View
216
Download
3
Category
Preview:
Citation preview
11
ECONOMIC OUTLOOK ECONOMIC OUTLOOK 2008: PAUSE OR DROP?2008: PAUSE OR DROP?
Dr. Mike WaldenDr. Mike WaldenNorth Carolina State North Carolina State
UniversityUniversity
22
Slower Growth Ahead Slower Growth Ahead (US Real Annualized GDP Growth Rate)(US Real Annualized GDP Growth Rate)
00.5
11.5
22.5
33.5
44.5
5
%
33
One Reason – Slower Corporate ProfitsOne Reason – Slower Corporate Profits(% change in real after-tax corporate profits)(% change in real after-tax corporate profits)
-20-15-10
-505
101520253035
%
1991 1993 1995 1997 1999 2001 2003 2005 2007
44
Job Growth Will SlowJob Growth Will Slow(annualized nonfarm payroll growth rate)(annualized nonfarm payroll growth rate)
0
0.5
1
1.5
2
2.5
%
2005,1
2005,4
2006,3
2007,2
2008,1
2008,4
55
And the Unemployment Rate WillAnd the Unemployment Rate Will Rise Rise(household unemployment rate)(household unemployment rate)
4
4.2
4.4
4.6
4.8
5
5.2
5.4
%
66
But the Consumer Hasn’t Fallen BehindBut the Consumer Hasn’t Fallen Behind(% change in real personal disposable income per capita)(% change in real personal disposable income per capita)
-1
0
1
2
3
4
5
%
77
Growth in Employee Costs Has Been ModestGrowth in Employee Costs Has Been Modest(annualized % increase in wages and benefits)(annualized % increase in wages and benefits)
-2
-1
0
1
2
3
4
5
6
7
%
wagesbenefits
88
Core Inflation Has Behaved !Core Inflation Has Behaved !(annualized % increase in CPI)(annualized % increase in CPI)
-3
-2
-1
0
1
2
3
4
5
6
7
%
Total Core
99
Behind Much of the Slowdown is Behind Much of the Slowdown is the Housing Marketthe Housing Market
1010
Interest Rates Have Moved the Housing MarketInterest Rates Have Moved the Housing Market(federal funds rate, % chg in starts, and % chg. in house price)(federal funds rate, % chg in starts, and % chg. in house price)
-25
-20
-15
-10
-5
0
5
10
15
2000
2001
2002
2003
2004
2005
2006
2007%
int. ratestartsprice
1111
Excess Supply Has SurgedExcess Supply Has SurgedExcess Supply Has SurgedExcess Supply Has Surged
2
4
6
8
10
12
1990
- Ja
n
1990
- Nov
1991
- Sep
1992
- Ju
l
1993
- M
ay
1994
- M
ar
1995
- Ja
n
1995
- Nov
1996
- Sep
1997
- Ju
l
1998
- M
ay
1999
- M
ar
2000
- Ja
n
2000
- Nov
2001
- Sep
2002
- Ju
l
2003
- M
ay
2004
- M
ar
2005
- Ja
n
2005
- Nov
2006
- Sep
2007
- Ju
l
Months Supply of Single Family Homes
1212
Subprime Mortgage Problems Have JumpedSubprime Mortgage Problems Have Jumped(percent of loans past due)(percent of loans past due)
9
10
11
12
13
14
15
16
%
2002 2003 2004 2005 2006 2007
1313
And There Are More Problems to ComeAnd There Are More Problems to Come(subprime loan balances with nearing reset dates)(subprime loan balances with nearing reset dates)
0
5
10
15
20
25
30
35
40
$bils.
2007,10 2008,3 2008,9 2009,2 2009,7 2009,12
1414
Gas Prices: As They Rise, Will Gas Prices: As They Rise, Will They Bring Us Down?They Bring Us Down?
1515
Gas Prices Are Also an Issue, But Maybe Not as Gas Prices Are Also an Issue, But Maybe Not as Much as Thought!Much as Thought!
