Summer/Fall 2013 Economic Update

Summer/Fall 2013Economic Overview

Presented ByKenneth Hunter, MPA

ABFM Executive CommitteeEditor, Line Item

September 12, 2013

Evaluating the Economy

Sources for Information

Understanding Productivity

2013q2, 1.6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%20

05q1

2005

q2

2005

q3

2005

q4

2006

q1

2006

q2

2006

q3

2006

q4

2007

q1

2007

q2

2007

q3

2007

q4

2008

q1

2008

q2

2008

q3

2008

q4

2009

q1

2009

q2

2009

q3

2009

q4

2010

q1

2010

q2

2010

q3

2010

q4

2011

q1

2011

q2

2011

q3

2011

q4

2012

q1

2012

q2

2012

q3

2012

q4

2013

q1

2013

q2

Annualized US Chained GDP Growth, 2005-Present

1980-2005 Average, 3.2%

1.7%2.0%

3.6%1.3%

1.6%-0.6%-0.5%

2.1%0.0%

2.5%3.4%

-5.4%-5.5%

-5.7%5.9%

5.8%6.3%

1.7%1.4%

3.4%0.4%

1.7%1.2%

2.6%-0.4%

-8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%

Personal consumption expenditures Goods

Durable goods Nondurable goods

ServicesGross private domestic investment

Fixed investment Nonresidential

Structures Equipment

Intellectual property products Residential

Change in private inventoriesNet exports of goods and services

Exports Goods

Services Imports Goods

ServicesGovt. expenditures & gross investment

Federal National defense

Nondefense State and local

Annual Growth Rate, Elements of Chained US GDP, 2005-Present

3.7%0.9%

-0.3%0.9%

1.7%5.6%

7.8%-1.2%

-0.4%-0.8%

0.0%0.7%

-1.7%1.4%

3.8%6.2%

0.2%3.3%

-2.4%2.0%2.0%

0.3%3.8%

-1.2%3.2%

3.1%1.9%

-3.2%3.4%

2.0%2.5%

-1.6%0.7%

1.0%2.2%

0.2%2.8%

-0.6%2.9%

-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

AustraliaAustria

BelgiumBrazil

CanadaChile

ChinaCzech Republic

DenmarkFinlandFrance

GermanyHungary

IcelandIndia

IndonesiaIreland

IsraelItaly

JapanKorea

LuxembourgMexico

NetherlandsNew Zealand

NorwayPoland

PortugalRussian Federation

Slovak RepublicSouth Africa

SpainSweden

SwitzerlandTurkey

United KingdomUnited States

Euro area (17 countries)G20

2012 Chained GDP Growth

44,785 43,848

40,102 41,455

22,211 6,091

26,600 42,176

23,060 38,282

36,249 41,231

25,071 22,124

37,783 43,579

29,830 33,139

35,207 30,800

91,377 18,321

43,146 32,150

65,638 22,167

25,230 23,622

25,323 27,609

32,081 43,176

53,733 18,078

36,892 49,614

36,369

- 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000

AustraliaAustria

BelgiumCanada

ChileChina

Czech RepublicDenmark

EstoniaFinlandFrance

GermanyGreece

HungaryIcelandIreland

IsraelItaly

JapanKorea

LuxembourgMexico

NetherlandsNew Zealand

NorwayPoland

PortugalRussian Federation

Slovak RepublicSlovenia

SpainSweden

SwitzerlandTurkey

United KingdomUnited States

OECD Total

2012 GDP Per Capita ($US)

5.9%5.8%

1.9%6.3%

5.0%6.7%6.8%6.9%

6.6%6.0%

7.7%9.6%

5.6%-0.7%

6.3%5.3%

4.6%6.6%

1.8%5.5%

8.8%3.3%

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Exports of goods and services

Exports of goods

Foods, feeds, and beverages

Industrial supplies and materials

Durable goods

Nondurable goods

Capital goods, except automotive

Civilian aircraft, engines, and parts

Other

Automotive vehicles, engines, and parts

Consumer goods, except automotive

Durable goods

Nondurable goods

Other

Exports of services

Transfers under U.S. military agency sales contracts

Travel

Passenger fares

Other transportation

Royalties and license fees

Other private services

Other

Annual Growth Rate, Chained Values of US Exports, 2005-Present

July 2008, 5.4%

July 2013, 1.8%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Jan…

Apr…

Jul…

Oct

…

Jan…

Apr…

Jul…

Oct

…

Jan…

Apr…

Jul…

Oct

…

Jan…

Apr…

Jul…

Oct

…

Jan…

Apr…

Jul…

Oct

…

Jan…

Apr…

Jul…

Oct

…

Jan…

Apr…

Jul…

Oct

…

Jan…

Apr…

Jul…

1-Yr Change in Chained CPI, All Items, January 2006-Present

The “market” certainly recovered!

Where’s the “Wealth”?

Are Markets “Stressed”?

