Transcript Module 5 (ppt file)

Cory Ando - cra21
Corey Holland - cph9
Ada Nina Johnson-Kanu - aj47
Jenna Watkins - jrw27
Andrew Kuntz - awk6
Where are we now?
To see how we are doing now, we
need a point of reference, so let us
turn back the clocks to look at the
past and compare it to our now…
Where should we look?
To see if we are in a good economic state, let’s look at a
bad economic state.
The National Bureau of Economic Research defines a recession as
“a significant decline in economic activity
[that] spreads across a economy…”
So lets look a little before the last recession and after it to see
how some of this economic activity was affected.
FRED – Civilian Unemployment Rate (2006-2011)
 4.6% prior to the
recession
 Fluctuated around 5%
in early recession
 Rapid increase
throughout recession
 Peak of 10.1% in
October 2009
 Typical trend for




this leading
indicator used to
predict the onset of
recession.
Gradually fell to
around 9.5% in July
2010
Rose to 9.8% over the
following 4 months
Fell to 9.4% in
December 2010
Fluctuated around 9%
throughout 2011
The present rate of 9.1% is still far from
the natural rate of unemployment, but,
as a lagging indicator for recoveries, is
not necessarily cause for alarm.
FRED – Natural Rate of Unemployment (2006-2011)
The Congressional Budget Office’s quarterly estimate of the natural
rate of unemployment was 5% up until July 2007. The natural rate
then rose incrementally to 5.12% at the end of 2008 and 5.2% at the
end of 2009, where it has remained.
When viewing the civilian unemployment rate in comparison, the
effect of cyclical unemployment becomes clear. During 2010 and
2011, the gap between the real unemployment rate and the natural
unemployment rate has narrowed.
FRED – Consumer Price Index for All Urban
Consumers: All Items (2006-2011)
Since 2006, there has been a steady rise in the consumer
price index (CPI). The end of 2007 through the first half
of 2008 saw a rapid rise in CPI. CPI then fell nearly as
much as it had risen
over the following
six months and
has increased since
that time.
Estimated Inflation
Inflation estimates are derived from percent changes in
CPI, with rapid increases being indicative of the latter
stages of an expansion, as has been the case throughout
2010 and 2011.
FRED – Gross Domestic Product (2006-2011)
Prior to the recession there was continuous growth. When the recession began, GDP was around
$14,250 billion.
During the recession it peaked
at around $14,400 billion and
then fell to around $13,850
billion. GDP then began another
run of continuous growth, hitting
pre-recession levels near the
beginning of 2010, and has continued
since to the current level of $15,000
billion today.
In light of the changes observed in real GDP, the
National Bureau of Economic Research’s
Business Cycle Dating Committee determined
that the U.S. economy entered recovery in June
2009.
FRED – Corporate Profits After Taxes (2006-2011)
Corporate Profits decreased prior to the recession and deeply
troughed mid-recession. Once the recession ended, profits were
close to pre-recession figures.
Now, profits are greater than those in 2006, indicating that
remaining companies are no longer experiencing such adverse
effects from the financial crisis.
FRED – Private Residential Fixed Investment
(2006-2011)
Residential investment by people has been decreasing since 2006.
~$415 billion in mid-recession (late 2008)
~$335 billion today
The rate of new home
construction is one third
of the pre-recession level.
 Distressed and
foreclosing properties
 Stress on financial
Institutions
 Concern over house
price declines.
 Tight credit conditions
for builders and
homebuyers.
FRED – Leading Index for the United States
(2006-2011)
 average weekly hours of production workers
in manufacturing;
 average weekly initial claims for state
unemployment insurance;
The leading economic index (LEI)
utilizes 10 data series to predict
economic recessions and recoveries.
 manufacturers’ new orders for (non-defense
capital goods, consumer goods, and
materials);
 supplier deliveries (vendor performance
diffusion index);
 new private housing (authorized by local
building permits);
 stock prices (500 common stocks);
 M2 money supply (in 2000 dollars);
 interest rate spread (10-year Treasury bonds
less
the federal funds rate);
 University of Michigan’s index of consumer
expectations
As of early 2009, the LEI has been
climbing and is currently at a
level greater than pre-recession.

Federal Reserve Chairman, Ben Bernanke
The U.S. Economic Outlook Speech
Exports have grown and the trade
deficit has narrowed.
September 8, 2011
 Improved competitiveness of U.S.
goods and services.
 Manufacturing and production
have risen nearly 15% since the
trough of the recession.
 Business investment in equipment
and software has expanded.
 Aggregate output has not returned
to pre-recession levels.
 GDP is estimated to have
increased at an annual rate of less
than 1 percent, on average, in Q1
and Q2. This can be partially
attributed to disaster in Japan,
which affected global supply
chains and production.
 The slow economic growth has
been ineffective at significantly
reducing the unemployment rate.
 Although consumer spending expanded
moderately in 2010, it decelerated in the first half
of 2011 due to a reduction in consumer purchasing
power due to the rise in commodity prices such as
oil.
 Households are struggling with persistently high
levels of unemployment, slow gains in wages,
falling house prices, and high debt levels.
Conclusion
The economy is not in perfect conditions, with high
rates of unemployment, it is clear that work still needs to
be done. Things are getting better, although, with GDP,
the CPI, and corporations making slow but steady
recoveries. The
economy seems to be
starting to come back
on track from where
it
left off when the
recession began, as if
the recession had just
put economic growth
on hold.
References
Bernanke, B. “The U.S. Economic Outlook”. Speech. Sept 2011. The Federal Reserve. Web. 12 Sept.
2011. http://www.federalreserve.gov/newsevents/speech/bernanke20110908a.htm
Clayton, G, Geisbrecht, M.G., and Feng Guo. A Guide to Everyday Economic Statistics. Mcgraw-Hill.
New York, New York. 7th Ed. Print.
Federal Reserve Bank of St. Louis. "FRED Graph " Economic Research - St. Louis Fed. Web. 15 Sept. 2011.
http://research.stlouisfed.org/fred2/graph/?g=2c6
Federal Reserve Bank of St. Louis. "Graph: Civilian Unemployment Rate" Economic Research - St. Louis
Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c6
Federal Reserve Bank of St. Louis. "Graph: Consumer Price Index for All Urban Consumers." Economic
Research - St. Louis Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c4
Federal Reserve Bank of St. Louis. "Graph: Corporate Profits After Tax." Economic Research - St. Louis Fed.
Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c1
Federal Reserve Bank of St. Louis. "Graph: Gross Domestic Product, 1 Decimal" Economic Research - St.
Louis Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c3
Federal Reserve Bank of St. Louis. "Private Residential Fixed Investment." Economic Research - St. Louis
Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2bY
Image Sources
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http://www.worldculturepictorial.com/images/content/be_pleased_technically_not_a_recession_yet.
jpg

http://s.wsj.net/public/resources/images/OB-KC185_GDP4_E_20100920122215.jpg
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http://rssbroadcast.com/wp-content/themes/news_10/tools/timthumb.php?src=/wpcontent/uploads/2011/09/BERNANKE-articleInline_4e6981be4995b.jpg&h=180&w=180&zc=1

http://six11.wordpress.com/2010/06/15/living-in-the-present-future/

http://debragrayelliott.blogspot.com/2011/07/if-only-i-could-turn-back-hands-of-time.html