Transcript Mark Vitner, Economy Update - NC-CCIM

Economic Outlook
March 17, 2010
Economic Growth
Real GDP
Bars = CAGR
10.0%
Line = Yr/Yr Percent Change
10.0%
GDPR - CAGR: Q4 @ 5.9%
GDPR - Yr/Yr Percent Change: Q4 @ 0.1%
8.0%
6.0%
8.0%
6.0%
Forecast
The ending of various stimulus
programs will cause growth to
moderate during the middle of
the year
4.0%
4.0%
2.0%
2.0%
0.0%
0.0%
-2.0%
-2.0%
-4.0%
-4.0%
-6.0%
-6.0%
-8.0%
-8.0%
2000
2002
2004
2006
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
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2008
2010
Domestic Demand
Real "Core" GDP
Bars = CAGR
10.0%
Line = Yr/Yr Percent Change
10.0%
7.5%
7.5%
Forecast
Real “core” GDP, or private
domestic final sales, reflects the
domestic economy more clearly
and shows an even more modest
economic recovery
5.0%
5.0%
2.5%
2.5%
0.0%
0.0%
-2.5%
-2.5%
-5.0%
-5.0%
-7.5%
-7.5%
-10.0%
"Core" GDP - CAGR: Q4 @ 2.4%
"Core" GDP - Yr/Yr Percent Change: Q4 @ -1.5%
-12.5%
-12.5%
2000
2002
2004
2006
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
CCIM Institute
-10.0%
3
2008
2010
Labor Market
Employment Change in Recessions
Percentage Change Peak-to-Trough
0%
0%
-1%
-1%
-1.3%
-1.5%
-2%
-1.5%
-2.3%
The labor market remains the
primary concern as job losses
have exceeded every post-World
War II downturn
-2%
-2.0%
-3%
-2.8%
-3%
-3.1%
-3.4%
-4%
-4%
-4.4%
-5%
-5%
-5.2%
-6%
-6%
-6.1%
-7%
-7%
19481949
Cycle
19531954
Cycle
19571958
Cycle
19601961
Cycle
19691970
Cycle
19731975
Cycle
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
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1980
Cycle
19811982
Cycle
19891991
Cycle
2001
Cycle
2007ToDate
Unemployment by County
Large Portions of the United States Continue to Face Serious Unemployment Issues
Unemployment Rate
Unemployment Rate
December 2009
Greater than 12.5%
6.0% to 8.0%
10.0% to 12.5%
Less than 6.0%
8.0% to 10.0%
Source: US Department of Labor and Wells Fargo Securities, LLC
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Income Proxy
Income Proxy
3-Month Annual Rate of 3-Month Moving Average
12%
Income earned from work has
fallen nearly 20 percent since
the recession began. Declines
have slowed more recently and
modest growth is expected to
return in 2010.
12%
9%
9%
6%
6%
3%
3%
0%
0%
-3%
-3%
-6%
-6%
-9%
-9%
-12%
-12%
Average Hourly Earnings Multiplied By Total Hours Worked
-15%
-15%
Income Proxy: Feb @ 0.8%
-18%
-18%
88
90
92
94
96
98
00
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
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02
04
06
08
10
Inventories
Change in Real Inventories
Billions of Dollars, Annual Rate
$125
$125
$100
$100
$75
Forecast
$50
$50
$25
$25
$0
Businesses are finally bringing
inventories back in line with
underlying demand
$0
-$25
-$25
-$50
-$50
-$75
-$75
-$100
-$100
-$125
-$125
-$150
-$150
-$175
-$200
2000
-$175
Change in Private Inventories: Q4 @ -$16.9B
-$200
2002
2004
2006
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
CCIM Institute
$75
7
2008
2010
Equipment & Software Investment
Real Equipment & Software Investment
Bars = CAGR
20.0%
Line = Yr/Yr Percent Change
20.0%
Forecast
10.0%
10.0%
0.0%
Demand for equipment and
software has already turned
positive and is expected to be a
larger contributor to economic
growth
0.0%
-10.0%
-10.0%
-20.0%
-20.0%
-30.0%
-30.0%
-40.0%
-40.0%
Equip & Software Invest - CAGR: Q4 @ 18.2%
Equip & Software Invest - Yr/Yr Percent Change: Q4 @ -7.7%
-50.0%
-50.0%
2000
2002
2004
2006
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
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2008
2010
Consumer Spending