(price per gallon, nominal and real $2000)(price per gallon, nominal and real $2000)
0
0.5
1
1.5
2
2.5
3
$ nom.real
1616
We’re Using Energy More EfficientlyWe’re Using Energy More Efficiently(thous. Of btus per real $ of output)(thous. Of btus per real $ of output)
02468
101214161820
1970 1975 1980 1985 1990 1995 2000 2005
1717
As a Result, the Pinch of Gas Prices Has Been As a Result, the Pinch of Gas Prices Has Been DulledDulled
(gas and oil spending as a % of total spending)(gas and oil spending as a % of total spending)
0
0.5
1
1.5
2
2.5
3
3.5
4
1990 1992 1994 1996 1998 2000 2002 2004 2006
%
1818
Another Issue – The Trade Deficit Another Issue – The Trade Deficit and the Dollarand the Dollar
1919
There Is a LinkThere Is a Link(trade deficit % of GDP on left scale and dollar exchange rate against major (trade deficit % of GDP on left scale and dollar exchange rate against major
currencies on right scale)currencies on right scale)
0
1
2
3
4
5
6
7
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
50
60
70
80
90
100
110
120
deficit
exch rt.
2020
PolicyPolicy
2121
We’re Living with Past Policy DecisionsWe’re Living with Past Policy Decisions(% growth in adjusted monetary base)(% growth in adjusted monetary base)
0
2
4
6
8
10
12
1991 1993 1995 1997 1999 2001 2003 2005 2007
2222
Relative Federal Deficits Have DroppedRelative Federal Deficits Have Dropped(deficit as % of GDP)(deficit as % of GDP)
0
0.5
1
1.5
2
2.5
3
3.5
%
2003 2004 2005 2006 2007
2323
After a Run-up, Interest Rates Have After a Run-up, Interest Rates Have Drifted LowerDrifted Lower
0
1
2
3
4
5
6
7
2000 2002 2004 2006 2008
fed fundsT-bond
2424
NORTH CAROLINANORTH CAROLINA
2525
NC vs. US and Southeast GSP
100102104106108110112114116118120
2000 2001 2002 2003 2004 2005 2006
Ind
ex
NCUSSE
2626
NC, US, and Southeast Unemployment Rate
33.5
44.5
55.5
66.5
7
2000 2001 2002 2003 2004 2005 2006
%
NCUSSE
2727
But Recently, Employment Growth Has Slowed
0
1
2
3
4
5
%
200620072008
2828
Housing Price Boom Was More ModestHousing Price Boom Was More Modest in NC in NC(national and NC house price appreciation rates)(national and NC house price appreciation rates)
0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005 2006 2007
%
USNC
2929
So “Crash” Was Delayed and MilderSo “Crash” Was Delayed and Milder(% change in US and NC housing starts)(% change in US and NC housing starts)
-30
-25
-20
-15
-10
-5
0
5
10
15
20
2000 2001 2002 2003 2004 2005 2006 2007%
USNC
3030
As Always, NC Regional Growth VariesAs Always, NC Regional Growth Varies(% change in employment, 2007 and forecasted 2008)(% change in employment, 2007 and forecasted 2008)
-0.5
0
0.5
1
1.5
2
2.5
%
20072008
3131
5
10
15
20
25
30
35
%
The Two Ends of the Occupational Structure Are Growing in NC
(% change in occupational categories)
20002005
3232
The “Returns to Education” Have Increased in NCThe “Returns to Education” Have Increased in NC(% change in hourly wage, after inflation, 2000-2005)(% change in hourly wage, after inflation, 2000-2005)
-10
-8
-6
-4
-2
0
2
4
%
Col Grad Some Col HS Grad HS Drop
3333
Final CommentsFinal Comments
• No “official” recession, but will look and No “official” recession, but will look and feel like onefeel like one
• Housing market is calling the shots nowHousing market is calling the shots now• Fed will choose growth over inflationFed will choose growth over inflation• 2008 will be a year to “hold back” – 2008 will be a year to “hold back” –
economy and election uncertaintyeconomy and election uncertainty• Challenge for NC: spreading the Challenge for NC: spreading the
prosperityprosperity
Recommended