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To: GFOAz By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company February 18, 2011

You Heard It Here First: Less Dreadful Times Ahead!. To: GFOAz By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company February 18, 2011. The U.S. Recovery:. U.S. Y/Y Job Losses - Recent Recessions Duration in Months - BLS. January. 2001. 1991. 1980/81. 1974.

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To: GFOAz By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company February 18, 2011

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  1. You Heard It Here First: Less Dreadful Times Ahead! To: GFOAz By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company February 18, 2011

  2. The U.S. Recovery:

  3. U.S. Y/Y Job Losses - Recent RecessionsDuration in Months - BLS January 2001 1991 1980/81 1974

  4. US Employment*Source: Bureau of Labor Statistics *January 2011/January 2010

  5. U.S. Unemployment Rate1980 – 2011* Source: Bureau of Labor Statistics Recession Periods USELESS!!!!! *Data through January 2011

  6. U.S. Leading Indicators1971 – 2010 (through December) Source: The Conference Board Recession Periods

  7. Select Recession Indicators: • Real GDP • Real Income • Employment • Industrial Production • Wholesale – Retail Sales

  8. Real Gross Domestic ProductPercent Change Quarter Ago, Annualized1971 – 2010* Source: Bureau of Economic Analysis Recession Periods Half of growth Q4 & Q1 was from inventory corrections. The softening in Q2 is from an increase in imports. * Data through 4th quarter 2010

  9. Real Personal Income Net of Government TransfersPercent Change Quarter Ago, Annualized1971 – 2010* Source: Bureau of Economic Analysis Recession Periods * Data through 4th quarter 2010

  10. National EmploymentPercent Change Month Ago, Annualized (S/A)1981 – 2011* Source: U.S. Bureau of Labor Statistics Recession Periods Flat after adjusting for Census employment *Data through January 2011

  11. Industrial ProductionPercent Change Year Ago1973 – 2010* Source: The Conference Board Recession Periods *Data through December 2010

  12. Real Retail Sales U.S. Percent Change Year Ago1973 – 2010* Source: Federal Reserve Recession Periods *Data through December 2010 **Three-month moving average

  13. Recession Indicators Summary: • Real GDP • Real Income • Employment • Industrial Production • Wholesale – Retail Sales

  14. Why is this Important? • Things won’t be getting WORSE… • But, when will they be getting SIGNIFICANTLY BETTER?

  15. Consumers

  16. Recession Periods Household Net WorthPercent Change Year Ago1970 – 2010*Source: Federal Reserve • Equals assets less debt; data through third quarter 2010.

  17. Recession Periods Household Net Worth ($$$)1970 – 2010*Source: Federal Reserve ($ in trillions) • Data through third quarter 2010.

  18. Recession Periods Financial Obligation Ratio**1980 – 2010Source: Federal Reserve *Data through third quarter 2010 **Ratio of mortgage and consumer debt (including auto, rent and tax payments) to disposable income.

  19. Savings Rate1973 – 2010* Source: Federal Reserve Recession Periods *Data through December 2010

  20. Consumer Confidence1978 – 2011* Source: The Dismal Scientist Recession Periods 1985 Benchmark = 100 *Data through January 2011

  21. Consumer Recap • Lots of pressure on the consumer. • Situation is improving but VERY slowly. • Wealth is an issue. • Less pent up demand than typical for a recovery.

  22. BusinessDepends on the sector…

  23. Recession Periods Corporate Profit (Billions of Dollars, SA) 1975-2010*Source: Freelunch.com *Data through third quarter 2010

  24. Corporate Profit By Industry ($Billions)2010 q3Source: BEA

  25. Doin’ God’s Work

  26. U.S. Real Exports as a Percent of Real GDP1971 – 2010* Source: Bureau of Economic Analysis Recession Periods *Data through fourth quarter 2010

  27. Hours WorkedPercent Change from Year Ago1976 – 2010** Source: Bureau of Labor Statistics Recession Periods **Data through fourth quarter 2010

  28. Capacity Utilization Rate1970 – 2010* Source: The Conference Board Recession Periods This is where investment occurs. *Data through December 2010

  29. Percentage of Large U.S. BanksReporting Easier Standards on Business Loans1997 – 2010* Source: Federal Reserve, Board of Governors Recession Periods * Data as of January 2011 survey.

  30. Business Recap • Profits are high, but… • Business spending on plant will be slow. • Spending on equipment will be up a little. • Hiring will still be relatively slow.

  31. U.S. Summary:Recovering but not recovered.

  32. Case Study:Arizona, the recession “poster child.”

  33. It all comes down to supply/demand and pop/employ growth.

  34. A strong rate of growth does not mean we have recovered.

  35. Jobs growing Top 10 Jobs declining Job Growth 2006 Source: US BLS 10 7 9 5 1 4 3 15 22 8 2 11 6 13

  36. Jobs growing Top 10 Jobs declining Job Growth 2007 Source: US BLS 7 8 15 5 11 2 28 1 10 36 6 22 20 9 4 3 45

  37. Hawaii Jobs growing Top 10 Jobs declining Job Growth 2008 Source: US BLS Alaska 8 15 2 34 42 7 1 11 46 17 10 45 9 4 47 14 3 6 50

  38. Hawaii Jobs growing Top 10 Jobs declining Job Growth 2009 Alaska 2 Source: US BLS 30 18 1 47 44 3 23 5 50 35 32 45 13 16 49 24 8 4 46

  39. Hawaii Jobs growing Top 10 Jobs declining Job Growth Update: Arizona Ranked 35th 2010 v 2009 Alaska 3 31 34 2 7 36 1 28 12 43 8 16 50 5 11 49 46 40 6 21 35 45 9 4 10 29

  40. Employment Growth: Top 10 States (December M/M) Texas New Hampshire North Dakota (added a Circle K) Oklahoma Massachusetts Wyoming (added 2 Circle K’s) Louisiana Arizona Washington Wisconsin

  41. Hawaii Jobs growing Top 10 Jobs declining Job Growth Update: Arizona Ranked 8th December 2010 v December 2009 Alaska 36 9 24 3 13 26 2 29 10 5 12 6 15 50 16 32 39 30 37 4 8 46 1 7 31

  42. Greater Phoenix Economy

  43. Recession Periods Phoenix-Mesa MSA Employment* Annual Percent Change 1975–2011**Source: Department of Commerce, Research Administration *Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990. ** 2011 & 2012 forecasts are from Elliott D. Pollack & Co.

  44. Greater Phoenix Y/Y Job Losses - Recent RecessionsDuration in Months – BLS - December 1991 2001 1980/81 1974

  45. Phoenix-Mesa Employment*Source: Arizona Department of Commerce, Research Administration *December 2010/December 2009

  46. Recession Periods Employment Levels: Greater Phoenix Back to Peak Before 2015? Source: ADOC Peak

  47. Real estate problems will continue… (principles hold for all areas)

  48. Properties in the Foreclosure Process Maricopa County 2002 – 2011 Source: The Information Market AZ = Approx 50% more; this will stay relatively high for a while! *Data through January 2011.

  49. Investors: 40% of the MarketPercent of Non-Owner Occupied Sales of Total SalesMaricopa CountySource: DataQuick

  50. How Investors Impact the Market: • Temporarily increase housing demand. • This puts upward pressure on prices.

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