recent u.s. economic growth - in charts

Recent U.S. Economic Growth

MAY 2012

In Charts

The Growth Story Since 2009GROWTH SINCE 2009

Early May 2010Cost of borrowing spikes across Europe

Euro falls to four-year low against the dollar

Feb. 2011Egyptian President steps down

Libyan conflict beginsPresident Obama ratchets up sanctions on Libya

Oil prices pass $90/barrel

Apr. 15, 2011Government shutdown

narrowly averted

Oct. 28, 2011Italian 10y bond yieldsclose above 6 percent, remain near or above that level through late Jan. 2012

Japanese earthquake/tsunami

Debt limit

European debt crisisOct. 2010

Greece, Ireland Portugal bond spreads widen

1

U.S. DEPARTMENT OF THE TREASURYSource: Bureau of Economic Analysis, Wall Street Journal.

2008/09 financial crisis

Jul. 2011Greek, Irish, and Portuguese

spreads spike

Aug. 2011Oil prices fall

below $90/barrel

Aug. 2, 2011Debt limit deal reached

Oct. 2011Oil prices pass $90/barrel

High oil prices High oil prices

Despite the worst financial crisis since the Great Depression and a series of shocks in its aftermath, the economy has gradually strengthened since mid-2009, though more work remains.Real quarterly GDP growth

2008 Q4-8.9%

2009 Q1-6.7%

2009 Q2-0.7%

2009 Q31.7%

2009 Q43.8%

2010 Q13.9%

2010 Q23.8%

2010 Q32.5%

2010 Q42.3%

2011 Q10.4%

2011 Q21.3%

2011 Q31.8%

2011 Q43.0%

2012 Q12.2%

-15

-10

-5

0

+5

+10

Q12008

Q2 Q3 Q4 Q12009

Q2 Q3 Q4 Q12010

Q2 Q3 Q4 Q12011

Q2 Q3 Q4 Q12012

Personal consumption expenditures

Gross private domestic investment

Exports

Imports

Government consumption and grossinvestmentTotal GDP growth

+4.3 +3.8 +2.9

-3.5

-0.7

Total+6.8

-6-4-20

+2+4+6+8

U.S. economic growth has been led by consumption, private sector investment, and exports.Percentage point contribution to real quarterly GDP growth, by component

The Components of Growth Since 2009GROWTH SINCE 2009

Source: Bureau of Economic Analysis.

2

U.S. DEPARTMENT OF THE TREASURY

Cumulative contributions to growth since 2009 Q2, by component

90

92

94

96

98

100

102

104

Q12008

Q2 Q3 Q4 Q12009

Q2 Q3 Q4 Q12010

Q2 Q3 Q4 Q12011

Q2 Q3 Q4 Q12012

Growth in the U.S. has outpaced that of other advanced economies affected by the global financial crisis.Real GDP, 2008 Q1 = 100

International GrowthGROWTH SINCE 2009

Source: Regional sources (see Notes section).

3


U.S.

Euro area

JapanU.K.

Germany

-8%

-6%

-4%

-2%

0%

2%

4%

2006Q1

'07 '08 '09 '10 '11 '12

0

10

20

30

40

50

60

70

80

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

-$19.3 trillion2007 Q2 - 2009 Q1

$80 trillion

Despite challenges, growth in private demand has outpaced GDP growth since late 2010. Household net worth, inflation-adjusted (constant 2011 dollars)

Wealth, Savings, and Private DemandUNWINDING THE CRISIS

Source: Federal Reserve Flow of Funds, Bureau of Economic Analysis.

4


Year-on-year percent change in real GDP and final sales to private domestic purchasers

0%

1%

2%

3%

4%

5%

6%

7%

8%

80%

90%

100%

110%

120%

130%

140%

150%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

Household debt-to-income

(left axis)

Household wealth

Household debt and savings as a percent of disposable income

Household wealth has begun to come back from a sharp decline in 2007-08, but has not fully returned...

1

…and families are saving more than before the crisis.

2

Despite these drags on spending, private demand has begun to show stronger growth as the overhang of the financial crisis fades.