Retail Sales Ex. Auto & Gas Stations vs. Income
3-Month Moving Average
15%
15%
Stock Market
Bubble
12%
Tax Cut 2
12%
Tax
Rebates
Tax Cut 1
9%
Core retail sales are rising more
closely with after-tax income
Housing Refi
Boom
9%
6%
6%
3%
3%
0%
0%
-3%
-3%
-6%
-6%
-9%
-9%
Disposable Personal Income, Yr/Yr % Change: Jan @ 2.4%
-12%
-12%
Retail Sales, ex. Autos & Gas, 3-Month Annual Rate: Jan @ 5.4%
-15%
-15%
96
97
98
99
00
01
02
03
04
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
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05
06
07
08
09
10
Mortgage Rates
Conventional Mortgage Rate vs. Spread
Basis Points, Percent
300
8.0%
Spread = Mortgage Rate - 10-Year Treasury Yield
275
7.0%
250
Mortgage rates were pushed
lower by the Fed’s intervention
in the MBS market. Now that
the Fed purchase program is
winding down, how much will
spreads widen?
225
6.0%
200
5.0%
175
150
4.0%
125
Mortgage Spread: Mar @ 134 bps (Left Axis)
Conventional 30-Year Fixed Mortg. Rate: Mar @ 5.0% (Right Axis)
100
2004
3.0%
2005
2006
2007
2008
Source: Freddie Mac, Federal Reserve Board and Wells Fargo Securities, LLC
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2009
2010
Corporate Bond Spread
Baa Corporate Spread vs. S&P 500 Index
Basis Points
700
1,800
Baa spread = Average Baa Yield - 10-Year Treasury Yield
600
The Baa corporate bond spread
has come down substantially
since the Fed began its
quantitative easing policy and
the stock market has rallied.
What happens when the Fed
stops buying MBS?
1,600
500
1,400
400
1,200
300
1,000
200
100
800
Baa Corporate Spread: Mar @ 263 (Left Axis)
S&P 500: Mar @ 1,112 (Right Axis)
0
2004
600
2005
2006
2007
2008
Source: Federal Reserve Board, Moody’s, S&P Corp. and Wells Fargo Securities, LLC
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2009
2009
Homebuilding
Housing Starts
Millions of Units
2.4
2.4
2.1
2.1
Forecast
Housing starts bottomed about
a year ago
1.8
1.8
1.5
1.5
1.2
1.2
0.9
0.9
0.6
0.6
0.3
0.3
0.0
0.0
80
82
84
86
88
90
92
94
96
98
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
CCIM Institute
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00
02
04
06
08
10
Vacant Homes for Rent and Sale
Vacant Homes for Rent and Sale
In Millions, Non-Seasonally Adjusted
5.0
The number of vacant homes for
rent has risen faster than the
number of vacant homes for sale
has fallen
5.0
4.0
4.0
3.0
3.0
2.0
2.0
1.0
1.0
Vacant Homes for Rent: Q4 @ 4.47M (Left Axis)
Vacant Homes for Sale: Q4 @ 2.09M (Right Axis)
0.0
1985
0.0
1989
1993
1997
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
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2001
2005
2009
Home Prices
Home Prices
Year-over-Year Percentage Change
24%
Home prices appear to have
bottomed. Prices may be
influenced by the persistence of
various mortgage moratoriums
and stimulus programs.
24%
20%
20%
16%
16%
12%
12%
8%
8%
4%
4%
0%
0%
-4%
-4%
-8%
-8%
-12%
-12%
Median Sale Price: Jan @ $163,600
Median Sales Price 3-M Mov. Avg.: Jan @ -1.7%
-16%
-16%
FHFA (OFHEO) Purchase Only Index: Dec @ -1.5%
S&P Case-Shiller Composite 10: Dec @ -2.4%
-20%
-20%
-24%
-24%
97
99
01
03
05
07
09
Source: Federal Housing Finance Agency, National Association of Realtors, S&P Corp. and Wells Fargo Securities, LLC
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Home Sales
Existing & New Single Family Home Sales
Seasonally Adjusted Annual Rate - In Millions
1.6
7.0
6.5
1.4
Incentives for first-time
homebuyers have helped drive
up home sales last year. A large
portion of existing sales,
however, are distressed sales.
Sales have since fallen back to
pre-incentive levels.
6.0
1.2
5.5
1.0
