Transcript Slide 1

ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Growth “… Will Guide You Home”
… “and Fix You”
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
1
Everyone is growing again
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Real GDP in selected regions (percent change from four quarters earlier)
11
Emerging economies in Asia, Eastern
10
Europe and Latin America (blue)
9
8
7
6
5
4
3
2
1
0
-1
US
-2
EU-11 (black)
-3
Japan (red)
-4
-5
-6
Global (shaded region)
-7
-8
-9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
11
10
9
8
7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
Sources: US Department of Commerce; JPMorgan Chase & Co.
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
2
The 2011-12 US outlook … gradually speeding up
US real GDP (annualized percent change)
8
7
8
7
6
6
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
5
4
3
4.0
3.8
3.1
2.9
1.9
2.7
2.4
2.9
2.3
3.4
2
1
5
4
3
2
0.4
0.2
1
0
0
-1
-1
-2
-2.8
-2
-3
-4
-3
-4
-5
-5
-6
-7
-6
-7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Forecast of
quarter-toquarter real
GDP growth
Quarter-toquarter
actual real
GDP growth
Annual
growth of
real GDP
(Q4 to Q4)
Change in
real GDP
from four
quarters
earlier
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
3
A big mistake corrected …
Nominal gross income per household and house prices (ratio to 1970 Q1 level)
13
12
LoanPerformance Corporation
11
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
10
13
12
11
Gross nominal income per household
10
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Sources: Loan Performance Corporation; US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
4
… and that’s why house prices are stabilizing
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Selected surveys of house prices (ratio of price indexes to the 2000 Q1 level)
2.3
2.3
2.2
2.2
2.1
2.1
2.0
2.0
1.9
1.8
1.7
1.6
Case-Shiller composite 10
Case-Shilller composite 20
Case-Shiller national index
1.9
1.8
1.7
1.6
1.5
1.5
1.4
1.4
1.3
1.3
1.2
1.2
1.1
1.1
1.0
1.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Sources: Loan Performance Corporation; FHFA’; NAR; Standard & Poor’s; Radar Logic
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
5
“Under water” losses …
Mortgage losses by vintage* ($ billions)
Cumulative amount of loans under water* ($ billions)
0
0
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
-500
-50
-1,000
-100
-1,500
-150
-2,000
-200
-2,500
* Assuming that all loans taken out at the
time were 100% loan-to-value
-3,000
1980
-250
1985
1990
1995
2000
2005
2010
Sources: MBA; CoreLogic; JPMorgan Chase & Co.
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
6
… mostly “recognized”
Mortgage losses by vintage* ($ billions)
Cumulative amount of loans under water* ($ billions)
2,000
GSEs
1,800
1,600
Insurance companies
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1,400
194
Banks
1,200
154
212
1,000
212
245
212
272
272
272
272
212
212
212
212
212
1241
1272
1275
1275
1275
212
115
800
152
600
48
95
400
23
53
200
0
251
260
12
10
43
213
374
76
109
508
952
1040
1133
1175
686
2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Sources: MBA; CoreLogic; JPMorgan Chase & Co.
