Transcript Document

OSIA
Wilsonville, Oregon
January 25, 2013
John W. Mitchell
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Brush with Disaster
Year Four of Upturn-Modest or Moderate
12/2012 Employment 4 Million below 1/2008
but 4.78 million above 2/2010 Trough
QE4 Underway
Weakness in Europe and Japan
Net Worth Rising
Largest Increase in Domestic Oil Production in
History of Industry in 2012
Less then Year to Next Stage of the Patient
Protection and Affordable Care Act
Lone Ranger Returning-Twinkies GONE!
Q1
Q2
Q3
GDP
2%
1.3%
3.1%
Consumption
2.4
1.5
1.6
Equip & Software
5.4
4.8
-2.6
Non-Res Structures
12.9
.6
0
Residential
20.5
8.5
13.5
Federal
-4.2
-.2
9.5
State and Local
-2.2
-1
.3
Exports
4.4
5.3
1.9
Imports
3.1
2.8
-.8
Source: BEA
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
-0.20%
-0.40%
Source: BLS
300
250
200
150
100
50
0
2,000,000
1,500,000
1,000,000
500,000
0
-500,000
-0.20%
August
July
June
May
April
March
February
December
November
October
September
August
July
June
May
April
March
February
January
December
November
October
September
-0.40%
January
Source:BLS
0.80%
0.60%
0.40%
0.20%
0.00%
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Beige Book January 16, 2013 Stable Price
Pressures
Energy Commodities 8.6% in Aug, 6.7% in
Sept. -.5% in October and -6.9% in November
and -2.2 in December
Non-Farm Business Year over Year 1.8%
Compensation and 1.7% Productivity-Unit
Labor Costs .1% Q3
30 years
20 years
10 years
7 years
5 years
3 years
2 years
1 year
6 months
3 months
1 month
3.50%
3.00%
2.50%
2.00%
1.50%
1/18/2013
1.00%
7/25/2012
0.50%
0.00%
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Seven Years of Zero Short Term Rates ?
30 Year Mortgage 3.4% on Week Ending
1/11/13
10 Year 1.9% on Week Ending 1/11/13
Fed will tolerate 2.5% Inflation
All Treasuries Under 5 Years Yield Less than
1%
Personal Interest Income Q4 2007 $1.32
Trillion by Q3 2012 $975.3 Billion
Pension Obligations?
Earnings on Reserves?
GDP Growth Fed Central Tendency
2012 1.7-1.8% and 2013 2.3-3%, 33.5% in 2014
 Consensus Moving from 2% in 2013
to 2.6% in 2014
 Drag from Recent Policy Actions ?
 Inflation Staying Near 2% Through
2014
 Fed on Hold Until at Least Mid 2015
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What happens Overseas ?
Dealing with the debt ceiling and sequesters
in the next few months?
How will the actors behave ? Taxes,
Healthcare, Uncertainty
July
January
July
January
July
January
July
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
1-Jan
Jul-05
Jan-05
2,500
2,000
1,500
1,000
500
0
10.00%
5.00%
0.00%
-5.00%
-10.00%
-15.00%
I Year
-20.00%
5 Years
-25.00%
-30.00%
-35.00%
-40.00%
-45.00%
25.00%
20.00%
15.00%
10.00%
5.00%
12 Month Change
-15.00%
2012/1
2
3
4
2
3
2009/1
-10.00%
4
-5.00%
2006/1
0.00%
35,000
31,024
30,000
27,309
26,623
25,000
21,101
20,000
15,000
11,676
10,000
10,361
7,039
6,868
2009
2010
7,931
5,000
0
2004
2005
2006
2007
2008
2011 2012/11
Source: Rockefeller Institute
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
-15.00%
-20.00%
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The First Cliff
Payroll Tax Holiday Ends
Bush Tax Cuts Expire for Over $450,000
Sequester Process Delayed 2 Months
New Medicare Taxes Start
Phase Outs and Deduction Limitations Back
Estate Tax Rate Bumped
AMT Fix, Doc Fix
Long Term Spending Issues-Not Addressed
Debt Ceiling Unresolved
Short Term Problem-Long Term Problem
Geithner-”And you can’t count indefinitely on the world having
more confidence in our political system than is justified”
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Different Tools
Twist to the End of December-Then Buy $45
Billion of Treasuries with maturities from 4 Years
to 30 Years
Continue to Buy $40 Billion Mortgage-Backed
Securities Per Month
Total $85 Billion Per Month
Exceptionally low rates as long as unemployment
remains above 6.5% and inflation is no more than
.5 point above 2% longer run goal (12/12/12)
Will it make any difference?
