Transcript Immigration Adjusted Birth Index

What Is Next for US Economy
presented by
Rodney Johnson
Dent Research
Boom & Bust
Survive and Prosper
Real Personal Consumption Expenditures
Billions of Chained 2005 Dollars
1995-2012
Data Source: Bureau of Economic Analysis, 2012
Missing
Growth
Spending By Age
Changes in
Spending at each
Age & Stage of
Life
46-50
22-30
31-42
Family,
50+
18-22
Young
Young
College
Empty
Single
Married
Family
Kids
Nesters
60+
Retired
Immigration Adjusted Birth Index
Immigration Adjusted Births
5,500,000
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
1930
1950
1970
1990
2010
Simple Four Season Economic Cycle
Eighty Years in Modern Times
Consumer Prices/
Inflation
Generation
Spending Boom
Stocks/
Economy
Spring
1940
1950
Source: HS Dent
1960
Summer
1970
1980
Fall
1990
2000
Winter
2010
2020
2030
Daily Consumer Spending
2008-2012
Data Source: Gallup.com, 2012
Not Soup Lines Like This
Instead, In the Mail
Americans on Disability
Tough Road Ahead
for Jobs
Index 100= 2000
Fall in Real Median Household
Income Since 2000
Data Source: U.S. Census Bureau, 2012
% of Re-Employed That Lost Pay
Drop in Pay for Re-Employed
Amount of Pay Reduction
Data Source: “Out of Work and Losing Hope: The Misery and Bleak Expectations of American Workers,” Cliff Zukin, Carl Van Horn, Charley Stone. 9/2011
% of Re-Employed
Drop in Pay for Re-Employed
by Age
Amount of Pay Reduction
Data Source: “Out of Work and Losing Hope: The Misery and Bleak Expectations of American Workers,” Cliff Zukin, Carl Van Horn, Charley Stone. 9/2011
Comparing Jobs Lost
to Jobs Gained
Use a matrix of three levels of pay to compare jobs lost
to those gained (each a third of 2008 employment) Lower wage - $7.69/hr. to $13.83/hr
($16,049 to $28,863)
Median wage - $13.84/hr to $21.13/hr
($28,884 to $44,098)
Upper wage - $21.14/hr to $54.55/hr
($44,119 to $113,845)
Comparing Jobs Lost
to Jobs Gained
Lower-wage occupations were 21 percent of recession
losses, but 58 percent of recovery growth.
Mid-wage occupations were 60 percent of recession
losses, but only 22 percent of recovery growth.
Higher-wage occupations were 19 percent of recession
job losses, and 20 percent of recovery growth.
Comparing Jobs Lost
to Jobs Gained
Comparing Jobs Lost
to Jobs Gained
Comparing Jobs Lost
to Jobs Gained
Comparing Jobs Lost
to Jobs Gained
Comparing Jobs Lost
to Jobs Gained
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Home Purchase Applications
Index 100= 1990
1990-2013
Data Source: Bloomberg, 2013
New Home Completions
1990-2012
Data Source: St. Louis Federal Reserve, 2013
New Home Sales
Seasonally Adjusted In Thousands
1963 – September 2012
Data Source: Calculated Risk, US Census Bureau, 2012
U.S. Spending on Construction
Billions
1990-2012
Data Source: St. Louis Federal Reserve, 2013
Construction as Percent of GDP
1990-2012
Data Source: St. Louis Federal Reserve, 2013
Total Construction Workers
1990-2013
Data Source: St. Louis Federal Reserve, 2013
Construction Workers, Share
of All Employees, 1990-2013
Data Source: St. Louis Federal Reserve, 2013
The Face of the Recovery
Share of Job Gains and
Losses Since June 2009
+3.8 Million
+781 Thousand
-479 Thousand
-842 Thousand
Data Source: Bureau of Labor Statistics, 2012
Percent of Part Time Workers
1968-2012
Data Source: Bureau of Labor Statistics, 2012
The Blunt Instruments of
Government
US Government
deficit spending, targeted stimulus
Federal Reserve
interest rates, bond purchases, printing
dollars
The Fed Is Here to Help!