Treasury Yields Ticking Upward

Dollar’s Position Helping Exports

Housing Market Slowly Recovering

Mortgage Rates Climbing

Energy Costs Trending Upward

Where do we stand on volatility?

Crude Oil

Gold

S&P 500

How are Individuals Doing?

-115,000

848,000

2,006,000

-.5M

.M

.5M

1.M

1.5M

2.M

2.5M

Last 1 Month Since Start of 2013 Since August 2012

Change in US Civilian Employment, August 2013

Published 9/6/2013

2007-11-01, 23,745,000

2013-08-01, 26,846,000

20M

22M

24M

26M

28M

30M

2005

-01-

0120

05-0

3-01

2005

-05-

0120

05-0

7-01

2005

-09-

0120

05-1

1-01

2006

-01-

0120

06-0

3-01

2006

-05-

0120

06-0

7-01

2006

-09-

0120

06-1

1-01

2007

-01-

0120

07-0

3-01

2007

-05-

0120

07-0

7-01

2007

-09-

0120

07-1

1-01

2008

-01-

0120

08-0

3-01

2008

-05-

0120

08-0

7-01

2008

-09-

0120

08-1

1-01

2009

-01-

0120

09-0

3-01

2009

-05-

0120

09-0

7-01

2009

-09-

0120

09-1

1-01

2010

-01-

0120

10-0

3-01

2010

-05-

0120

10-0

7-01

2010

-09-

0120

10-1

1-01

2011

-01-

0120

11-0

3-01

2011

-05-

0120

11-0

7-01

2011

-09-

0120

11-1

1-01

2012

-01-

0120

12-0

3-01

2012

-05-

0120

12-0

7-01

2012

-09-

0120

12-1

1-01

2013

-01-

0120

13-0

3-01

2013

-05-

0120

13-0

7-01

Civilian Labor - Part Time - January 2005 to August 2013

2007-11-01, 122,850,000

2013-08-01, 117,324,000

110M

2005

-01-

0120

05-0

3-01

2005

-05-

0120

05-0

7-01

2005

-09-

0120

05-1

1-01

2006

-01-

0120

06-0

3-01

2006

-05-

0120

06-0

7-01

2006

-09-

0120

06-1

1-01

2007

-01-

0120

07-0

3-01

2007

-05-

0120

07-0

7-01

2007

-09-

0120

07-1

1-01

2008

-01-

0120

08-0

3-01

2008

-05-

0120

08-0

7-01

2008

-09-

0120

08-1

1-01

2009

-01-

0120

09-0

3-01

2009

-05-

0120

09-0

7-01

2009

-09-

0120

09-1

1-01

2010

-01-

0120

10-0

3-01

2010

-05-

0120

10-0

7-01

2010

-09-

0120

10-1

1-01

2011

-01-

0120

11-0

3-01

2011

-05-

0120

11-0

7-01

2011

-09-

0120

11-1

1-01

2012

-01-

0120

12-0

3-01

2012

-05-

0120

12-0

7-01

2012

-09-

0120

12-1

1-01

2013

-01-

0120

13-0

3-01

2013

-05-

0120

13-0

7-01

Civilian Labor - Full Time - January 2005 to August 2013

Unemployment Claims DOWN!

Hiring Resumed (Sort Of)

Hiring Resumed (Sort Of)

The Biggest Shift of All!

Discouragement Still a BIG Issue!

Earnings are Improving

Saez, Emmanuel. Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2012 preliminary estimates) . http://elsa.berkeley.edu/~saez/saez-UStopincomes-2012.pdf (September 3, 2013)

It’s Been a TOUGH Recession!

Gasoline Prices in Perspective

What It Means for Government

Federal Debt Keeps Growing!

How’s the “Fed” Helping?

Revenues, 11.2%

Revenues, 2.3%Expenditures, 3.1%

Expenditures, -0.1%

Debt Outstanding, 0.0%

Debt Outstanding, 3.4%

-2%

0%

2%

4%

6%

8%

10%

12%

State Local

1-Yr Change in State & Local Government Revenues & Exependitures, FY 2011

State & Local Condition Better

Local Pensions are Underfunded

100%

93%

90%88% 87% 86% 88%

84%

80%78%

74%

50%

60%

70%

80%

90%

100%

110%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Aggregate Actuarial Funding Ratio of Select State & LocalDefined-Contribution Plans, FY 2001 to FY 2011

Local Pensions are Underfunded

0%

20%

40%

60%

80%

100%

120%

140%FY 2010 Actuarial Funding Ratios, US State & Local Defined Benefit Plans

Group Funding Aggregate, 77.8%

Source: Center for Retirement Research, Boston College

Looking forward?

Outlook

US GDP Growth2.3% annualized rate for 3rd Quarter1.9% growth for 2013 (down from earlier 2.4%)3.0% growth in 2014

Probability of Fed’s “Taper”~45% during rest of 2013~80% in 2014

Thank You!

Kenneth HunterKenneth.Hunter@nclgba.org

www.ABFM.org