5.0
0.8
4.5
0.6
0.4
4.0
3.5
New Home Sales: Jan @ 309 Thousand (Left Axis)
Existing Home Sales: Jan @ 4.4 Million (Right Axis)
0.2
2002
3.0
2003
2004
2005
2006
2007
2008
2009
Source: National Association of Realtors, U.S. Department of Commerce and Wells Fargo Securities, LLC
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2010
North Carolina
North Carolina Nonfarm Employment
3-Month Moving Averages
6%
Preliminary data show a modest
improvement in employment
6%
3%
3%
0%
0%
-3%
-3%
-6%
-6%
3-Month Annual Rate: Jan @ 1.2%
Year-over-Year Percent Change: Jan @ -4.0%
Household: Year/Year Percent Change: Jan @ -3.9%
-9%
-9%
90
92
94
96
98
00
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
CCIM Institute
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02
04
06
08
10
North Carolina
North Carolina Unemployment Rate
Seasonally Adjusted
12%
12%
Unemployment Rate: Jan @ 11.1%
11%
11%
12-Month Moving Average: Jan @ 10.7%
10%
The unemployment rate hit a
new high in December
10%
9%
9%
8%
8%
7%
7%
6%
6%
5%
5%
4%
4%
3%
3%
2%
2%
90
92
94
96
98
00
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
CCIM Institute
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02
04
06
08
10
North Carolina
North Carolina Housing Permits
Thousands of Permits, Seasonally Adjusted Annual Rate
120
100
Building activity will remain
slow for the foreseeable future
120
Single-Family: Jan @ 27,480
Single-Family, 12-Month Moving Avg.: Jan @ 26,659
Multi-Family, 12-Month Moving Avg.: Jan @ 7,421
100
80
80
60
60
40
40
20
20
0
0
90
92
94
96
98
00
02
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
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04
06
08
10
Greensboro
Greensboro MSA Nonfarm Employment
3-Month Moving Averages
9%
Employment conditions have
started to improve modestly
9%
6%
6%
3%
3%
0%
0%
-3%
-3%
-6%
-6%
-9%
3-Month Annual Rate: Jan @ 0.0%
Year-over-Year Percent Change: Jan @ -5.2%
Household: Yr/Yr Percent Change: Dec @ -4.9%
-9%
-12%
-12%
90
92
94
96
98
00
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
CCIM Institute
19
02
04
06
08
10
Greensboro
Greensboro MSA Unemployment Rate
Seasonally Adjusted
12%
12%
Unemployment Rate: Dec @ 11.9%
11%
11%
12-Month Moving Average: Dec @ 11.2%
10%
The unemployment rate reached
a record high in December
10%
9%
9%
8%
8%
7%
7%
6%
6%
5%
5%
4%
4%
3%
3%
2%
2%
90
92
94
96
98
00
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
CCIM Institute
20
02
04
06
08
10
Greensboro
Greensboro MSA Housing Permits
Thousands of Permits, Seasonally Adjusted Annual Rate
7
6
Housing construction activity
remains at depressed levels
7
Single-Family, 12-Month Mov. Avg.: Jan @ 1,419
Multi-Family, 12-Month Mov. Avg.: Jan @ 775
Single-Family: Jan @ 1,272
6
5
5
4
4
3
3
2
2
1
1
0
0
90
92
94
96
98
00
02
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
CCIM Institute
21
04
06
08
10
Winston-Salem
Winston-Salem MSA Nonfarm Employment
3-Month Moving Averages
The worst of job losses are likely
over
8%
8%
4%
4%
0%
0%
-4%
-4%
3-Month Annual Rate: Jan @ -2.2%
Year-over-Year Percent Change: Jan @ -4.2%
Household: Year-over-Year Percent Change: Dec @ -2.9%
-8%
-8%
91
93
95
97
99
01
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
CCIM Institute
22
03
05
07
09
Winston-Salem
Winston-Salem MSA Unemployment Rate
Seasonally Adjusted
11%
11%
Unemployment Rate: Dec @ 10.4%
10%
The unemployment rate remains
elevated
10%
12-Month Moving Average: Dec @ 9.8%
9%
9%
8%
8%
7%
7%
6%
6%
5%
5%
4%
4%
3%
3%
2%
2%
1%
1%
90
92
94
96
98
00
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
CCIM Institute
23
02
04
06
08
Winston-Salem