Federal Reserve Balance Sheet
2000-2013
Data Source: St. Louis Federal Reserve, 2013
Outcomes – Desired vs.. Actual
Wanted –
inflation expectations, increased
borrowing and spending, falling
unemployment, higher wages, asset
inflation (re-inflation)
Got –
split prices – deflation in services and real
estate, inflation in commodities – local vs..
global
Who Gets Helped, Who Gets Hurt?
QE favors real assets, hurts dollars, so the question
becomes, what is more important to your household,
real dollars (dividends, interest, paycheck) or assets
such as stocks, metals, commodities?
Assets
Income
Who Gets Helped, Who Gets Hurt?
Wealthy households tend to hold assets, poor households tend to
rely on income. While higher food/energy costs might annoy
rich households, the increase in their assets more than offsets
the price difference. Not so for the poor.
Affluent
households own
more hard assets
Modest
households rely
on earned
income
Percent of After-Tax Income
Spent on Food and Energy by Income
Source: U.S. Bureau of Labor Statistics, CEX, 2009
Inflation since 2000
Through September 2012
Core CPI Categories
CPI
Data Source: Bureau of Labor Statistics, HS Dent, 2012
Dollars Spent on Essential and Non-Essentials
vs.. Inflation (2000- Sept. 2012) on Those Items
Young
Families
Peak
Spending
Data Source: Bureau of Labor Statistics, HS Dent, Bloomberg; 2012
Retirees
Growth of Consumer Credit
Index 100= 2006
2006-2011
Data Source: Federal Reserve Flow of Funds Report, 2012
The Term for Where We Are:
Financial Repression
When interest rates are held artificially low
given the rate of inflation, resulting in savers
being taxed/punished in order to provide
borrowers greater incentives/benefits
Normal Yield Curve
US Treasury Yield Curve 5/1/1995
(normal market)
www.treasurydirect.gov
8.00%
7.00%
6.00%
5.00%
Real Rate of Return
4.00%
3.00%
2.00%
CPI 2.8%
1.00%
0.00%
1 mo
3 mo 6 mo
1 yr
2 yr
3 yr
5 yr
7 yr
10 yr
20 yr
30 yr
Yield Curve Manipulated
While US Economy Not
Shrinking, Growth Is
Anemic at Best
In Billions
U.S. Federal Government Spending
vs. Receipts, 1980-2011
Data Source: Bureau of Economic Analysis, 2012
Distribution of Federal
Spending
Data Source: Office of Management and Budget, 2012
Recent Tax Increases and
Spending Cuts
Payroll Tax
$126 billion
Unemployment
12
ACA – personal
24
Bush-era Upper
56
Sequestered Cuts
45
Total
$263 billion in Tax Cuts / Spending
Reductions at Federal
Level
State Budget Gaps
Source: Center on Budget and Policy Priorities, 2012
How States Closed Budget Gaps
What A Major Downturn
Could Bring
• Tremendous reduction in private debt
outstanding – another $5 trillion at least
• Commensurate reduction in mortgage
debt, freedom of workers to move
• Continued reduction in home values so
that next generation can afford them
• Wage reduction to make US more
competitive with other labor markets
What A Major Downturn
Could Bring
• Actually, a lot has already occurred…what
an economic downturn HAS BROUGHT…
– Debt reduction, lower home values, falling
wages
What we are missing is falling prices outside of
homes, thanks to the Fed and other central
banks. We have not given commodity prices
the opportunity to reset with other areas of
life.
What Lies Ahead
Anemic US growth, Euro crises, deleveraging, and
more Fed action
The US as well as other economies is facing a very
difficult future, but stocks are near all time highs. Are
they worth it? Does it feel like we should be at historic
highs, given stubborn unemployment, unbalanced
books, falling real wages, and Fed intervention?
Be careful, and be cautious. Expect tough times
ahead.
What About the Next
Generation?
Falling Pay for College
Graduates, 2000-2011
Data Source: U.S. Census Bureau, 2013
Borrowers and Balances
Young People with Student Debt
Share of Borrowers Late
Effect of Recession on Household
Composition, 1989-2012
Source: US Census Bureau, 2012