3

Household savings rate(right axis)

Growth in final sales to private

domestic purchasers

Growth in real GDP

recession

recession

recession

0.25

0.16

0.02

0.16

-0.08 -0.01

0.01

-0.34

-0.08

0.12

-0.19

-0.37

-0.49

0.05

-0.06

-0.33

-0.41

-0.34

-0.19

-0.26

-0.14

-0.90%

-0.75%

-0.60%

-0.45%

-0.30%

-0.15%

0%

+0.15%

+0.30%

-300

-250

-200

-150

-100

-50

0

+50

+100

2007Q1

'08 '09 '10 '11 '12

State and local government

contribution to real GDP growth

(right axis)

-15%

-10%

-5%

0%

+5%

-3,000

-2,000

-1,000

0

+1,000

'07 '08 '09 '10 '11 '12

Private sector job growth (Thousands, left axis)

Private contribution to real GDP growth1

(right axis)

State and local governments have been forced to cut deeply and shed jobs in response to fiscal challenges… Change in quarterly state and local employment, end-of-period (line, left axis)

Fiscal Drag

Source: BLS, BEA. U.S. DEPARTMENT OF THE TREASURY

Change in state and local

employment(left axis)

State and local government contribution to real GDP growth, percentage points (bars, right axis)

+100 thousand

UNWINDING THE CRISIS5

…while private sector growth has continued.Quarterly private sector changes in employment and contributions to real GDP growth

Three Misconceptions About Recent Economic GrowthMISCONCEPTIONS6


Some analysts have asserted that the following factors have been impediments to growth:

1.Regulations. Have increased regulations or regulatory uncertainty been a major factor in holding back growth?

2.Taxes. Is a high tax burden – or fears of future tax burdens – impeding growth?

3.Government. Is government so large that it is getting in the way of private sector-led growth?

But the facts do not support these assertions.

1,100

1,300

1,500

1,700

Jan2008

'09 '10 '11 '12

Regulations are not impeding business lending or investment.Commercial and industrial loans outstanding, constant 2011 dollars (log scale)

Are Regulations Holding Back Growth?MISCONCEPTIONS

Source: Federal Reserve, BEA.

7


Percent change in real investment in equipment and software 11 quarters after NBER trough

$1,700 billion

2%

8%

19%

21%

21%

26%

28%

28%

+34%

38%

1980 Cycle

1957-58 Cycle

2001 Cycle

1969-70 Cycle

Average(excl. 2007-09)

1960-61 Cycle

1973-75 Cycle

1990-91 Cycle

2007-09 Cycle

1981-82 Cycle

Jul. 15, 2010Wall Street reform enacted

+12%($144b)

Since Oct. 2010

Commercial and industrial

loans

600

800

1,000

1,200

1,400

1,600

2007Q1

'08 '09 '10 '11

Regulations have not dampened corporate profits, even in the industries undergoing significant regulatory change, such as energy, health care, and finance. Corporate profits after tax, constant 2011 dollars (log scale)

Are Regulations Holding Back Growth?MISCONCEPTIONS

Source: BEA, Barclay’s.

8


S&P 500 Economic Sectors Index, trailing 12-month earnings per share

$1,600 billion

+57%($570b)

Since 2009 Q1

After-tax corporate profits

-20

-10

0

10

20

30

40

50

60

70

'05 '06 '07 '08 '09 '10 '11 '12

Consumer DiscretionaryIndustrialsUtilitiesMaterialsTelecommunications ServicesInformation TechnologyConsumer Staples

Energy

HealthCare

Financial

recessionrecession

12

13

14

15

16

17

18

19

20

21

22

1946 '51 '56 '61 '66 '71 '76 '81 '86 '91 '96 '01 '06 '11

From 2009 to the present, federal revenues relative to the economy have been at their lowest levels in 60 years.Total federal revenues as a percentage of GDP (line, left axis)

Is a High Tax Burden Damaging Growth?MISCONCEPTIONS

Source: OMB, BEA, NBER.

922 percent of GDP

Federal revenues

14.4%of GDP

1950

15.4%of GDP

2011


recession

The President’s Budget proposes new revenues that amount to less than 1 percent of GDP.Projected revenue raised in the President’s FY2013 Budget and projected cumulative GDP, Fiscal Years 2013 – 2022.