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
7
Builders are still hibernating, owing to the glut …
Cumulative houses built and new households formed since 1970 (thousands)
70,000
70,000
60,000
60,000
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Housing units built since December 1960
50,000
50,000
40,000
40,000
30,000
30,000
20,000
20,000
Number of new households since December 1969
(adjusted for breaks in population controls in the
2000 Census)
10,000
10,000
0
1970
0
1975
1980
1985
1990
1995
2000
2005
2010
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
8
… but current activity is in a work-off range …
Stock of housing (thousands)
8,000
7,000
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
6,000
Housing starts and household formation (millions at an annual rate)
Total housing
starts (right)
2,600
New households
per year (right)
2,200
2,400
2,000
1,800
5,000
1,600
1,400
4,000
1,200
1,000
3,000
800
2,000
1,000
0
600
400
An estimate of the new housing glut:
new homes built over the most recent 10 years less number of new households (left)
200
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
9
… so builders will help us out eventually
Home building and growth (contribution of res construction to % ch in real GDP over 4 qtrs, pct pts)
1.5
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1.0
1.5
Actual/forecast
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
-1.0
-1.0
-1.5
-1.5
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Sources: NBER recession bars; US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
10
Business is positioning for the future again …
Business investment for capital goods and software (percent change from a year earlier)
25
20
15
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
10
25
Shaded area
denotes real
business spending
for equipment &
software
20
15
10
5
5
0
0
Industrial output of business equipment
-5
-5
-10
Orders for capital goods excluding
civilian aircraft and defense
-10
-15
Nonauto capital goods imports
-15
-20
Shipments of nondefense capital goods
-20
-25
-25
-30
-30
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sources: US Department of Commerce; Federal Reserve Board
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
11
… because it has restored profitability
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
After-tax GDP profits (percent of nominal Gross Domestic Income)
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012
Sources: NBER recession bars; US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
12
Consumers are back in the game too …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Real consumer spending and income (percent change from 12 months earlier)
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-3
Real consumer spending
Real disposable personal income
-2
-3
-4
-4
-5
-5
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
13
… with hiring starting …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Private sector employment (thousands per month)
500
500
400
400
300
300
200
100
200
100
0
0
-100
-100
-200
-200
-300
-300
-400
-400
-500
-500
-600
-600
-700
-700
-800
-800
-900
-900
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
14
... households saving more again ...
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Personal saving rate (percent of disposable personal income)
15
15
14
13
14
13
12
11
10
9
12
11
10
9
8
7
8
7
6
5
6
5
4
3
4
3
2
1
0
2
1
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Sources: NBER recession bars; US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
15
… and the equity market recovering
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Equity P-E
Wilshire 5000 index
26
18,000
24
16,000
22
Price-earnings ratio (left scale)
20
Wilshire 5000 (right scale)
18
14,000
12,000
10,000
16
14
12
8,000
6,000
10
4,000
8
2,000
6
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Sources: Federal Reserve Board; Dow Jones; US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
16
Low inflation gives the Fed a lot of latitude
Selected core consumer price indexes (percent change from 12 months earlier)
16
16
14
14
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
12
The Federal
Reserve's
long-run
inflation
target (for
chain core
PCE price
inflation)¹
10
8
Core CPI
12
10
8
6
6
4
4
2
Core chain PCE price index
2
0
1960
0
1965 1970 1975 1980 1985 1990
1995 2000 2005 2010 2015 2020
Sources: NBER recession bars; US Department of Commerce; US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
17
A vision of the future …
US potential and real GDP (chained 2005 dollars)
19,000
19,000
18,000
18,000
17,000
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
16,000
Real GDP associated with 5% unemployment
17,000
16,000
15,000
15,000
14,000
14,000
13,000
13,000
12,000
12,000
11,000
11,000
10,000
10,000
9,000
9,000
8,000
8,000
7,000
7,000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Sources: US Department of Commerce; Macroeconomic Advisers LLC
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
18
… but there’s lots of work to do …
US unemployment rate (percent of the labor force)
12
11
12
Note: thin line represents my forecast,
which is more cautious than the Fed's
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
10
11
The Fed's view about the near-term and
sustainable (Nairu) unemployment level¹
10
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
¹ Range of FOMC members’ views
Sources: NBER recession bars; US Department of Labor; Federal Reserve Board
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
19
… the damage is greater than we measure …
Official and hidden unemployment (thousands)
20,000
Gave up looking and are doing other things
18,000