Winston-Salem MSA Housing Permits
Thousands of Permits, Seasonally Adjusted Annual Rate
7
7
Single-Family: Jan @ 672
Single-Family, 12-Month Mov. Avg.: Jan @ 739
6
Building activity remains
subdued
6
Multi-Family, 12-Month Mov. Avg.: Jan @ 320
5
5
4
4
3
3
2
2
1
1
0
0
90
92
94
96
98
00
02
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
CCIM Institute
24
04
06
08
10
Appendix
Wells Fargo Economics Group Publications
A Sampling of Our Recent Special, Regional & Industry Commentary
Recent Special Commentary
Date
March-10
March-08
Title
Treasury Outlook: A Closer Look
State Finances Poised to Face a Tough Road Ahead
Authors
Silvia, York & Whelan
Vitner, Khan & Kamar.
Character of Recovery: Yes, It Is Very Different
Is Greece the Tip of the Iceberg?
Commercial Real Estate Chartbook: Quarter 4
Housing Chartbook: February 2010
Texas Economic Outlook: February 2010
The Long Road Ahead for Greece (and Others)
Employment: Growth is Finally Coming
Silvia & Iqbal
Bryson
Vitner, Khan & Kamar.
Vitner & York
Aleman & Vitner
Bryson
Silvia, York & Whelan
2010: Year of the Tiger or Asian Bubble?
U.S. and Chinese Labor Markets: Interdependencies
Colorado Economic Outlook: January 2010
Bryson & Kamaruddin
Silvia
Anderson & Kashmarek
December-31
December-31
December-31
December-30
December-15
Georgia Economic Outlook: December 2009
Florida Economic Outlook: December 2009
California Economic Outlook: December 2009
New Jersey Economic Outlook: December 2009
Pennsylvania Economic Outlook: Spotlight on Jobs
Vitner & Kamaruddin
Vitner & Kamaruddin
Anderson
Vitner, Khan & Kamar.
Bryson & Quinlan
November-18
November-13
November-11
November-04
November-04
November-04
November-03
Santa Tightens His Belt Another Notch
North Carolina Faces Difficult Road to Recovery
Commercial Real Estate Chartbook: Q3
Did the Nation Overdose on Debt?
An Economy at Non-Market Prices
Inflation Chartbook: November 2009
How Bleak Is the British Consumer Spending Outlook
Vitner & York
Silvia, York & Whelan
Vitner, Khan & Kamar.
Silvia & Whelan
Silvia
Vitner, Khan & Kamar.
Bryson
What Is Gold Telling Us?
Housing Chartbook: October 2009
Beyond America, Canadian Economic Prospects
Georgia Economic Outlook: October 2009
Bryson, Khan & Kamar.
Vitner & York
Bryson & Quinlan
Vitner & Kamaruddin
February-24
February-22
February-17
February-12
February-09
February-05
February-01
To join any of our research
distribution lists please visit our
website:
http://www.wachovia.com/econ
omicsemail
January-28
January-28
January-12
October-20
October-19
October-15
October-06
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Wells Fargo Securities, LLC Economics Group
Diane Schumaker-Krieg
Global Head of Research & Economics





[email protected]
Mark Vitner
Jay H. Bryson, Ph.D.
Senior Economist
Global Economist
[email protected]
 U.S. Macro Economy
 Real Estate
John E. Silvia, Ph.D.
Chief Economist

[email protected]
Scott Anderson, Ph.D.
Eugenio Aleman, Ph.D.
Senior Economist

[email protected]
 Global Economies
[email protected]

Senior Economist

[email protected]

U.S. Macro Economy
U.S. Macro Economy
Sam Bullard
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Azhar Iqbal
Adam G. York
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Econometrician
Economist
[email protected]
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Economic Analyst
Economic Analyst
Economic Analyst
[email protected]
 U.S. Macro Economy
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[email protected]
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U.S. Macro Economy
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