u.s. and kansas city region economic and real estate conditions … · • employment growth is...
TRANSCRIPT
Economic Conditions and Outlook for the U.S. and Kansas
Kansas House of Representatives Commerce, Labor and Economic Development Cmmittee
January 17, 2013
Kelly D. Edmiston Federal Reserve Bank of Kansas City
Overview
• The U.S. economy continues to recover, but at a very modest pace – But there remain considerable risks
• Employment growth is thin, in the U.S. and in Kansas, and by some measures, its worse than we think it is
• Kansas has some economic advantages that had mitigated the national economic doldrums, but has concentrations of some industries that have not done well – growth has not kept pace with the nation recently
• The residential real estate market, however, is doing better
January 17, 2013 2 K. Edmiston, FRBKC
U.S. ECONOMIC OVERVIEW AND FORECAST
Economic Conditions in the U.S. and Kansas
January 17, 2013 3 K. Edmiston, FRBKC
Annual Growth in Real GDP
January 17, 2013
-1.9
4.5
7.2
4.1
-3.5
3.0 1.7
-6
-4
-2
0
2
4
6
8
10
-6
-4
-2
0
2
4
6
8
10
1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
Annual Percent Change Annual Percent Change
1980 - 1985
2012 preliminary due Jan 30; FOMC forecast 1.7% - 1.8%
4.5 7.2 4.1
-8 -6 -4 -2 0 2 4 6 8
-8 -6 -4 -2 0 2 4 6 8
1980 1981 1982 1983 1984 1985
1980 - 1985
4 K. Edmiston, FRBKC
Quarterly Real GDP Growth (Annualized)
January 17, 2013
Source: U.S. Bureau of Economic Analysis
-8.9
-6.7
3.1
1.4
-10
-8
-6
-4
-2
0
2
4
6
-10
-8
-6
-4
-2
0
2
4
6
2007-I 2007-III 2008-I 2008-III 2009-I 2009-III 2010-I 2010-III 2011-I 2011-III 2012-I 2012-III
Annualized Percentage Change Annualized Percentage Change
$400B Stimulus Blue Chip Economic Forecast
5 K. Edmiston, FRBKC
Contributions to Percentage Change in Real GDP
January 17, 2013
Source: Bureau of Economic Analysis; Haver Analytics
4.1
2.0
1.3
3.1
1.1
0.8 0.7
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Total GDP Consumer Spending
Res. Invest
Bus. Invest
Net Exports
Gov. Spending
Inventories
2011:Q4 2012:Q1
2012:Q2 2012:Q3
Percentage Points Percentage Points
6 K. Edmiston, FRBKC
Retail Spending (Tenth Federal Reserve District, incl. Kansas)
January 17, 2013
Source: Federal Reserve Bank of Kansas City Beige Book Survey; latest release October 10, 2012
Aug
Sep Nov
Dec
-100
-80
-60
-40
-20
0
20
40
60
80
100
-100
-80
-60
-40
-20
0
20
40
60
80
100
Retailers Auto dealers
Index: 100=Neutral Index: 100=Neutral
Year-over-Year Diffusion Indexes
7 K. Edmiston, FRBKC
Retail Spending (3-month forecast) (Tenth Federal Reserve District, incl. Kansas)
January 17, 2013
Aug
Sep
Nov
Dec
-100
-80
-60
-40
-20
0
20
40
60
80
100
-100
-80
-60
-40
-20
0
20
40
60
80
100
Retailers Auto dealers
Index: 100=Neutral Index: 100=Neutral
3-Month Ahead Diffusion Indexes
8 K. Edmiston, FRBKC
Personal Income Growth
January 17, 2013
60
70
80
90
100
110
120
60
70
80
90
100
110
120
2005 2006 2007 2008 2009 2010 2011 2012
Index: q1 2005 = 100 Index: q1 2005 = 100
Source: BEA; Haver Analytics
9 K. Edmiston, FRBKC
Savings as a Share of Disposable Income
January 17, 2013
0
2
4
6
8
10
0
2
4
6
8
10
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
Percent Percent
Source: BEA; Haver Analytics
10 K. Edmiston, FRBKC
Average Debt per Consumer
January 17, 2013
$0
$4,000
$8,000
$12,000
$16,000
$20,000
$0
$4,000
$8,000
$12,000
$16,000
$20,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Consumer Debt (excludes first mortgage)
Revolving Debt
U.S.
