Economic Outlook When Will It End? 2009 Tri-State ASBO Conference May 14, 2009 Dennis Delay NHCPPS

1. Economic OutlookWhen Will It End?2009 Tri-State ASBO ConferenceMay 14, 2009Dennis DelayNHCPPS “…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

2. All of our reportsare available on the web:www.nhpolicy.org New Hampshire Center for Public Policy Studies Board of Directors Donna Sytek, Chair John B. Andrews John D. Crosier Shelia T. Francoeur Chuck Morse Todd Selig Stuart Smith James Tibbetts Brian Walsh Kimon S. Zachos Martin Gross Staff Steve Norton Dennis Delay Ryan Tappin “…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

3. Edward Hopper – The Lee Shore:

4. It’s a Great Time to be an Economist:

5. Has Bear turned to Bull?

6. The Bursting Housing Bubble… Fiserv Case Shiller National House Price Index (-31.6%) Index: 2000q1 = 100 -20.2%

7. …Means Homes No Longer Equal to ATMs..

8. …Households Buckle Under the Stress… Household debt in delinquency or default, $ bil, annualized Sources: Equifax, Moody’s Economy.com

9. …Large and Growing Capital Shortfall Projected losses on assets as of 2008Q3, $ bil At risk mortgages 20,000,000 Foreclosure rate 50% Foreclosed mortgages 10,000,000 Loss rate 50% Mortgage loss $1 trillion Corporate Commercial mortgages Consumer loans Residential mortgages

10. …Shattering the Collective Psyche Net % of businesses responding positively to Dismal survey Source: Moody’s Economy.com

11. Looking For Stability in the Financial System… Difference between 3 month Libor and Treasury bill yields

12. The Worst Downturn Since the Great Depression Recessions since World War II

13. Anecdotal evidence from the Fed Bank of Boston, April 15, 2009 • Business activity continues to slow in the First District, • Non-auto retail sector sales are better than expected. • Manufacturers report ongoing year-over-year declines in sales or orders, with the pace worsening in the first quarter. • Consulting and advertising firms cite marked declines. • Commercial and residential real estate markets remain in the doldrums, although residential contacts see early signs of improvement. • Costs are generally declining. • Real estate prices continue to fall, but most responding manufacturers and advertising and consulting firms are holding prices steady.

14. Comparing Recessions – So Far:

15. Home prices rose much faster than income. Source: FHFA and Bureau of Economic Analysis

16. Home prices rose much faster than income. Source: FHFA and Bureau of Economic Analysis

17. Home prices rose much faster than income. Source: FHFA and Bureau of Economic Analysis

18. Homebuilding at a stand still. Source: US Dept of Commerce

19. If and When? Market is continuing to deteriorate in terms of backlog of unsold homes and price declines Price decline is approaching that experienced in the early 1990s Major problem now is buyers sitting on the sidelines New construction is not adding much inventory (that’s good) Inventory in absolute terms is stable/modestly improving (that’s good) To get buyers back in the game: They need confidence they will have a job They need confidence prices will not drop further They need reasonable access to mortgage credit They need low interest rates Major national economic and buyer incentives could take hold in second half of 2009 to provide some stability, if not recovery. 50-50 chance we will see price and inventory stability by the end of the year, but at low levels Look for a very gradual recovery, when it comes

20. Variation in State Tax Structure Source: The Tax Foundation

21. AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

22. Recovery.gov • Save or create • 15,000 jobs in ME • 16,000 jobs in NH • 8,000 in VT • Formula block grant awards 2/19/09 • Fed agencies report use of funds 3/3/09 • More reporting from Feds in May • States start reporting in July

23. Northeast Scores Big in Stimulus Package – Source: Economy.com Stimulus funding, $ per capita $1,650 to $1,750 > $1,850 < $1,650 $1,750 to $1,850

24. ARRA 2009 funds for Education Source: Economy.com and Recovery.gov

25. ARRA of 2009 targeted to Education and Healthcare Source: PolEcon Research, April 2009

26. ARRA of 2009 will see most of the impact next year Source: PolEcon Research, April 2009

27. A significant recession with difficult challenges over the full forecast period Global credit crisis and its after effects have pushed New England economy into recession. Declining employment in the New England region (since first half of 2008). Forecast to lose over 250,000 jobs in the region by end of decline in 2010, or 3.6% of employment. Unemployment rate is expected to rise to highest rate since 1992, to 9.2% in US, over 8% in the region by mid-2010. Housing price decline expected till 2010.   Slow recovery expected ….in housing, employment and overall regional economy.

28. Declining oil prices have softened the blow.

29. When Will it End? (Economy.com) Major Financial Failures Abate Employment Bottoms Foreclosures Peak House Prices Resume Rising Stock Market Bottoms Housing Starts Bottom Fed Tightens ’08q1 ’08q2 ’08q3 ’08q4 ’09q1 ’09q2 ’10q1 ’10q2 ’09q3 ’09q4 ’10q3 ’10q4 Oil Prices Peak Home Sales Bottom Jobless Rate Peaks House Prices Bottoms Extraordinary Writedowns End $ Rises

30. Right Place, Right Time.

31. Recasts- The Next Lee Shore?

32. Northern New England Scores Well

33. A full proof economic indicator!