2009 syracuse economic outlook

2009 U.S. andSyracuse Area

Economic OutlookGary D. Keith

Regional Economist – M&T Bank

January 22, 2009

U.S. Consumer Financial ObligationsAs a Percentage of Disposable Income

16.0%

16.5%

17.0%

17.5%

18.0%

18.5%

19.0%

19.5%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Source: Federal Reserve

Consumers gorged on cheap and easy credit—

Q3

19.1%

Q3:07 19.5%

17.9% Average Since 1990

RECESSION

RECESSION

Mortgage and consumer loan debt payments, plus homeowners insurance,

property taxes, auto lease and property rental

payments as a percentage of disposable income

It appearsFederal stimuluschecks were used to paydowndebt in Q2

RECESSION

U.S. Consumer Financial ObligationsAs a Percentage of Disposable Income

16.0%

16.5%

17.0%

17.5%

18.0%

18.5%

19.0%

19.5%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Source: Federal Reserve

Consumers gorged on cheap and easy credit— until August 2007, when

mounting losses from the subprime mortgage meltdown caused financial

markets to seize up…

Q3

19.1%

Q3:07 19.5%

17.9% Average Since 1990

RECESSION

RECESSION

Mortgage and consumer loan debt payments, plus homeowners insurance,

property taxes, auto lease and property rental

payments as a percentage of disposable income

It appearsFederal stimuluschecks were used to paydowndebt in Q2

RECESSION

30

40

50

60

70

80

90

100

110

120

130

140

150

38.0

RECESSION

The Conference Board

U.S. Consumer Confidence IndexIndex: 1985 = 100

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08Dec

July 2007111.9

Index

Causing consumer confidence to

tumble…99.6 averagesince Jan 1990

The lowest reading in the history of the survey, which dates back to 1967

RECESSION

Source: The Conference Board

RECESSION

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

-0.9%

RECESSION

Inflation-Adjusted Year-Over-Year Percentage Change

U.S. Personal Consumption Expenditure Growth

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08Nov

…and real spending to contract for the

first time since 1991…

3.1% averagesince Jan 1990

RECESSION

Source: U.S. Bureau of Economic Analysis

RECESSION

Seasonally Adjusted

U.S. Unemployment Rate

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08Dec

Source: U.S. Bureau of Labor Statistics

Millions ofPersons Unemployed Persons (left scale)

Unemployment Rate (right scale)

June ’039.3

UnemploymentRate

6.7Mar ‘07

RECESSION

RECESSION

6.3%

7.2%

…driving the jobless rate to a 16-year

high

RECESSION

June ’927.8%

…How’s the

Syracuse area

performing in this

environment?

Year-Over-Year Percentage Change

Total Private Sector Employment Growth

Syracuse Metro Area vs. United States

-3%

-2%

-1%

0%

1%

2%

J F M A M J J A S O N D J F M A M J J A S O N D

2007 2008

Source: U.S. Bureau of Labor Statistics -2.6%

-0.2% (Nov.)

Syracuse

United States

So far…reasonably well: Job losses remain modest relative to the U.S.


Private Sector Job Growth – Sept./Oct./Nov. 2008


SYRACUSE

Albany

New York City

Poughkeepsie-Newburgh

Long Island

Buffalo

Rochester

Binghamton

United States

-3%

-2%

-1%

0%

1%

2%



Retail & Leisure/Hospitality Job GrowthSyracuse Metro Area vs. United States

Reflecting the pullback in consumer spending, U.S. retail &

leisure/hospitality job losses have accelerated—while the Syracuse

region has remained stableSource: U.S. Bureau of Labor Statistics

2007 2008

-3.6%

Syracuse

United States(Nov)

0.2%

$330

$335

$340

$345

$350

$355


12-Month Running Total

NYS Sales Tax CollectionsSyracuse Metro Area

Sales tax collections— a good proxy for consumer

spending—declined during the final three months of 2008 and were 1.6%

below Q4:07

2007 2008

$351.1

Sept ’08$354.3

Source: New York State Department of Taxation & Finance

Millions

As a frame of reference, U.S. retail sales were

7.7% below year-ago totals in Q4


NYS Sales Tax Collections – Q4 2008

Source: New York State Department of Taxation & Finance

SYRACUSE

Buffalo

New York City

New York State

Upstate New York

Albany

Poughkeepsie-Newburgh

Rochester

Binghamton

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%



2007 2008

Syracuse’s jobless rate remains well

below the U.S. average

Not-Seasonally Adjusted

Unemployment RateSyracuse Metro Area vs. United States

6.0% (Nov)

United States 7.1%

Syracuse

5.0%

7.0%

6.8%

5.9%

5.2%5.1%

4.2% 4.2%

3.4%

4.0%

3.6%

4.9%5.0%

5.6%

5.0%4.8%

4.2%4.1%

6.0%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

4.9% Avg.Since 1990

Syracuse Metro Area Unemployment RateMonth of November 1990 through 2008

Blue bars signify U.S. recession periods


…Where do

we go from

here?

-6%

-5%

-4%

-3%

-2%

-1%

0%

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

2006 2007 2008

-1.5% (Nov)



Manufacturing EmploymentSyracuse Metro Area vs. United States

United States

Big Question: What happens to

industrial employment?