KS
U.S.
KS
Source: FRBKC Consumer Credit Reports
11 K. Edmiston, FRBKC
Consumer Credit Delinquencies
January 17, 2013
3.2%
9.6%
1.8%
5.8%
1.9%
10.3%
1.6%
3.4%
106.4
83.2
0
25
50
75
100
125
150
175
200
0%
4%
8%
12%
16%
Auto Delinquency (percent of outstanding
loans)
Student Loan Delinquency (percent of outstanding
loans)
Bank Card Delinquency (percent of outstanding
accounts)
Delinquency on Any Account (percent of
outstanding accounts)
Bankruptcy Filings per 10,000 Households
(annual rate)
US KS
Source: FRBKC Consumer Credit Reports
Four-quarter moving average
12 K. Edmiston, FRBKC
FOMC Real GDP Growth Forecast (December, 2012)
January 17, 2013 Sources: Bureau of Economic Analysis; FOMC
1.7 2.3
3.0 3.0 2.3
-4
-3
-2
-1
0
1
2
3
4
5
-4
-3
-2
-1
0
1
2
3
4
5
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 LR
Percent Percent
Through 1990
Through 2000
Current Projection
3.0 3.5
3.7
2.5
1.8
13 K. Edmiston, FRBKC
EMPLOYMENT AND UNEMPLOYMENT
Economic Conditions and Outlook for the U.S. and Kansas
January 17, 2013 14 K. Edmiston, FRBKC
Historical Recessions
January 17, 2013
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48
Perc
ent L
oss
from
Em
ploy
men
t Pea
k
Weeks
1970 1974 1980 1981 1990 2001 2007
15 K. Edmiston, FRBKC
Employment Growth in the U.S. and Kansas
January 17, 2013
Source: BLS; Haver Analytics
-900
-600
-300
0
300
600
900
1200
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12
Thousands of Jobs (seasonally adjusted; 3 mos moving average) Thousands of Jobs (seasonally adjusted)
Kansas (left axis) 1yr: 16,800 (0.4%) 5yr: -43.4K (-3.1%)
U. S. (right axis) 1yr: 2.1 million (1.4%) 5yr: - 4.1M (-3.0%)
16 K. Edmiston, FRBKC
Employment Growth by Industry (last 12 months)
January 17, 2013
-8
-6
-4
-2
0
2
4
6
8
10
-8
-6
-4
-2
0
2
4
6
8
10
Total Mfg. (12.4)
Nat Res. & Mng
(0.7)
Cons. (3.9)
Trade (14.8)
Trans. & Util. (3.8)
Info. (1.8)
Finance (5.4)
Prof. & Bus. Serv. (11.8)
Ed. & Health Serv. (14.0)
Leisure & Hosp.
(8.3)
Other Serv. (3.9)
Fed. Gvt. (2.0)
SL Govt. (17.1)
U.S. Employment Kansas Employment
Percent Percent
17 K. Edmiston, FRBKC
Employment Growth by Industry (since recession began in Dec 2007)
January 17, 2013
-40
-30
-20
-10
0
10
20
30
-50
-40
-30
-20
-10
0
10
20
Total Mfg. (12.4)
Nat Res. & Mng
(0.7)
Cons. (3.9)
Trade (14.8)
Trans. & Util. (3.8)
Info. (1.8)
Finance (5.4)
Prof. & Bus. Serv. (11.8)
Ed. & Health Serv. (14.0)
Leisure & Hosp.
