Transcript 1996 Survey of Maricopa County Manufacturere

Arizona Outlook
GFOAz
Conference
February 19, 2009
Economic Outlook 2009-2010
• US Recession Watch
• Arizona Jobs
• Arizona People
• Arizona Housing
• Outlook Summary
US RECESSION WATCH
• How long in duration?
• How severe in depth?
Is This a Repeat of the
GREAT DEPRESSION?
"There is nothing
in the situation to be
disturbed about."
Feb. 1930
Andrew Mellon
Secretary of the Treasury
for Herbert Hoover
Another Great Depression?
In the Great Depression real GDP
declined for 4 years & 27%
1930
1931
1932
1933
1934
-8.6%
-6.4%
-13.0%
-1.3%
+10.8%
Another Great Depression?
In the current downturn real GDP is
expected to fall for 4 quarters & 2-3%
2008 Q3
2008 Q4
2009 Q1
2009 Q2
2009 Q3
-0.5%
-3.8%
-4.9%
-1.5%
+0.8%
Blue Chip Consensus
GDP Recovery in 2nd Half?
Percent Change in Real GDP at Annual Rate
2.8
0.9
0.8
-0.5
-1.5
-3.8
Q1
Q2
Q3
2008
Blue Chip Consensus
2.0
Q4
-4.9
Q1
Q2
2009
Q3
Q4
Survey of Leading Economists
Blue Chip
Consensus
___
• 90% say recession
50 Top
Economists
• 93% say unemployment
will peak in 2010
will end by Q4 2009
Blue Chip Economic Indicators, February 2009
Longest Since The Depression
Post-War Recessions
Months
Average: 10 Previous Post-War Recessions
10 mos.
Longest (1973-1975 & 1981-1982)
16 mos.
Current Recession (Duration since 12/07)
14 mos.
Current Recession Forecast (12/07 – 12/09)
24 mos.
The Great Depression (1929-1933)
43 mos.
Historical data: National Bureau of Economic Research
GDP Growth in Q4 2008
Components
Q3 08
Q4 08
Consumption
-3.8%
-3.5%
Exports
3.0%
-19.7%
-16.0%
-23.6%
9.7%
-1.8%
-0.5%
-3.8%
Residential Building
Non-Residential Building
Change in Real GDP
U.S. Bureau of Economic Analysis, January Report
U. S. Consumer Spending
Negative Again in Q 4
Percent Growth In Consumer Spending at Annual Rate
3.9
First negative quarter since 1991
2.0
2.0
1.0
Q1
2007
Q2
Q3
Q4
0.9
Q1
2008
1.2
Q2
-3.8
-3.5
Q3
Q4
Consumer confidence sinks
Auto sales worst in 26 years
Neighborhood Banks Doomed to Fail?
1930:
744 Bank
Failures
2008:
25 Bank
Failures
Problem banks: What you need to know
The FDIC is keeping close tabs on 171 banks
8,500 Banks
171 on
“Watch List”
12 Months of U.S. Job Loss
Job Growth/Loss, Thousands
-76 -83 -88
-67 -47
-100
-67
-127
-403
2 million jobs lost
-524
-524
-583
Jan. Feb. Mar. Apr. May June July Aug. Sept Oct. Nov. Dec.
Arizona Job Losses in 2008
Monthly Percent Change vs Year Ago
2
1
0.6
0.0
0
-1
-2
-3
-0.4 -0.2 -0.6
-1.5 -1.7
-1.9 -2.2
-2.7
-4
-5
-6
-3.8
Worst since -4.6% June 1975
-4.3
Jan. Feb. Mar. Apr. May June July Aug. Sept Oct. Nov. Dec.
12 Months Into Recession
Arizona Weaker Than US
Non-Farm Job Loss After 12 Months
% Loss
Average 10 Post-War Recessions
-2.0%
U.S. in Current Recession
-2.0%
Arizona (Dec./Dec.)
-4.3%
Wyoming (Dec./Dec.)
