1 / 39

Current Economic Conditions FirstBank Brentwood Country Club

Current Economic Conditions FirstBank Brentwood Country Club. David A. Penn Director, Business and Economic Research Center Jennings A. Jones College of Business Middle Tennessee State University dpenn@mtsu.edu 615-904-8571 September 13, 2007. Economic Indicators. Unemployment Job growth

siusan
Download Presentation

Current Economic Conditions FirstBank Brentwood Country Club

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Current Economic ConditionsFirstBankBrentwood Country Club David A. Penn Director, Business and Economic Research Center Jennings A. Jones College of Business Middle Tennessee State University dpenn@mtsu.edu 615-904-8571 September 13, 2007 Business and Economic Research Center

  2. Economic Indicators • Unemployment • Job growth • Taxable sales • Housing construction Business and Economic Research Center

  3. Unemployment July 2007 • U. S.: 4.6% (steady) • Tennessee: 4.1% (falling) • Nashville MSA: 3.4 % (falling) Business and Economic Research Center

  4. Nashville MSA Unemployment Rate Business and Economic Research Center

  5. Nonfarm job growth is slowing (yty percent change) • U. S.: 1.3% (drifting lower) • Tennessee: 0.8% (steady) • Nashville MSA: 1.2% (slowing) Business and Economic Research Center

  6. Job growth in Tennessee(yty percent change) Business and Economic Research Center

  7. Nashville MSA Job Growth (yty percent change) Business and Economic Research Center

  8. Manufacturing employment growthNashville MSA Business and Economic Research Center

  9. Construction employment growthNashville MSA Business and Economic Research Center

  10. Nashville MSA labor market conditions • Recap: • Unemployment rate very low. • Overall payroll employment growth tepid. • Manufacturing job losses are a drag on overall employment. • Construction employment still robust. Business and Economic Research Center

  11. Taxable sales Nashville MSA – showing some weakness Business and Economic Research Center

  12. Housing construction and real estate • Home sales and construction down from last year. • Boom spurred by low mortgage rates, rapidly rising home prices. Business and Economic Research Center

  13. Permits issued for new houses U.S. Business and Economic Research Center

  14. Housing construction and real estate • Rising home prices were a major source of retail spending since the 2001 recession. • Households cashed out $1 trillion in home equity during the boom. • How much was spent for consumption? Analysts don’t agree on this. • A reduction in housing wealth will cause spending to slow to some degree. Business and Economic Research Center

  15. Housing construction and real estate • Housing construction decline cut 1 point from GDP growth second half 2006. • Decline of this magnitude usually precedes a recession. • But not this time? Business and Economic Research Center

  16. Nashville home building permits Business and Economic Research Center

  17. Building permits growth 2nd Quarter Business and Economic Research Center

  18. Single-family permits by countySecond Quarter Growth Business and Economic Research Center

  19. Unsold inventory of homes rising in the Nashville area (August) Business and Economic Research Center

  20. Home prices and growing inventory in the Nashville area (August) Business and Economic Research Center

  21. Existing homes price index - OFHEO • U.S. and Nashville homes price trends. Business and Economic Research Center

  22. OFHEO existing homes price index – yty growth rate Business and Economic Research Center

  23. Housing and Real Estate • What factors determine the demand for new housing? • Household formation, • Mortgage rates, • Income growth, • Investor and vacation home demand, • Household confidence, • Prices of new homes, and • Availability of credit. Business and Economic Research Center

  24. Nashville MSA population growth Business and Economic Research Center

  25. Supply of new housing • Building permits is our measure of new housing supply. • A permit typically precedes construction completion by about 8 months. • 15,700 new housing units expected for 2007. • Down 3% from 2006. Business and Economic Research Center

  26. Other sources of demand • Household formation is the primary, but not the only, source of demand for new houses. • Other sources of demand include: • Demand for second homes and vacation homes. • Demand for investment homes and speculative investment. • Investment and vacation homes were 36% of demand in 2005 for the U.S. • Share dropped to 29% in 2006. Business and Economic Research Center

  27. Mortgage rates • Mortgage rates are very low. • Rate is 6.6% for August, near a 37 year low. Business and Economic Research Center

  28. Mortgage rates and capital flows • World savings glut: foreign capital inflow keeps our mortgage rates low. • Capital inflow is a direct result of our large trade deficits, largely with China. • As China’s consumer sector grows, they will absorb more savings in capital investment. • This will cause smaller trade deficits for the U.S., but also less savings inflow and higher interest rates in the long term. Business and Economic Research Center

  29. Mortgage rates • Housing construction slumps tend to be preceded by climbing mortgage rates. • But not this time. Fed tightening has had little effect on mortgage rates until very recently. Business and Economic Research Center

  30. Housing affordability • Affordability suffering in the U.S. housing market compared with Nashville. Business and Economic Research Center

  31. Income growth • Nashville MSA: Family incomes not keeping up with home prices. • Median family income rose 6.6% 2004-06 • Median price of home up 13.7% Business and Economic Research Center

  32. Comparative affordability • Affordability has slipped in Nashville, but much more in the U.S. Business and Economic Research Center

  33. Housing Construction • Important factors: • Household formation, • Mortgage rates, • Income growth, • Investor and vacation home demand, • Consumer confidence, • Prices of new homes, and • Availability of credit. Business and Economic Research Center

  34. Subprime mortgages - Tennessee Business and Economic Research Center

  35. Tennessee –disproportionate growth in subprime mortgages Business and Economic Research Center

  36. Tennessee – tightened credit and new home construction Business and Economic Research Center

  37. Conclusions • Payroll employment growth may soften more, with some recovery by the end of the year. • Some time will be needed for the economy to digest the job losses in manufacturing and finance. • Unemployment rates still very low. • Taxable sales sputtering, but may firm. • My view: recession is unlikely in the near future. Business and Economic Research Center

  38. Business and Economic Research Centerwww.mtsu.edu/~berc • Annual Outlook Conference Sept. 28 • Publications • Tennessee’s Business • Global Commerce • Midstate Economic Indicators Business and Economic Research Center

  39. Business and Economic Research Center • Studies • Economic Impact of Higher Education • Economic Impact of the Healthcare Industry • Retail and food services trends for Rutherford County • Assessment of Needs for the Williamson County United Way Business and Economic Research Center

More Related