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
16,000
20,000
18,000
Working part time because
can't find full-time work
16,000
14,000
14,000
12,000
12,000
10,000
Actively looking for a job and unemployed
10,000
8,000
8,000
6,000
6,000
4,000
4,000
2,000
2,000
0
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
20
The employment status of folks …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Status of people in the job market (thousands)
160,000
160,000
155,000
155,000
150,000
150,000
145,000
145,000
140,000
140,000
Recession 2008
dropouts
Frictional
unemployment (4%)
Long-term
unemployment
Short-term
unemployment
Underemployment
(part-timers, beyond the
norm, for economic
135,000 reasons)
135,000
130,000
1999
Dot.com dropouts
2001
2003
2005
2007
2009
Full-time, part-time by
130,000 choice, and "normal"
part-time for economic
2011
reasons
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
21
… and what it takes
Status of people in the job market (thousands)
180,000
180,000
175,000
175,000
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
170,000
Projection
170,000
165,000
165,000
160,000
160,000
155,000
155,000
150,000
150,000
145,000
145,000
140,000
140,000
135,000
135,000
130,000
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
130,000
Dot.com dropouts
Recession 2008
dropouts
Frictional
unemployment (4
Long-term
unemployment
Short-term
unemployment
Underemploymen
(part-timers, beyo
norm, for econom
reasons)
Full-time, part-tim
choice, and "norm
part-time for econ
reasons
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
22
Ditto for the rest of the world …
Actual real GDP in selected regions (chained 2005 dollars)
1.40
1.40
Estimated level of potential global
real GDP (US dollars)
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Emerging Markets
1.30
Trend global real GDP
Global
1.30
1.20
EU-11
US
Japan
1.20
Global slack
1.10
1.10
1.00
1.00
0.90
2007
0.90
2008
2009
2010
2011
Sources: US Department of Commerce; various international agencies
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
23
Conclusion: things to cheer and fear
To cheer
To fear
Recession shines light on state finances
State fiscal sector challenged
Private sector in good shape
Builders restrained by work-off of housing glut
Double-digit cap X spending growth
Europe’s sovereign / banking issues
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Record business profitability
Consumers spending again
Understanding relative prices versus inflation (the
winter commodity pressures)
Equities 15% from record
Household balance sheets better
Private employment growing 1%
Global economy booming
Risk assets pricing a recovery
Layoffs back to normal in half our states
Auto industry on the rebound
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
24
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Appendix 1. The Empire State …
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
25
The pulse of New York …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
New York
US (bars)
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
New York accounts for 2.6% of auto manufacturing employment
0.75
2008
0.75
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
26
Unemployment has crested …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Unemployment in New York versus the nation (percent of the labor force)
12
12
10
10
8
New York
6
4
8
6
US
4
2
2
0
0
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
27
… employment is rising again …
Employment in New York versus the nation (ratio to 2000 Q4)
4
4
3
3
New York
US
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
-4
-4
-5
-5
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
28
… and tracking national trends, like it usually does
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Employment in New York versus the nation (ratio to 2000 Q4)
1.06
1.06
1.05
1.05
1.04
1.04
1.03
1.03
1.02
1.02
1.01
US
1.01
1.00
1.00
0.99
0.99
0.98
0.98
0.97
0.97
0.96
New York
0.95
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0.96
0.95
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
29
But real estate is a little pricey …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Ratio of New York’s house prices to the US average (1995 Q1 = 1.0)
1.3
1.3
1.2
1.2
1.1
1.1
1.0
1.0
0.9
0.9
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Source: FHFA
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
30
... and we’re still working off a glut too
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
New York home building activity (thousands of units at an annualized rate)
500
500
450
450
400
400
Average units put up over the most recent decade
350
350
300
300
250
250
200
200
150
150
100
100
Current new home building pace
50
50
0
1970
0
1975
1980
1985
1990
1995
2000
2005
2010
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
31
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Appendix 2. State of the states …
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
32
8,000
6,000
4,000
2,000
0
Alaska
Massachusetts
New York
Rhode Island
Connecticut
New Jersey
Colorado
Washington
Illinois
Nevada
Pennsylvania
California
Delaware
Kentucky
Texas
Hawaii
South Carolina
New Hampshire
Minnesota
Nebraska
Oregon
Florida
Michigan
Wisconsin
Kansas
Indiana
Louisiana
Vermont
Virginia
Missouri
Maryland
Montana
Arizona
New Mexico
South Dakota
Utah
Ohio
Alabama
Maine
Tennessee
North Dakota
North Carolina
West Virginia
Georgia
Iowa
Oklahoma
Mississippi
Arkansas
Wyoming
Idaho
Source: Bureau of the Census
33
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Financial red flags ...
State and local debt obligations per capita (dollars)
14,000
12,000
10,000
Headwinds remain stiff in the Sunshine State, but ....