How Large are Proposed Tax Changes? MISCONCEPTIONS10

Source: Office of Management and Budget. U.S. DEPARTMENT OF THE TREASURY

CUMULATIVEGDP

2013 - 2022

Total new revenue proposed in

President’s FY2013 Budget, 2013 - 2022

<1% of GDP

Letting the top two income tax brackets return to pre-2001 levels has a minimal impact on small businesses with employees.Projected revenue effect of reinstating 36 and 39.6 individual income tax brackets as proposed in the President’s FY2013 Budget, Fiscal Year 2013

Would Proposed Tax Changes Hurt Small Business?MISCONCEPTIONS11

Total income of high-income filers in the top two brackets2

$1.2 trillion13% of total income

Total income of high-income filers in the top two brackets who own small

businesses with employees3

$400 billion4% of total income

Small business income of high-income filers in the top two

brackets who own small businesses with employees

$113 billion1% of total incomeNew revenue4 from small business income of

high-income filers in the top two brackets who own small businesses with employees

$2.9 billion<0.03% of total income

Total income1 of all filers$9 trillion

Source: Treasury analysis. See Notes section for methodology. U.S. DEPARTMENT OF THE TREASURY

0%

1%

2%

3%

4%

5%

'48 '52 '56 '60 '64 '68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12

Federal employment is at historic lows relative to the overall workforce.Federal civilian employment as a percentage of the labor force*

Has Government Grown?MISCONCEPTIONS

Source: OMB, BEA, BLS. U.S. DEPARTMENT OF THE TREASURY

Federal civilian

employment

1.8%February 2012

* Periods after 1980 exclude temporary Census workers.

12

recession

Investors remain confident that the U.S. government will meet its real fiscal obligations, as demonstrated by…5-year sovereign credit default swap prices

Is There Concern About the Size of Government?MISCONCEPTIONS

Source: Bloomberg, Federal Reserve Bank of Cleveland, Treasury. U.S. DEPARTMENT OF THE TREASURY

0

50

100

150

200

250

300

'10 '11 '12

Germany

One-, five-, and ten-year U.S. inflation expectations

-1

0

1

2

3

Jan2009

'10 '11 '12

France

United States

300 basis points

1-yr inflation expectations

10-yr inflationexpectations

5-yr inflation expectations

3 percent

…low cost of insurance against default and…

1

…low inflation expectations.

2

13

NotesNChart 1Oil prices are West Texas intermediate crude oil spot prices.

Chart 3Regional sourcesEuro Area: Statistical Office of the European CommunitiesJapan: Cabinet Office of JapanU.K.: Office for National StatisticsU.S.: Bureau of Economic Analysis

“Euro Area” consists of the following 17 European Union member countries who have adoptedthe euro (European Monetary Union): the 11 original members - Austria, Belgium, Finland,France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain - and Greece(from January 2001), Slovenia (from January 2007), Cyprus and Malta (from January 2008),Slovakia (from January 2009) and Estonia (from January 2011).

Chart 5“Private contribution to real GDP growth” defined as the sum of the contributions of realpersonal consumption expenditures, real gross private domestic investment, and real exports tooverall annualized quarterly real GDP growth, in percentage points.

Chart 101 “Income” defined as adjusted gross income.

Chart 10 cont.2 “High-income filers” are those who would be subject to the top two individual income taxbrackets under the President’s FY2013 Budget proposal.

3 “Small business owners” defined as filers a) with business income and deductions of lessthan $10 million, and b) who employ other individuals. See Knittel et al, “Methodology toIdentify Small Businesses and Their Owners”, Office of Tax Analysis Technical Paper 4, August2011.

4 “New revenue” includes revenues raised in Fiscal Year 2013 by reversing theEGTRAA/JGTRAA rate cuts on the top two individual income tax brackets to small businessincome of high-income filers who own small businesses with employees.

U.S. Department of the Treasury, Office of Tax Analysis calculations. Revenue estimate excludesincreased revenue that would come from the expiration of other upper-income EGTRAA/JGTRAAtax cut provisions such as those affecting itemized deductions, personal exemptions, qualifieddividends, and capital gains.

The calculation of the additional revenue from small business employers takes into account thevariation among taxpayers in the importance of small business income. Since the highestincome classes pay most of the added tax but are less dependent on small employer income,the small employer share of the total tax increase is lower than the small business share of totalincome.


recent u.s. economic growth - in charts

Economy & Finance