Cory Ando - cra21 Corey Holland - cph9

Ada Nina Johnson-Kanu - aj47

Jenna Watkins - jrw27Andrew Kuntz - awk6

Where are we now?

To see how we are doing now, we need a point of reference, so let us turn

back the clocks to look at the past and compare it to

our now…

Where should we look?To see if we are in a good economic state, let’s

look at a bad economic state.

The National Bureau of Economic Research defines a recession as “a significant decline in economic activity

[that] spreads across a economy…”

So lets look a little before the last recession and after it to see how some of this economic activity was affected.

FRED – Civilian Unemployment Rate (2006-2011) 4.6% prior to the

recession Fluctuated around

5% in early recession Rapid increase

throughout recession Peak of 10.1% in

October 2009 Typical trend for

this leading indicator used to predict the onset of recession.

Gradually fell to around 9.5% in July 2010

Rose to 9.8% over the following 4 months

Fell to 9.4% in December 2010

Fluctuated around 9% throughout 2011

The present rate of 9.1% is still far from the natural rate of

unemployment, but, as a lagging indicator for recoveries, is not necessarily cause for alarm.

The Congressional Budget Office’s quarterly estimate of the natural rate of unemployment was 5% up until July 2007. The natural rate then rose incrementally to 5.12% at the end of 2008 and 5.2% at the end of 2009, where it has remained.

When viewing the civilian unemployment rate in comparison, the effect of cyclical unemployment becomes clear. During 2010 and 2011, the gap between the real

unemployment rate and the natural unemployment rate has narrowed.

FRED – Natural Rate of Unemployment (2006-2011)

FRED – Consumer Price Index for All Urban Consumers: All Items (2006-2011)

Since 2006, there has been a steady rise in the consumer price index (CPI). The end of 2007 through the first half of 2008 saw a rapid rise in CPI. CPI then fell nearly as much as it had risen over the following six months and has increased since that time.

Inflation estimates are derived from percent changes in CPI, with rapid increases being

indicative of the latter stages of an expansion, as has been the case throughout 2010 and 2011.

Estimated Inflation

FRED – Gross Domestic Product (2006-2011)Prior to the recession there was continuous growth. When the recession began, GDP was around $14,250 billion.

During the recession it peaked at around $14,400 billion and then fell to around $13,850 billion. GDP then began another run of continuous growth, hitting pre-recession levels near the beginning of 2010, and has continued since to the current level of $15,000 billion today.

In light of the changes observed in real GDP, the National Bureau of Economic Research’s Business Cycle Dating Committee determined that the U.S. economy entered recovery in June 2009.

FRED – Corporate Profits After Taxes (2006-2011)Corporate Profits decreased prior to the recession and

deeply troughed mid-recession. Once the recession ended, profits were close to pre-recession figures.

Now, profits are greater than those in 2006, indicating that remaining companies are no longer experiencing

such adverse effects from the financial crisis.

FRED – Private Residential Fixed Investment (2006-2011)

Residential investment by people has been decreasing since 2006. ~$415 billion in mid-recession (late 2008)~$335 billion todayThe rate of new home construction is one third of the pre-recession level.

Distressed and foreclosing propertiesStress on financial InstitutionsConcern over house price declines. Tight credit conditions for builders and homebuyers.

FRED – Leading Index for the United States (2006-2011) The leading economic index (LEI)

utilizes 10 data series to predict economic recessions and recoveries.

As of early 2009, the LEI has been climbing and is currently at a

level greater than pre-recession.

average weekly hours of production workers in manufacturing;

average weekly initial claims for state unemployment insurance;

manufacturers’ new orders for (non-defense capital goods, consumer goods, and materials);

supplier deliveries (vendor performance diffusion index);

new private housing (authorized by local building permits);

stock prices (500 common stocks); M2 money supply (in 2000 dollars); interest rate spread (10-year

Treasury bonds less the federal funds rate);

University of Michigan’s index of consumer expectations

Federal Reserve Chairman, Ben Bernanke The U.S. Economic Outlook Speech September 8, 2011

Exports have grown and the trade deficit has narrowed.

Improved competitiveness of U.S. goods and services.

Manufacturing and production have risen nearly 15% since the trough of the recession.

Business investment in equipment and software has expanded.

Aggregate output has not returned to pre-recession levels.

GDP is estimated to have increased at an annual rate of less than 1 percent, on average, in Q1 and Q2. This can be partially attributed to disaster in Japan, which affected global supply chains and production.

The slow economic growth has been ineffective at significantly reducing the unemployment rate.

Although consumer spending expanded moderately in 2010, it decelerated in the

first half of 2011 due to a reduction in consumer purchasing power due to the rise in commodity prices such as oil.

Households are struggling with persistently high levels of unemployment, slow gains in wages, falling house prices,

and high debt levels.

ConclusionThe economy is not in perfect conditions, with high rates of unemployment, it is clear that work still needs to be done. Things are getting better, although, with GDP, the CPI, and corporations making slow but steady

recoveries. The economy seems to be starting to come back on track from where it left off when the recession began, as if the recession had just put economic growth on hold.

ReferencesBernanke, B. “The U.S. Economic Outlook”. Speech. Sept 2011. The Federal Reserve. Web. 12 Sept.

2011. http://www.federalreserve.gov/newsevents/speech/bernanke20110908a.htm

Clayton, G, Geisbrecht, M.G., and Feng Guo. A Guide to Everyday Economic Statistics. Mcgraw-Hill. New York, New York. 7th Ed. Print.

Federal Reserve Bank of St. Louis. "FRED Graph " Economic Research - St. Louis Fed. Web. 15 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c6

Federal Reserve Bank of St. Louis. "Graph: Civilian Unemployment Rate" Economic Research - St. Louis Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c6

Federal Reserve Bank of St. Louis. "Graph: Consumer Price Index for All Urban Consumers." Economic Research - St. Louis Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c4

Federal Reserve Bank of St. Louis. "Graph: Corporate Profits After Tax." Economic Research - St. Louis Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c1

Federal Reserve Bank of St. Louis. "Graph: Gross Domestic Product, 1 Decimal" Economic Research - St.

Louis Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2c3

Federal Reserve Bank of St. Louis. "Private Residential Fixed Investment." Economic Research - St. Louis Fed. Web. 14 Sept. 2011. http://research.stlouisfed.org/fred2/graph/?g=2bY

Image Sources http://www.worldculturepictorial.com/images/content/

be_pleased_technically_not_a_recession_yet.jpg

http://s.wsj.net/public/resources/images/OB-KC185_GDP4_E_20100920122215.jpg

http://rssbroadcast.com/wp-content/themes/news_10/tools/timthumb.php?src=/wp-content/uploads/2011/09/BERNANKE-articleInline_4e6981be4995b.jpg&h=180&w=180&zc=1

http://six11.wordpress.com/2010/06/15/living-in-the-present-future/

http://debragrayelliott.blogspot.com/2011/07/if-only-i-could-turn-back-hands-of-time.html