+2.2%
Arizona & US Move Together
(Employment Year/Year Percent Change 1970 - 2008)
14
12
Arizona
10
8
6
4
2
0
-2
USA
-4
-6
1970
1974
1978
1982
1987
1991
You are here
1995
1999
2004
2008
Five Recessions Since 1970
14
12
Arizona Follows U.S.
10
8
6
4
2
0
-2
-4
Energy
Stagflation
-6
1970
1974
S & Ls
Energy
Leverage
Fed
Policy
1978
1982
1987
1991
Tech
Bubble
1995
1999
Energy
Housing
Leverage
2004
2008
US Economic Forecast
2008
2009
2010
Real GDP Growth
1.3%
-2.0%
2.0%
Employment Growth
-0.2%
-2.5%
0.0%
Inflation (CPI)
3.8%
-1.0%
1.8%
Housing Starts (000)
900
660
900
W. P. Carey School of Business, ASU
Arizona Ranks Near Last in
Rate of Job Creation
(Percent Change Dec. 2008 vs Dec. 2007)
20
16
6
1
5
41
48
36
36
27
49
13
8
4
14
2
Green = Growth
U. S. Bureau of Labor Statistics
7
Red: 42 States
Losing Jobs
116,500 Arizona Jobs Lost
Sector
Dec 08 vs Dec 07
Overall
-116,500
Health Care
+9,400
Arts, Entertainment
+1,200
Government (Fed/Local) +3,600
Employment Services
-10,800
Retail Trade
-25,200
Food Service
-11,200
Construction
-43,800
Less Harmed by Recession
• Food, guns, alcohol
• Online commerce
• Repair & maintenance
• “Down market” retail
• Health care & related
Hit Hardest by Recession
• Discretionary & postponable
• Temporary worker agencies
• Retail outlets, restaurants
• Auto dealers, appliances
• Finance & insurance
• Construction, home stores
80,000 Arizona Construction Jobs
Lost Since Summer of 2006
Thousands of Jobs
260
250
240
230
220
210
2005
200
2006
2007
2008
190
180
170
160
JAN
JULY
JAN
JULY
JAN
JULY
JAN
DEC
Unemployment at 7%?
Arizona
Unemployment
Rates in Recession
1976 10.3%
1982 11.5%
1992 7.5%
2008 6.9%
(Dec)
nd
2
Arizona
in Population
Growth Among All States
Percent Change 2008 vs 2007
11
12
8
17
14
6
16
7
1
2
36
5
18
9
3
US Census Bureau
4
10
Arizona Population Rank 2008
• 14th Largest State
• 2nd Fastest Growth Rate
• 5th in New Resident Count
• 3rd in Domestic Migration Count
• 9th in International Migration Count
Population in 2030
• Population 10.7 Million
• 2nd Largest State in West
• 10th Largest State in US
• Median Age 39.3 Yrs
• More Children than Seniors
U. S. Census Bureau
Every time the Arizona
population increases
by 2.5 people, a new
housing unit is needed.
AZ Housing Slump Continues
Single
Family
Q3
‘07
Single Family 2008
Permits
Resales
Prices (Phx)
Resale
Price
- 53%
30%
- 31%
+10%
--26%
4.1%
Source: National Assoc Realtors; US Census
Source: US Census, National Assoc. Realtors
10 Months Supply of Housing
for Sale in US Market
12
11
10
Months Supply
9
8
7
6
5
4
3
2
1991
1994
1997
2000
2003
2006
2008
3 States Add Construction Jobs
(Percent Change Dec. 2008 vs Dec. 2007)
Red: Loss of
10% or More
Green = Growth
U. S. Bureau of Labor Statistics
Housing Market Drivers
• Population growth
• Employment growth
• Mortgage rates
• Mortgage standards
• Move-up buyers
• Investors
Affordability Rebounds
Share of Phoenix home sales affordable at median income
80
60
40
Phoenix Affordability
20
1995
1998
2001
2004
National Association of Home Builders, 2008 Q3
2007
2009
Metro Phoenix Construction
Single family Permits
42,423
31,172
19,400
12,582 14,285
2006
2007
2008
Greater Phoenix Blue Chip Forecast, 2008 Q4
2009
2010
Metro Tucson Construction
Single Family Permits
8,132
5,068
4,698
2,909
2006
2007
2008
2,871
2009
Economic Outlook, University of Arizona, December 2008
2010
Blue Chip
Forecast Panel
Arizona Public Service
ASU
AZ Dept. Commerce
Davidson Fixed Income
Econ-Linc
EconLit
Elliott Pollack Co.
