Economic Update: North Carolina and the U.S. September 15, 2010

Economic Update:North Carolina and the U.S.September 15, 2010 Dr. Andrew Brod Center for Business and Economic Research Bryan School of Business and Economics University of North Carolina at Greensboro Email: AndrewBrod@uncg.edu Web: http://cber.uncg.edu

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The Recession is Over, But…

It’s Going to be Okay … according to 2½-year-old Meyer Brod

This Pie Chart Proves It

Expansion of 2001-07: Lame Source: Economic Policy Institute

Great Recession of 2008-09 • It probably ended in the summer of ‘09. • Longest and deepest recession since the Great Depression • The non-government National Bureau of Economic Research will make the official call. • But the economy isn’t strong yet. • Expansion means things are getting better, not that they’re good. • Are we measuring and dating recessions correctly? • Unemployment rate is a lagging indicator. • Should we focus on per-capita real GDP?

Great Recession of 2008-09 • NBER isn’t in the business of forecasting recessions and expansions. • November 2001: Announces that a recession began in March 2001. • July 2003: Announces that the recession ended in November 2001. • NBER’s announcement this time: • Announced in December 2008 that the recession began in December 2007. • No surprise: 96% of NABE economists surveyed in November 2008 said a recession was underway.

Great Recession of 2008-09 • A double-dip recession-within-a-recession: • In mid-2008, it looked like we might avoid an outright recession. • Real GDP actually rose in Q2. • Rising commodity prices not due to speculation, which implies they were being used. • But on 9/15/08, the government let Lehman fail. • That’s when things got ugly • The recession-within-a-recession was the first since the Great Depression to be triggered by a financial crisis. • Will there be a triple dip? • Probably not

Recession History • Since WWII, recessions have been short. • That wasn’t always the case. • 1946 Employment Act, 1978 Humphrey-Hawkins Act: • Authorized federal govt. to manage economy • Creeping socialism, or effective management? Source: National Bureau of Economic Research

Recession History • Recessions are changing. • The post-recession job recovery is slowing. • Number of months for employment to reach pre-recession levels: 2001: 54 in NC Average of 1st 6 postwar recessions Source: Economic Policy Institute

Recession History Will we miss breaking the record set by the 2001 recession? Employment, SA, % change from peak month Source: Bureau of Labor Statistics, Bureau of Census

Real GDP Growth Average growth 1946-2000 = 3.4% 2009 @ -2.6% GDP in 2005 dollars: Annual growth Source: Bureau of Economic Analysis

Real GDP Growth 2008:3 thru 2009:1 were the worst 3 quarters “ever” (since 1947) Strong growth in 2009:4 but weakening since then 2010:2 @ 1.6% GDP in 2005 dollars: Chge from prevqrtr, SAAR Source: Bureau of Economic Analysis

Real GDP & GDP/S Growth NC: 2008 @ 0.1% Source: Bureau of Economic Analysis

Real GDP/S Growth, 2007 . Source: Bureau of Economic Analysis

Real GDP/S Growth, 2008 . Source: Bureau of Economic Analysis

Payroll Employment Late 2008/ early 2009: drops of 600K+ for 5 months in a row Good rises in spring, but stalling this summer 47 months Aug @ 130.3 million Monthly, SA, millions Source: Bureau of Labor Statistics

Payroll Employment in N.C. SA employment gains stalling in NC as well 54 months Jul @ 3.90 million Monthly, SA, millions Source: Bureau of Labor Statistics

Initial Unemployment Claims No longer moving in the right direction 9/4 @ 478K Weekly, in thousands, SA, 4-week moving avg Source: Department of Labor

NC Initial Unemployment Claims Possibly still moving in the right direction 8/28 @ 12.7K Weekly, in thousands, NSA, 4-week moving avg Source: Department of Labor

Unemployment Rates NC: Jul @ 9.8% US: Aug @ 9.6% Improving slowly US Avg. 1947-2000 = 5.7% Monthly, SA Source: Bureau of Labor Statistics

