The Economy 2012
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Transcript of The Economy 2012
CA Urban/Community Forest Conference:The Economy 2012
Palo Alto, CA September 16, 2011
Robert Eyler, Ph.D.Professor, Economics
Frank Howard Allen Economics Research FellowDirector, Executive MBA Program
Sonoma State [email protected]
1
Major Economic Issues• A year of mixed signals and international issues– International concerns worldwide
• Domestic economy in US continues to struggle– International issues transmission to US– US issues transmission to world building: is the debt a big deal?
• State: Budget passed, mix of cuts and new taxes– Where will the new unemployed public workers find jobs?– Is there a commitment to anything in Sacramento?
• Commercialized science the key long-term: pulls all behind– Where is the investment?
2
What we have tried• Monetary Policy: about $1.2 trillion– Generate investment from lower interest rates and
increasing money supply– Good: stimulated exports– Bad: inflation potential and lack of focus
• Fiscal Policy: over $800 billion– Advertised as “New Deal 2”, some of that happened– Lack of investment in science, no focus here either– New jobs packages more rhetoric than real for now
• If innovation and entrepreneurship the way out of recession, not much direct investment
3
Excess Reserves at U.S. Banks (Loanable Funds Not Lent), 2008$Jan 2000 - Aug 2008
0
2
4
6
8
10
12
14
16
18
Month
Bil
lio
ns
of
$
4Source: Federal Reserve Board
5Source: Federal Reserve Board
6Source: Federal Reserve Board
7
S&P 500 Index, 1990 - Present
Sources: Reuters and CREA at SSU 7
8
S&P 500 Index, 2007 - Present
Sources: Reuters and CREA at SSU
9
Philadelphia FED Business Survey, 1968 – Aug 2011
Source: Federal Reserve, Philadelphia
What we want (or should want)• Investment in solutions to scientific problems– We know these problem are coming or are here
• To remain the technological and scientific leader worldwide– We know competition is coming from all points on
the globe– Who in here likes math?
• To create jobs and businesses– Science has a large multiplier effect on our
economy
10
11Source: BEA (www.bea.gov)
12Source: BEA (www.bea.gov)
13Source: BEA (www.bea.gov)
Unemployment Rates, US and CA, Seasonally Adjusted, 1976-2011
14Source: BLS (www.bls.gov)
15
California
• 2011-12 likely to be slightly better than 2010-11– If recovery is truly in place, CA will feel effects of
recovery
• Labor market still the big deal– Private and public issues: job creation vs. destruction– Need to stimulate jobs and business and retain both
• CA slowly bifurcating in terms of housing markets– Interior valleys likely to have a Japanese-like recovery– Coastal recovery dependent on general economic
recovery and conversion of emerging wealth to housing demand
16
TechPulse Index, Jan 2007 = 100
Source: BEA (www.bea.gov)
Source: BEA (www.bea.gov)17
Source: BEA (www.bea.gov) 18
Investment in Environmental Change
• Three biggies:– Peak oil, petroleum use and culture– Generalizing the use of renewables: wind, solar– Rising oceans and climate change effects
• Three issues– Lack of ROI short-term: need to commoditize
solutions– Political will around this, especially in CA– Bad advertising to Wall Street: housing markets a
good example of how Wall Street works
19
Housing and Environmental Issues• People make consumption choices, households
make savings choices• Forestry use: are we still using new wood to build?• Need households to generate demand for many
environmental solutions– Do teenagers consume micro-wind turbines?– Do teenagers consume solar paneling, low-flow toilets,
instant hot water heaters?– Do people see oceans rising?– Are teenagers buying high MPG cars en masse?
20
Environ Employment, 1990-2011, Index (1990 = 100)
21Source: BLS (www.bls.gov)
Peak Wood? Index (1979 = 100), 1979-2011
22Sources: BEA (Residential) and BLS (Softwood Prices)
Where are we headed?• Recession-like activity through 2011: labor markets– Hiring not concentrated in private firms or with
sustainable funding– Unlikely to see a national surge in 2012, as elections and
continued uncertainty will drag• CA economy now starting to pull and push– Tech firms and activity doing well– 2012 as an election year may also slow things down
• Recognize slower growth and better choices– Economic development choices have economic and
environmental effects on communities– Investment in solutions to scientific problems a good
long-term, slow growth bet23