(8.3)
Other Serv. (3.9)
Fed. Gvt. (2.0)
SL Govt. (17.1)
U.S. Employment Kansas Employment
Percent Percent
18 K. Edmiston, FRBKC
Unemployment Rates
January 17, 2013
7.8
5.4
0
2
4
6
8
10
12
0
2
4
6
8
10
12
Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12
Percent Percent
Kansas
National
19 K. Edmiston, FRBKC
Unemployment and Labor Force Participation Rates
January 17, 2013
0
2
4
6
8
10
12
Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 60.0
62.0
64.0
66.0
68.0
70.0
72.0
Labor Force Participation Rate (U.S.; down 3.9 percent from peak)
Labor Force Participation Rate (KS; down 4.6 percent from peak)
Unemployment Rate (U.S.)
Unemployment Rate (KS)
Source: U.S. Bureau of Labor Statistics: Haver Analytics
20 K. Edmiston, FRBKC
Jobs Deficit
January 17, 2013
120,000
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
4.1 Million
2.8 Million
Chart computes the employment level that would be required to keep the unemployment rate at the December, 2007 level, given structural trends in the labor force participation rate. The structural trend in labor force participation rates is discussed in Van Zandweghe (2012).
Source: Federal Reserve Bank of Kansas City Updated through July, 2012
21 K. Edmiston, FRBKC
Expanded Unemployment Rate
January 17, 2013
Source: U.S. Bureau of Labor Statistics; Haver Analytics
14.4
0
4
8
12
16
20
0
4
8
12
16
20 Percent Unemployed Percent Unemployed
U-6
U-3
United States
Kansas
10.4
0
4
8
12
16
20
0
4
8
12
16
20 Percent Unemployed Percent Unemployed
U-6
U-3
22 K. Edmiston, FRBKC
KEY KANSAS INDUSTRIES Economic Conditions and Outlook for the U.S. and Kansas
January 17, 2013 23 K. Edmiston, FRBKC
Manufacturing Indexes
January 17, 2013
30
35
40
45
50
55
60
65
30
35
40
45
50
55
60
65
Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12
U.S. Tenth District
Index: 50 = Neutral Index: 50 = Neutral
Sources: ISM, FRBKC Manufacturing Survey
24 K. Edmiston, FRBKC
Aerospace Products and Parts (Average Production Workers per Year)
January 17, 2013
0
20
40
60
80
100
120
0
20
40
60
80
100
120
2008 2009 2010 2011
U.S.
KS
Index: 2008 = 100 Index: 2008 = 100
Source: Annual Survey of Manufacturers; Haver Analytics
25 K. Edmiston, FRBKC
Information (incl. Telecommunications) (Employment)
January 17, 2013
0
20
40
60
80
100
120
0
20
40
60
80
100
120
2007
03
2007
05
2007
07
2007
09
2007
11
2008
01
2008
03
2008
05
2008
07
2008
09
2008
11
2009
01
2009
03
2009
05
2009
07
2009
09
2009
11
2010
01
2010
03
2010
05
2010
07
2010
09
2010
11
2011
01
2011
03
2011
05
2011
07
2011
09
2011
11
2012
01
2012
03
2012
05
2012
07
2012
09
2012
11
Index: 2007 QI = 100 Index: 2007 QI = 100
U.S.
