto Sales –
Consumer Confidence – 2012 Campaign Themes
TPMES
47
Economic Outlook:
Don’t Think Twice, It’s All Right
CFT Banks’ Forum
May 25, 2011
Todd P. Martin Economic Services
203-218-9825
[email protected]
TPMES
48