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
2.00
Florida
US (bars)
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
34
A new breeze from the Great Lakes … Illinois …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.00
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1.75
2.00
Illinois
US (bars)
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
35
… Indiana …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.75
2.75
2.50
2.50
Indiana
US (bars)
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.25
2.25
2.00
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
Indiana accounts for 21.6% of auto manufacturing employment
2008
2009
2010
0.75
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
36
… Kentucky …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.50
2.50
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.25
2.25
Kentucky
US (bars)
2.00
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
Kentucky accounts for 9.1% of auto manufacturing employment
2008
2009
2010
0.75
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
37
… Michigan …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
2.25
2.00
2.00
1.75
Michigan
US (bars)
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
Michigan accounts for 33.5% of US auto manufacturing employment
0.50
2008
0.50
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
38
… Minnesota …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
2.00
Minnesota
US (bars)
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
39
… Ohio …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.50
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.50
2.25
Ohio
US (bars)
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
Ohio accounts for 19.8% of auto manufacturing employment
0.75
2008
0.75
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
40
… Wisconsin …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
Wisconsin
US (bars)
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
Wisconsin accounts for 1.8% of auto manufacturing employment
0.75
2008
0.75
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
41
… and from other “auto” states … North Carolina …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.50
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.25
2.00
2.50
2.25
North Carolina
US (bars)
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
42
… and South Carolina
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.50
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.25
2.50
South Carolina
US (bars)
2.25
2.00
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
43
Good news from the Farm Belt too … Arkansas …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.50
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.25
2.00
2.50
2.25
Arkansas
US (bars)
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
44
… Iowa …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
3.25
3.25
3.00
3.00
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.75
Iowa
US (bars)
2.75
2.50
2.50
2.25
2.25
2.00
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
45
… Kansas …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
3.50
3.50
3.25
3.25
3.00
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.75
Kansas
US (bars)
3.00
2.75
2.50
2.50
2.25
2.25
2.00
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
46
… Mississippi
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
2.00
Mississippi
US (bars)
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
Mississippi accounts for 0.6% of auto manufacturing employment
0.75
2008
0.75
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
47
… Missouri …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
2.00
Missouri
US (bars)
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
Missouri accounts for 1.3% of auto manufacturing employment
0.75
2008
0.75
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
48
… North Dakota
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
4.00
3.75
3.50
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
4.00
North Dakota
US (bars)
3.75
3.50
3.25
3.25
3.00
3.00
2.75
2.75
2.50
2.50
2.25
2.00
2.25
2.00
1.75
1.75
1.50
1.50
1.25
1.00
1.25
1.00
0.75
0.75
0.50
0.50
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
49
The Energy Belt too … Oklahoma …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
3.00
3.00
2.75
2.75
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.50
Oklahoma
US (bars)
2.50
2.25
2.25
2.00
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
Oklahoma accounts for 0.3% of auto manufacturing employment
0.75
2008
0.75
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
50
The Home Building Footprint … Oregon …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
Oregon
US (bars)
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
51
And in some unexpected places … Connecticut …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
Connecticut
US (bars)
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
52
… Delaware …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.25
2.25
Delaware
US (bars)
2.00
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
53
… Massachusetts
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.00
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1.75
2.00
Massachusetts
US (bars)
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
54
… New Jersey …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.00
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1.75
2.00
New Jersey
US (bars)
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
55
… Pennsylvania …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.00
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1.75
2.00
Pennsylvania
US (bars)
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
56
… Vermont …
Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)
2.25
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2.00
2.25
Vermont
US (bars)
2.00
1.75
1.75
1.50
1.50
1.25
1.25
1.00
1.00
0.75
0.75
2008
2009
2010
2011
Source: US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
57
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Appendix 3. Fiscal red herrings …
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
58
The red ink … big in absolute terms …
Federal budget balance (billions of dollars over the most recent 12 months)
400
400
200
200
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
0
0
-200
-200
-400
-400
-600
-600
-800
-800
-1,000
-1,000
-1,200
-1,200
-1,400
-1,400
-1,600
-1,600
1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009
Sources: NBER recession bars; NBER Macroeconomic database
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
… and relative terms too …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Federal budget balance (percent of GDP)
0.05
0.05
0.00
0.00
-0.05
-0.05
-0.10
-0.10
-0.15
-0.15
-0.20
-0.20
-0.25
-0.25
-0.30
-0.30
1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009
Sources: NBER recession bars; NBER Macroeconomic database
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
… and all about the recession (remember the bonds)
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Federal budget indicators (rolling 12-month tally as a percent of GDP)
Actual federal deficit
2010
2011
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
Cyclically-adjusted federal deficit (excludes impact of
fiscal initiatives and automatic stabilizers)
-8
-9 Cyclically-adjusted federal deficit (excludes automatic
-10 stabilizers
-11
1960
1970
1980
1990
Sources: Congressional Budget Office; US Treasury
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
-10
-11
2000
2010
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Appendix 4. Fiscal Red Storm Rising
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
62
Healthcare entitlement costs … OMG!