-5.9%

Syracuse Metro Area United States

8.7%

13.3%

9.2%

(0.5%)

1.0%

2.7%

Manufacturing Share of Total Non-Farm Payroll Compensation – 2007

Source: U.S. Bureau of Economic Analysis

Albany

United States

SYRACUSE

Buffalo

Rochester

Binghamton

2001-07 Changein Manufacturing

Payroll Income

Share of Total Private Sector Employee Compensation*

Health Care & Education Payroll IncomeSyracuse Metro Area vs. United States

12%

13%

14%

15%

16%

17%

18%

19%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Syracuse

United States

2002 2003 2004 2005 2006 2007 ‘08

19.1%

14.3%

* 4-Quarter running total


Net Change in Syracuse Area Payroll Wages by Industry 2007-08*

Health Manufact. Care & Education

6.1% 4.2%AnnualGrowth

U.S. Avg.


* 4-Quarter running total Q2:2007 to Q2:2008

0.5%6.8%

$ Millions

Net Change in Syracuse Area Payroll Wages by Industry 2007-08*

Health Manufact. Prof. & Financial Construction Care & Business Activities Education Services

4.8%6.1% 4.2%AnnualGrowth

U.S. Avg.


* 4-Quarter running total Q2:2007 to Q2:2008

0.5%

6.0% 7.3%6.8% 6.5% 0.8% 2.6%

$ Millions


Existing Home Price AppreciationSyracuse Metro Area vs. United States

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2003 2004 2005 2006 2007 2008

Source: Office of Federal Housing Enterprise Oversight

United States -4.0%

2.8%Syracuse

Good News:Local home prices

continue to appreciate— in

contrast to the U.S.

Binghamton

Ithaca

Buffalo

SYRACUSE

Utica-Rome

Albany

Rochester

New York State

U.S. Average

Poughkeepsie

New York City

Long Island


Existing Home Price Appreciation – Q3 2008

Source: Office of Federal Housing Enterprise Oversight

Note: Excludes homes financed with non-conforming loans (subprime, I.O., jumbos, etc.)

The national housing market

correction is bypassing the Upstate region

2009 Economic Outlook

?

Highly-LeveragedConsumersScale Back Spending Especially on

big-ticketdurable goods

Lower Revenue Growth Causes Businesses to Reduce Hiring / Increase

Layoffs

Payroll Cuts Further Erode

Consumer Confidence & Buying

Power

1

2

3

We’reExperiencing ASelf-Reinforcing

Contraction

“A Vicious Cycle”

-1%

0%

1%

2%

3%

4%

5%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%


Growth in U.S. Personal Consumption Spending & Household Net Worth

97 98 99 00 01 02 03 04 05 06 07 08

Sources: Federal Reserve, U.S. Bureau of Economic Analysis

Q3

Personal Consumption (L) Household Net Worth (R)

RECESSION

RECESSION

Net WorthPersonalConsumption

Job #1:Fix the housing

finance/foreclosure problem

Year-Over-Year Absolute Change

Total Credit OutstandingU.S. Banks vs. Asset-Backed Securities Issuers

Q3

ABS credit—which grew from $637 billion in Q1:96 to $4.4 trillion in Q3:07—contracted

sharply over the past year, in contrast to bank lending

Sources: Federal Reserve, U.S. Bureau of Economic Analysis

Commercial Banks

$795

-$31997 98 99 00 01 02 03 04 05 06 07 08

ABS Issuers

Billions

-15%

-10%

-5%

0%

5%

10%

15%

20%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Actual Real (inflation adjusted)

Year-Over-Year Change in 12-Month Running Total Revenue

New York State Tax Revenue Growth

Sources: Rockefeller Institute of GovernmentU.S. Bureau of EconomicAnalysis 4.0%

-1.2%

2001 2002 2003 2004 2005 2006 2007 2008

Q2 200415.6%

Q3 2008 Year-Over-Year Change In Real Tax Revenue

Personal Income -0.4%Sales Tax -1.7%Corporate Income -5.6%

RECESSION

RECESSION

Job #1A:Provide help to state & local governments

40

50

60

70

80

90

100

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2004 2005 2006 2007 2008

Syracuse Metro Area Source: Sienna Research Institute

U.S.Source: University of

Michigan Survey

55.050.9

Outlook For Next Six Months

Future Economic Expectations IndexSyracuse Metro Area vs. United States

75.9

82.6

Job #1AA:Give consumers & businesses a reason for optimism— ensure that fiscal & monetary policy is working in concert—and toward a

tangible goal

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%


U.S. Gross Domestic Product Growth Forecast

-0.2%

97 98 99 00 01 02 03 04 05 06 07 08 09

AverageSince1991

Sources: U.S. Bureau of Economic Analysis, M&T Bank forecast

On a year-over-year basis, real GDP growth

fell into negative territory in Q4:2008 and is not likely to rebound until the second half of

2009

RECESSION

FORECAST

RECESSION

Real GDP is expected to decline by an average of 1.4% in 2009—the first full-year decrease since 1982 (-1.9%)

2009 U.S. andSyracuse Area

Economic OutlookGary D. Keith

Regional Economist – M&T Bank

January 22, 2009

2009 syracuse economic outlook

Economy & Finance