JLBC
Maguire Co.
Northern Arizona Univ.
Salt River Project
Stellar Capital
S’west Growth Partners
Univ. of Arizona
VisionEcon
Wells Fargo
ARIZONA
BLUE CHIP ECONOMIC FORECAST
2008 2009
2010
Annual Percent Change
Personal Income
3.5
2.5
4.0
Employment
-1.6
-0.9
1.8
Single Family Units
-53
-3.7
13.2
Retail Sales
-5.0
0.2
3.7
Population
2.3
1.8
2.0
Arizona Employment:
No Job Growth Until 2010
Annual Numeric Change In Arizona Employment
127,500
125,700
85,000
47,000
31,500
31,200
0
-42,000
2002
2003
2004
2005
2006
2007
2008
-25,000
2009
2010
Arizona Employment:
No Job Growth Until 2010
Annual Percent Change In Arizona Employment
5.4 5.0
3.7
1.4
0.0
1.2
1.8
-1.6
-0.9
2002 2003 2004 2005 2006 2007 2008 2009 2010
Arizona Retail Sales:
Recession Level Growth
13.2
Annual CY Percent Change
9.0
7.9
5.3
3.7
1.3
0.5
0.2
-5.0
2002
2003
2004
2005
Source: Arizona Blue Chip Forecast
2006
2007
2008
2009
2010
Forecast
Arizona Retail Sales Decline
Percent Change Vs Previous Year
Category
CY2006 CY2008
Building Supplies
+9.2
-10.8
Apparel
+8.4
-8.3
Furniture
+8.4
-10.3
Restaurant/Bar
+10.3
-3.5
Motor Vehicles
+2.8
-28.3
Source: US Bureau of Labor Statistics and AZ Dept of Commerce
Source: Arizona Department of Revenue, collections
Arizona Outlook Summary
• Stagnant economy 2009
• No job growth until 2010
• Unemployment goes up
• Population growth is critical
• Wait for US economic recovery
Construction Outlook Summary
• Resale prices fall next 9 mos.
• New starts, resales up end 2009
• Tighter lending standards
• Non residential building stops
• Watch population growth
Anatomy of Recovery
• National economy rebounds
• Population growth improves
• Home prices stabilize
• Housing inventory falls
• Job creation increases
• Unemployment declines
• General confidence restored
National Outlook Summary
• Worse economic news ahead
• Housing must bottom out
• Recovery late 2009?
• Unemployment at 8%? 10%?
• Stimulus plan to boost growth
Economic Policy Options
1. Monetary policy (credit & interest rates)
•Lenders must lend, borrowers must borrow
•Works with a lag, no direct job impacts
2. Tax Cuts (give rebates & reduce rates)
•Smaller impact but rate cuts keep on working
•Rebates saved or pay off debt, one time impact
3. Spending on Infrastructure, state aid
•Takes time to implement, larger multiplier
•Job impacts end when projects end
•But infrastructure may support growth
Stimulus Plan: A Hybrid
$787 Billion Program 2009 - 2019
Component
2009
2010 To 2019
Total
Tax Cuts/Aid
$116
$245
$28
$389
Infrastructure
$29
$83
$142
$254
State/Local Gov
$40
$72
$32
$144
$185
$400
$202
$787
Total
http://www.cbo.gov/ftpdocs/99xx/doc9989/hr1conference.pdf
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