Long-term projections (percent of GDP)
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
40
Revenues (historical average of 18.1%)
40
35
35
30
30
25
Debt service
20
25
20
15
Other
15
10
Coverage of uninsured
10
5
0
Medicare and Medicaid
Social Security
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
Source: Congressional Budget Office
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
5
0
Ultimately all about economics, economic growth, …
Long-term projections (billions of dollars, fiscal year basis)
20
20
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Average historical growth = 3.75% annually
15
15
10
10
5
5
0
0
-5
-5
CBO
assumption
-10
-10
-15
1851
-15
1876
1901
1926
1951
1976
2001
2026
Source: Congressional Budget Office
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
2051
2076
… which can bend the curve …
Long-term projections (percent of GDP)
40
40
35
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
30
Revenues
Debt service
35
30
25
25
20
20
15
Other
10
5
15
10
Medicare and Medicaid
Social Security
0
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
Sources: Congressional Budget Office; JPMorgan Chase & Co.
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
5
0
… and basic economic principles
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Three Questions
(1)You know the price of 87-octane gasoline at the local gas
station. How much did your annual physical cost? How
much does your employer contribute to your health
insurance coverage? Right.
(2) You can arrange air travel and get your boarding pass
from your home computer. Why do doctors need to be told
to automate records? No financial incentive to do this.
(3) We’ve known about smoking risks for 50 years; why only
in the last two years are non-smoker discounts offered on
health insurance premiums? Why are there no incentives
to reduce other post-65 risks?
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
66
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Appendix 5. QE, not a textbook’s story
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
67
The Fed buys assets to dampen rates …
Assets held by the Federal Reserve (billions of dollars)
2,500
Loans to
depositories
2,250
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2,000
2,250
2,000
Mortgage
backed
securities
1,750
1,500
1,250
1,750
1,500
1,250
1,000
GSE debt
750
1,000
750
Treasuries
500
250
500
250
0
Aug 2007
2,500
0
Feb 2008
Aug 2008
Feb 2009
Aug 2009
Feb 2010
Aug 2010
Source: Federal Reserve Board
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
68
… pays for that by creating reserves …
Liabilities issued by the Federal Reserve (billions of dollars)
2,500
2,250
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
2,000
Deposits at the Fed
other than those of
depository institutions,
including the Treasury's
supplementary financing
account
Reverse RPs, Treasury
cash, and other liabilities
and capital
1,750
1,500
750
500
250
0
2,250
2,000
1,750
Excess reserves
1,250
1,000
2,500
1,500
1,250
Required reserves
(includes vault cash
used to satisfy reserve
requirements)
1,000
Currency in circulation
excluding surplus vault
cash held by depository
institutions
500
Series5
750
250
0
Aug 2007 Feb 2008 Aug 2008 Feb 2009 Aug 2009 Feb 2010 Aug 2010 Feb 2011 Aug 2011 Feb 2012
Source: Federal Reserve Board
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
69
… but the reserves remain quarantined (excess) …
Selected components of the monetary base (billions of dollars)
2,200
2,200
2,000
2,000
1,800
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1,600
1,800
Key components of the monetary base =
currency in circulation + required reserves + excess reserves
1,600
1,400
1,400
1,200
1,200
1,000
1,000
800
800
600
600
400
400
200
200
0
1970
0
1975
1980
1985
1990
1995
2000
2005
2010
Source: Federal Reserve Board
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
70
… i.e., the Fed isn’t “monetizing” debt … not QEing
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Monetary base (billions of dollars)
M2 (billions of dollars)
2,200
22,000
2,000
20,000
1,800
18,000
1,600
16,000
1,400
14,000
Monetary base (left scale)
1,200
12,000
M2 (right scale)
1,000
10,000
800
8,000
600
6,000
400
4,000
200
2,000
0
1970
0
1975
1980
1985
1990
1995
2000
2005
2010
Source: Federal Reserve Board
