Professor Emeritus of Economics Thomas R. Brown Professor in Economics Education.
-
Upload
sara-brooks -
Category
Documents
-
view
214 -
download
0
Transcript of Professor Emeritus of Economics Thomas R. Brown Professor in Economics Education.
GOOD NEWS – OUR ECONOMY IS GROWING
WE ARE NOT IN A RECESSION
WE HAVE A LONG WAY TO GO TO A FULL RECOVERY
WORST RECOVERY SINCE GREAT DEPRESSION
October 2009 unemployment rate = 10.0 %
September 2013 unemployment rate = 7.2%
STILL 2.2 MILLION FEWER WORKERS THAN BEFORE THE FINANCIAL CRISIS
Number unemployed Sept 2013 = 11.3 million
NEW NORMAL
Participation rate = % population over age of 16 in labor force
January 2001 67.2%September 2013 63.2%
136,000 left the labor force in September 2013
515,000 left the labor force in August 2013
NEW NORMAL
Employment rate =% of population over the age of 16 employed
January 2001 64.4% September 2013 58.6%
September 2013 Population 25 years and over
Participation Rate Employment RateLess than H.S. 44.5% 39.9%H.S. no college 59.0% 54.5%Some college 67.2% 63.2%Bachelor’s Degree 75.3% 72.5%
or higher
REASONS FOR UNEMPLOYMENTSeptember 2013Job Losers 3.8% Job Leavers 0.6% Reentrants 2.0% New Entrants 0.8% Total unemployment = 7.2%
Government Payroll
Decline since 2006Federal Government - 74,000State Government -161,000Local Government -560,000
State and local governments are starting to hire again
WH0 HAS BEEN HIRING?RETAILHEALTH CAREPROFESSIONAL & BUSINESS SERVICESMANUFACTURING
WHO IS STARTING TO HIRE? GOVERNMENT CONSTRUCTION
Those with homes and jobs are
on the road to recovery
Those who lost jobs and/or homes
are stalled - No recovery
UNDERPERFORMING 2009 GDP 2010 GDP 2011 GDP 2012 GDP
Q1 -6.4% Q1 3.7% Q1 0.4% Q1 3.7% Q2 -0.7% Q2 1.7% Q2 1.3% Q2 1.2% Q3 1.6% Q3 2.5% Q3 1.8% Q3 2.8% Q4 5.0% Q4 2.3% Q4 3.0% Q4 0.1%
GROWTH FOR Q1 2013 = 1.1% GROWTH FOR Q2 2013 = 2.5%
NEW NORMAL
GDP AVERAGE GROWTH 1950 – 1999 3.6 %
GDP AVERAGE GROWTH 2007 – 2012 2.0%
HOW IMPORTANT IS THE CHANGE IN GROWTH?
3.6% GR0WTH - GDP DOUBLES IN 20 YRS 2.0% GROWTH – GDP DOUBLES IN 36 YRS
AGGREGATE DEMAND
C+I+G+XCONSUMER SPENDINGINVESTMENT SPENDINGGOVERNMENT SPENDINGNET EXPORTS (EXPORTS-IMPORTS)
PENT UP DEMAND – BUYING CARS & TRUCKS
SAVINGS RATE UP = 4.6%
NET WORTH OF HOUSEHOLDS UP
CONFIDENCE UP & DOWN
REAL WAGES STAGNANT
ECONOMY WORKED THROUGH FISCAL DRAG
INCREASE IN PAYROLL TAX JAN 2013
4.2% to 6.2%
TAX INCREASE ON AVERAGE WAS$40 PER BI-WEEKLY PAYCHECK
CUT TAKE-HOME PAY BY $125 BILLION
HOUSING MARKET IS STABILIZING
CONSTRUCTION IS SLOWLY PICKING UP
BUSINESS PROFITS ARE STRONG
BUSINESSES HAVE LOTS OF CASH
BUSINESSES ARE READY TO SPEND
UNCERTAINTY IS A MAJOR PROBLEM
EXPORTS HAVE BEEN A DRIVING FORCE IN OUR ANEMIC RECOVERY
EXPORTS ARE SLOWING DOWN EXPORTSACCOUNT FOR 14% OF OUR GDP
BRIC Nations 2012 2013 est
BRAZIL 2.4% 8.9%RUSSIA 1.8% 3.4%INDIA 4.2% 3.4%CHINA 8.0% 7.8%
40% OF WORLD POPULATION
EUROZONE UNEMPLOYMENT AT RECORD HIGH
17 COUNTRIES THAT USE THE EURO HIT THE HIGHEST UNEMPLOYMENT RATES IN THE HISTORY OF THE CURRENCY. =
12.2% MAY 2013
CURRENT UNEMPLOYMENT RATE = 12.1%
SEPTEMBER 2013 UNEMPLOYMENT
GREECE 27.9% SPAIN 26.2% ITALY 12.2% FRANCE 10.5% GERMANY 6.9% UK 7.7%
SCHADENFREUDE!