KS
Source: BLS Establishment Survey; Haver Analytics
26 K. Edmiston, FRBKC
Agriculture
January 17, 2013
0.00
4.00
8.00
12.00
16.00
20.00
0.00
4.00
8.00
12.00
16.00
20.00
2007 2008 2009 2010 2011 2012
Corn Soybeans Wheat
$/bushel $/bushel
0
20
40
60
80
100
120
140
160
180
0
20
40
60
80
100
120
140
160
180
2007 2008 2009 2010 2011 2012
Capital Spending
Farm Income
Index: 100 = Neutral Index: 100 = Neutral
-10
-5
0
5
10
15
20
25
30
35
-10
-5
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011 2012
Irrigated Cropland
Ranchland
Nonirrigated Cropland
% change (year-over-year)
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012
Cattle Breakeven Hog Breakeven
Hog Price Cattle Price
27 K. Edmiston, FRBKC
RESIDENTIAL REAL ESTATE Economic Conditions and Outlook for the U.S. and Kansas
January 17, 2013 28 K. Edmiston, FRBKC
Existing Home Sales
January 17, 2013
0
20
40
60
80
100
120
0
20
40
60
80
100
120
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
KC Wichita Topeka
Index: Jan 2007 = 100 Index: Jan 2007 = 100
Source: Area Realtors Associations
29 K. Edmiston, FRBKC
Demand Constraints
• Economy/Financial Security • Uncertainty about Market • Household Formation • Credit Availability
Existing Single-Family Home Activity
Homebuyer Traffic
January 17, 2013
0.0
25.0
50.0
75.0
100.0
0
25
50
75
100
Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
First-Time Homebuyer Traffic Current Homeowner Traffic Investor Traffic
Index: 50=Neutral Index: 50=Neutral
30 K. Edmiston, FRBKC
Months Supply of Homes
January 17, 2013
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12
Months Months
Kansas City
Wichita
Source: Area Realtors Associations
31 K. Edmiston, FRBKC
Home Prices
January 17, 2013
Source: FHFA / Haver Analytics
0
20
40
60
80
100
120
140
160
180
0
20
40
60
80
100
120
140
160
180
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
U.S KS Lawrence Manhattan Topeka Wichita KC
Index: 2002 Q1 = 100 Index: 2002 Q1 = 100
32 K. Edmiston, FRBKC
Housing Starts
January 17, 2013
0
20
40
60
80
100
120
0
20
40
60
80
100
120
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12
Index: March 2006 = 100 Index: March 2006 = 100
33 K. Edmiston, FRBKC
RISKS Economic and Commercial Real Estate Conditions and Outlook
January 17, 2013 34 K. Edmiston, FRBKC
The Fiscal Cliff (Current Projection 2013 is 2.3% - 3.0%)
January 17, 2013
Payroll Tax Payroll Tax
Extended UI Extended UI
AMT Fix Expires
BushCuts Expire
Sequestratation, -0.5
-4
-3.5
-3
-2.5
-2
-1.5
-1
-0.5
0
Fiscal Cliff Scenario Likely Scenario (Embedded in forecast)
v Partial
Delayed two months
Indexed to inflation
Source: Goldman Sachs; www.whitehouse.com
35 K. Edmiston, FRBKC
European Debt Crisis
Australia Austria
Belgium
Canada
Czech Republic Denmark
France
Germany
Greece
Iceland
Ireland
Italy
Japan
Netherlands
New Zealand
Poland Slovak Republic
Slovenia
Spain
United Kingdom
Euro Area
-12
-10
-8
-6
-4
-2
0 0 20 40 60 80 100 120 140
United States
2011
GO
VT.
DE
FIC
ITS,
Perce
nt of
GD
P
2011 NET GOVT. DEBT, Percent of GDP
Source: Organization for Economic Co-operation & Development
January 17, 2013 36 K. Edmiston, FRBKC
European Interest Rate Spreads
January 17, 2013
Source: Bloomberg
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13
Italy France UK Spain
37 K. Edmiston, FRBKC
U.S. Exports to the EU (Goods Only)
January 17, 2013
0
50,000
100,000
150,000
200,000
250,000
300,000
0
50,000
100,000
150,000
200,000
250,000
300,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E
$2012M $2012M
Source: U.S. Census Bureau Note: Inflation adjusted with BEA implicit GDP deflator
38 K. Edmiston, FRBKC
Federal Debt (% of GDP)
Source: Congressional Budget Office
0%
20%
40%
60%
80%
100%
120%
0%
20%
40%
60%
80%
100%
120%
'40 '50 '60 '70 '80 '90 '00 '10 '20
Debt to GDP Ratio
CBO Alternative Scenario
CBO March Baseline
Percent Percent
January 17, 2013 39 K. Edmiston, FRBKC
Contact Information: Kelly D. Edmiston Senior Economist Community Development 1 Memorial Drive Kansas City, MO 64198 (816) 881-2004 [email protected]
January 17, 2013 40 K. Edmiston, FRBKC