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
71
Desperately seeking a proper label …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Comment
QE (Quantitative Easing)
Not
CE (Credit Easing)
Sort of
DE (Duration Easing)
Better
EE (Expectations Easing)
Best answer
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
72
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Appendix 6. On inflation … zzzzzzzz
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
73
Whatever
Core PCE inflation (percent change from 12 months earlier)
Gold ($/ Troy ounce)
10
1400
1300
1200
Core PCE
8
1100
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1000
900
6
Gold
(London
800
700
600
4
500
400
300
2
200
100
0
1970
0
1975
1980
1985
1990
1995
2000
2005
2010
Sources: NBER recession bars; US Department of Commerce; Bloomberg
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
74
Inflation is below target ... and this isn’t the final answer
Selected core consumer price indexes (percent change from 12 months earlier)
16
16
14
14
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
12
The Federal
Reserve's
long-run
inflation
target (for
chain core
PCE price
inflation)¹
10
8
Core CPI
12
10
8
6
6
4
4
2
Core chain PCE price index
2
0
1960
0
1965 1970 1975 1980 1985 1990
1995 2000 2005 2010 2015 2020
Sources: NBER recession bars; US Department of Commerce; US Department of Labor
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
75
A strict interpretation of the Nairu “model” …
Core PCE inflation (percent change from 12 months earlier)
11
74
10
9
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
8
7
6
5
73
4
3
2
1
0
-6
-5
-4
-3
-2
-1
0
1
2
3
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
76
… which comes from the observed short-term tradeoff …
Core PCE inflation (percent change from 12 months earlier)
11
74
10
9
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
79
8
7
75
78
6
77
76
5
73
4
3
2
1
0
-6
-5
-4
-3
-2
-1
0
1
2
3
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
77
… between inflation and slack …
Core PCE inflation (percent change from 12 months earlier)
11
74
10
80
9
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
81
8
79
7
75
78
6
77
82
88
76
83
90
5
73
84
4
87
85 86
3
89
2
1
0
-6
-5
-4
-3
-2
-1
0
1
2
3
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
78
… (inflation rises as the economy surpasses Nairu …
Core PCE inflation (percent change from 12 months earlier)
11
74
10
80
9
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
81
8
79
7
75
78
6
77
82
76
83
90
5
73
84
4
87
85 86
91
92
04
93
07
96 05
3
94
06
95
2
98
97
1
0
-6
-5
-4
-3
-2
-1
0
1
2
3
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
79
… and falls as the economy falls below it) …
Core PCE inflation (percent change from 12 months earlier)
11
74
10
80
9
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
81
8
79
7
75
78
6
77
82
76
83
90
5
73
84
92
04
03
87
85 86
91
02
4
93
07
96 05
3
94
06
95
2
98
01
97
1
0
-6
-5
-4
-3
-2
-1
0
1
2
3
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
80
… should say “deflation”
Core PCE inflation (percent change from 12 months earlier)
11
74
10
80
9
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
81
8
79
7
75
78
6
77
82
76
83
90
5
73
84
92
04
02
08
03
87
85 86
91
09
4
93
07
96 05
3
94
06
95
2
98
01
97
1
0
-6
-5
-4
-3
-2
-1
0
1
2
3
Actual unemployment rate less 5% Nairu assumption (percentage points)
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
81
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Appendix 7. Trauma at the grocery store
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
82
Corn prices
Price of corn (dollars per bushel)
8
Energy Independence and Security Act of
2007 (December 19, 2007)
7
8
7
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Energy Policy Act of 2005 (August 8, 2005)
6
6
5
5
4
4
3
3
2
2
1
1
0
0
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Source: US Department of Agriculture
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
83
Corn and grocery bills
Change in the relative price of corn and food ratio of price indexes to 2005 prices)
7
6
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
5
4
3
2
Relative retail price of food (ratio of chain price index for personal consumption
expenditures of food and beverages that were
purchased for off-premises consumption,