GROUP OF SEVEN: SLOW TO NO GROWTH
GDP GROWTH 2013 est
U.S. 2.2%JAPAN 1.9%GERMANY 0.9%BRITAIN 1.3%FRANCE -0.1%CANADA 1.6%ITALY -1.0%
WE WENT OVER THE FISCAL CLIFF AND LIVED TO TALK ABOUT IT
WE DID GET HIGHER TAXES
WE DID GET SEQUESTRATION
2009 $1.4 TRILLION2010 $1.3 TRILLION2011 $1.3 TRILLION2012 $1.1 TRILLION
2013 $642 BILLION est.
TOTAL DEBT = $17 TRILLION +
GOOD NEWSDEFICIT AS A PERCENT OF GDP IS
SHRINKING
DECEMBER 2009 10.1 % GDPDECEMBER 2010 9.0% GDPDECEMBER 2011 8.7% GDPDECEMBER 2012 7.0% GDPDECEMBER 2013 4.0% GDP est.
Three Reasons for Deficit Decline
!. Recession is over - economy is growing2. Sequestration remains in effect3. Govt health care costs lower than
expected
DEBT AS A PERCENT OF GDP IS GROWING
2000 57.7%2005 64.6%2008 71.1%2010 95.1%2012 101.7%2013 103.0% est.
December 13, 2013 Conference Committee Fiscal 2014 Budget Due
January 15, 2014Second Round of Sequester Budget
Cuts
February 7, 2014Reach New Debt Ceiling
MOST EXPANSIVE MONETARY POLICY IN THE HISTORY OF THE FEDERAL RESERVE
FEDERAL RESERVE BALANCE SHEET
INCREASED BY
$2.9 TRILLION SINCE AUGUST 2007
UNCONVENTIONALQE1 NOVEMBER 2008
QE2 NOVEMBER 2010
QE3 SEPTEMBER 2011(operation twist)
QE4 SEPTEMBER 2012 (print $85B/mth)
UNCONVENTIONAL
FEDERAL RESERVE IS PRACTICING TRANSPARENCY
INFLATION TARGET 2.5%
UNEMPLOYMENT TARGET 6.5%
KEEP INTEREST RATES AT ZERO INDEFINITELY
PUMP $85 BILLION PER MONTH INTO ECONOMY
TAPER TANTRUMSeptember 2013FED ANNOUNCES IT IS GOING TO TAPER DOWN
THE AMOUNT OF MONEY IT IS PRINTING EVERY MONTH
Stock market fallsWorld currencies devalueMortgage interest rate jump
October 2013 FED REVERSES POSITION – WILL KEEP PRINTING INDEFINITELY
FUTURE EFFECT OF MONETARY POLICY IS VERY LIMITED
PUSHING ON A STRING
WE HAVE HAD 58 MONTHS OF ZERO INTEREST RATES
SEPTEMBER 2013
BANKS HAD $2.2 TRILLION IN EXCESS RESERVES
HEADWINDS FOR 2013-14
1. DEBT CRISIS PLAGUING EUROPEAN GOVERNMENTS
2. HIGH U.S. UNEMPLOYMENT RATE3. STOP-AND-START NATURE OF CONSUMER
SPENDING4. LACK OF CONFIDENCE AMONG CEO’S5. LACK OF CONSUMER CONFIDENCE6. CONTINUED POLITICAL BRINKSMANSHIP7. FEAR THAT IT ALL COULD HAPPEN AGAIN
FIVE REASONS TO BE SLIGHTLY OPTIMISTIC
1.BALANCE SHEETS HAVE IMPROVED2. INFLATION IS TAME3.WE ARE GROWING FASTER THAN MANY
OF OUR COMPETITORS4.DEFICIT IS DECLINING5.WE ARE GAINING ENERGY
INDEPENDENCE