How and When does one unwind it? Federal Debt
Costs when rates increase?
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North Dakota 1
Utah 2
Hawaii 3
Texas 4
Arizona 5
Oklahoma 6
Colorado 7
Idaho 8
Indiana 9
Montana 10
Minnesota 11
Louisiana 12
Kentucky 13
Ohio 14
California 15
South Carolina 16
Washington 17
Georgia 18
Massachusetts 19
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Oregon 21
Florida 22
Nevada 23
Arkansas 30
Michigan 33
Alabama 34
New Jersey 38
Illinois 35
South Dakota 36
New Jersey 38
Maine 43
Connecticut 44
Mississippi 45
Alaska 46
New Hampshire 47
Rhode Island 48
New Mexico 49
West Virginia 50
November
August
May
February
November
August
May
February
November
August
May
February
November
August
May
February
November
August
May
Feb
November
Aug-07
1,750
1,700
1,650
1,600
1,550
1,500
Total
Govt.
Other…
Leisure&Hos.
Ed&Health
Prof. Services
Finance
TP,W,Util
Information
Trade
Constructi…
Mine&Log
Manufactu…
-5,000
0
5,000
10,000
15,000
20,000
25,000
Total
Other…
Govt.
Leisure&Hos.
Ed&Health
Prof. Services
Finance
TP,W,Util
Information
Trade
Construction
Mine&Log
Manufactur…
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Metro
Job Change
Percentage
Bend
360
.6
Corvallis
130
.3
Eugene/Springfield
2,900
2.1
Medford
1,140
1.5
Portland
15,300
1.5
Salem
700
.5
Coos
90
.4
Douglas
580
1.7
Lincoln
-80
-.5
Umatilla
-40
-.1
Union
60
.6
Wasco
180
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Personal Income in Q3 Oregon up .8%, US .5%
Census Population Estimates for 2010-2012 up
1.8% versus the US up 1.7%
PSU Oregon Population Up .7% in 2012
Brookings Institution- Q3 Portland 4th of the top
100 Metros-Employment, Unemployment,
Output, and House Prices
Preliminary Oregon Employment Data .8-.9% Gain
in Annual Average Employment
Oregon Jobs Gap in October 133,000 Brookings
Hamilton Project
December Data-Total Employment in Oregon
down 25,546 in Year to December?
Source: Employment Department
100,000
50,000
0
2005
-50,000
-100,000
-150,000
2006
2007
2008
2009
2010
2011 2012/P
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Youth Un and Underemployment -Scarring
December U-6 14.4%, Mean Unemployment
38.1 Weeks, 39.1% of Unemployed more than
27 Weeks
Labor Force Participation Rate December
63.6%-The last Time it was there was
December 1981. Recession Start 66%
Real Family Median Net Worth Down 38.8%
2007-2010 Survey of Consumer Finances
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Sustainability Popular Here- Fiscal Situation is
Not- The Current Path leads to sclerosis or
stagnation.
How does it end? Simpson-Bowles,
Confidence Collapse –Endgame-Mauldin,
Rogoff and Reinhart- Slow Growth
Is December/January the best that we can do?
Do we still have the recipe for growth?
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Stella
The Tooth Fairy
Free Medical Services
Fairy
The No New Taxes
Fairy
The Rich Will Pay Fairy
The Entitlement Fairy
Fairies
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Uncertainty Reduced, But Remains
Most likely Growth Near 2%
Falling Debt Burdens, Housing, Rising Income
and Employment, Balance Sheets, Financial
Institutions Strength, ISM, Energy
Developments, Initial Claims