i.e., groceries and not restaurants to
chain price index)
7
Corn's estimated contribution to
the relative price of retail food,
assuming corn comprises 3% of
the typical grocery bill
4
6
5
3
2
1
1
0
0
-1
-1
-2
-2
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Sources: US Department of Agriculture; US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
84
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Appendix 8. Global awakening …
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
85
A Copernican story …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
External balance (percent of GDP)
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
-4
-4
US nominal net exports
US current account balance
-5
-5
-6
-6
-7
-7
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
86
... a reflection of an economic awakening …
Real GDP (chained 2005 US dollars)
40,000
40,000
35,000
35,000
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
30,000
25,000
30,000
Developing economies in
Eastern Europe, Latin
America, and Asia
25,000
20,000
20,000
15,000
15,000
10,000
10,000
5,000
5,000
US real GDP
0
1990
0
1995
2000
2005
2010
Sources: US Department of Commerce; J.P. Morgan
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
87
… as impoverished areas manage out of poverty ...
GDP per capita
(Ratio to 2010 US level)
US level (dollars per person)
42,000
0.80
0.60
China's per capita real GDP
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
1.00
India's per capita real GDP
1.20
35,000
28,000
21,000
0.40
14,000
0.20
7,000
0.00
0
1877 1887 1897 1907 1917 1927 1937 1947 1957 1967 1977 1987 1997 2007
Sources: US Department of Commerce; J.P. Morgan
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
88
America sponsors this and …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
After-tax GDP profits (percent of nominal Gross Domestic Income)
350
350
300
300
250
250
200
200
US goods imports from China
150
150
100
100
50
0
1990
50
US goods exports to China
0
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
89
… America benefits from brand new export markets
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
US goods exports to China (percent of all US exports)
0.08
0.08
0.07
0.07
0.06
0.06
0.05
0.05
0.04
0.04
0.03
0.03
0.02
0.02
0.01
0.01
0.00
1990
0.00
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
90
… with decades to go …
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
China’s real GDP per capita (ratio to US level)
1.0
1.0
0.9
0.9
0.8
0.8
0.7
0.7
0.6
0.6
0.5
0.5
0.4
0.4
0.3
0.3
0.2
0.2
0.1
0.1
0.0
0.0
1950
1960
1970
1980
1990
2000
2010
2020
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
2030
2040
2050
… for two sleeping giants
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
China and India’s real GDP per capita (ratio to US level)
1.0
1.0
0.9
0.9
0.8
0.8
0.7
0.7
0.6
0.6
China
0.5
0.5
0.4
0.4
0.3
0.3
India
0.2
0.2
0.1
0.1
0.0
0.0
1950
1960
1970
1980
1990
2000
2010
2020
Source: US Department of Commerce
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
2030
2040
2050
52% of growth here to 2050 will come in China and India
Real GDP in selected regions (percent change from four quarters earlier)
600,000
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
500,000
400,000
Other
India
China
Current developed (North America, Japan, Western
Europe)
300,000
200,000
100,000
0
1990
2000
2010
2020
2030
Sources: US Department of Commerce; JPMorgan Chase & Co.
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
2040
2050
How global GDP will evolve …
Distribution of real GDP (percent of global output)
1.00
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
0.80
Other
India
0.60
China
0.40
0.20
Current developed (North America, Japan, Western Europe)
0.00
2007
2017
2027
2037
Sources: NBER recession bars; US Department of Commerce; various academic sources
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
2047
… kind of an Asia story
Distribution of real GDP (percent of global output)
100%
80%
ECONOMIC OUTLOOK UPDATE, AFP OF WESTERN NEW YORK, JANUARY 26, 2011
Asia
60%
40%
United States
20%
0%
2007
Europe
Latin America
MIddle East and Africa
2012
2017
2022
2027
2032
2037
2042
Sources: NBER recession bars; US Department of Commerce; various academic sources
JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)
2047