State Unemployment Rates Source: Bureau of Labor Statistics

A Little Political Economy Source: John Judis, “Job One,” The New Republic, September 22, 2009

A Little Political Economy Direction matters as well: A year later, unemp. is about the same, but Obama’s disapproval rating is up slightly, to 45-50% Source: John Judis, “Job One,” The New Republic, September 22, 2009

A Little Political Economy

Avg. Private Sector Work Week Production and non-supervisory employees Aug @ 33.5 Monthly, hours per week, SA Source: Bureau of Labor Statistics

Avg. Manufacturing Work Week US: Aug @ 41.2 NC: Jul @ 40.3 Production and non-supervisory employees Monthly, hours per week, SA for US, NSA for NC Source: Bureau of Labor Statistics

N.C. Employment Growth Change from December to December, NSA Source: Bureau of Labor Statistics

S&P 500 Index Oct ‘08: 8th worst month on record 57% from Oct ‘07 peak to Mar ‘09 trough But 66% since then 2008: 38% 2009: 23% 2010:  1% 9/13 @ 1122 Lowest close since 9/12/96 Daily close, 2008-10 Source: Wall Street Journal

Consumer Confidence Index Decline in Oct ‘08 was 3rd largest in CCI history Feb ’09: all-time low since index began in 1967 Aug @ 53.5 Monthly, SA, 1985 = 100 Source: Conference Board

Industrial Production Index Up in 11 of the last 13 months 2008: 9.4% 2009: 1.6% 2010: 4.3% Sept ’08 was the largest one-month drop since 1946 Jul @ 93.4 Monthly, SA, 2007 = 100 Source: Federal Reserve Board

Industrial Utilization Jun ‘09 level lowest since series started in 1967 But up since then 2008: 8.3% 2009: 1.4% 2010: 3.3% Jul @ 74.8% Monthly, SA Source: Federal Reserve Board

ISM Indexes: PMI and NMI PMI: Aug @ 56.3 NMI: Aug @ 51.5 Dec ‘08 PMI was the lowest since 1980 Monthly, SA, 50 = “no change” Source: Institute for Supply Management

Retail Sales* Huge drops in Fall ’08, but upward trend throughout ’09 and ‘10 Aggregate annual sales (NSA) 0.4% in 2008 and 6.2% in 2009 Aug @ $363.7 billion *and Food Services Monthly, SA, billions of nominal dollars Source: Census Bureau

Retail Auto Sales Auto sales fell 27% in 2008! Cash for Clunkers: 11.5% in Aug ‘09 But then 15.8% in Sep 7.7% in 2009 Aug @ $55.4 billion Monthly, SA, billions of nominal dollars Source: Census Bureau

Retail Home-Furnishings Sales Furniture sales fell… 2.9% in ’07 13.3% in ’08 3.1% in ’09 Increases in Fall ‘09 and Winter ‘10 have disappeared Aug @ $7.5 billion Monthly, SA, billions of nominal dollars Source: Census Bureau

Consumer Price Inflation Still dancing at the edge of deflation For 2009, +2.7% Jul @ 3.8% Monthly change in CPI, SAAR Source: Bureau of Labor Statistics

Consumer Price Inflation “Core” inflation still too close to zero for comfort Monthly change in CPI, 2008-10, SAAR Source: Bureau of Labor Statistics

Oil Prices Aug @ $76.60 Crude oil, WTI, spot price ($/bbl), monthly avg. Source: Department of Energy

Energy Prices Matter Less Now High oil prices didn’t push us into recession, in part because the economy is becoming more energy-efficient Relative annual energy consumption: 1000 Btu per dollar of real GDP Source: Department of Energy

Interest Rates Aug @ 0.19% Federal Funds Rate (effective), monthly average Source: Federal Reserve Board

Interest Rates Aug @ 4.43% Conventional mortgage rate, monthly average Source: Federal Reserve Board

Dollar Hovering Trade-Weighted Dollar Index (real) Aug @ 87.9 Broad index, 1973 = 100 Source: Federal Reserve Board

Economic Update: North Carolina and the U.S. September 15, 2010