Transcript Division of Research

2010 Outlook for the
South Carolina Economy
Recovery or Relapse?
Doug Woodward
Division of Research
, Division of Research
2010 U.S. Outlook




2009 was year of government
activism.
 Massive fiscal stimulus.
 Low interest rates.
 Direct monetary
intervention in credit
(mortgage) markets.
There will be a recovery.
But slow growth for private
sector activity in 2010.
Relapse?
South Carolina’s Economic
Prospects in 2010
140
130
120
percentage
Leading
economic
indicators look
good.
150
Boeing is big.
2000m1
2002m1
2004m1
2006m1
2008m1
2010m1
Uncertainty
 Dysfunctional
financial system
 Leverage
and debt
 More surprises?
 From
excessive credit to no credit
 Despite
 Choking
bailouts
private expansion
A Lasting Recovery … No Relapse
 No more
financial shocks
 Virtuous cycle
of
U.S. GDP
growth
Spending
Investment
Jobs
Dr. Doom: No Lasting Recovery




Predicted recession
Possibility of a W-Shape rather
than V- or U-shaped.
Unemployment rates in the middouble digits
15% or above unemployment rate,
with and multi-year stagnation in
economic activity.
http://www.rgemonitor.com/
V-Shape?
Keys to a Sustained Recovery
 Monetary
and
fiscal stimulus
will fade
 Consumer
spending

Sales
 Private
investment

Risk taking
4500
5000
5500
6000
S.C. Real Retail Sales
12-Month Moving Average
2000m1
2002m1
2004m1
2006m1
2008m1
2010m1
South Carolina Metro Areas (MSAs):
Real Retail Sales
07/08
7.3%
0.8%
-0.6%
5.3%
2.6%
-6.0%
5.6%
-3.4%
08/09
(up to Oct)
-14.3%
-14.9%
-11.9%
-11.6%
-15.1%
-13.3%
-4.1%
-12.3%
Anderson
Charleston-N Charleston
Columbia
Florence
Greenville
Myrtle Beach-Conway-N Myrtle Beach
Spartanburg
Sumter
Business Investment
Source: U.S. Department of Commerce: Census Bureau.
-40
-20
0
% change
20
40
S.C. Growth of Single Family
Housing Permits
2000q2
2001q4
2003q2
2004q4
2006q2
2007q4
2009q2
Monetary Stimulus Needed


Trillions from U.S. Treasury and Fed
Liquidity




Low, low rates
Extra monetary easing by Fed
Credit crunch continues
A solvency problem?
Fiscal Stimulus

$800 billion, with half
still unspent

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

Shovel-ready
projects
Infrastructure
Restoration of state
cuts
Short-term: Multiplier
effect
Long-term: Combover effect
Forecast for South Carolina’s
Economy in 2010
-2
0
2
4
6
Outlook for 2010:
Personal Income
2008q1
2008q3
2009q1
2009q3
quarter
Historical
2010q1
Forecast
2010q3
-6
-4
-2
0
2
Outlook for 2010:
Total Employment
2008q1
2008q3
2009q1
2009q3
quarter
Historical
2010q1
Forecast
2010q3
Employment Growth by
Sectors of Activity 2008/2009
Difference %Change
1,100
1.1% Government
-26,600
-11.2% Manufacturing
-6,700
4,400
-8,000
-1,000
-16,900
-3,200
-2.9% Retail Trade
2.0% Professional & Business Services
-3.8% Leisure & Hospitality Services
-0.5% Education and Health Services
-14.9% Construction
-3.0% Financial Activities
South Carolina Metros (MSAs):
Total Nonfarm Employment
Oct 08
Oct 09
62.8
300.8
61.4
292.9
364.2
87.9
320.1
120.7
361.2
87.2
309.5
116.1
129.0
124.7
%Change
-2.2% Anderson
-2.6% Charleston-N Charleston
-0.8% Columbia
-0.8% Florence
-3.3% Greenville-Mauldin-Easley
-3.8% Myrtle Beach-Conway-NMB
-3.3% Spartanburg
0
5
10
15
Outlook for 2010:
Unemployment Rate
2008q1
2008q3
2009q1
2009q3
quarter
Historical
2010q1
Forecast
2010q3
Conclusion
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Fragile recovery.
Distress in the financial system.
Running out of tricks.
Weak job market.
Slow growth in income.
Relapse possible.
Additional information available at:
http://mooreschool.sc.edu/moore/research/
Thank you!