Post on 26-Mar-2015
Great Disappointment? Overdue Recovery?
Economic Trends and Outlook
Michael J. Parks, editor emeritus
Marple's Northwest Business Lettermichaeljparks.com marples.com
Copyright © 2011 Michael J. Parks; please don’t reproduce without permission
School Employees Credit Unionof Washington
April 16, 2011
Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.
The Zurich Axioms
Key takeawaysThe financial crisis changed everything.
A new, vastly different, era has begun.
High oil prices and inflation elevate risk
of another recession. Stagflation, anyone?
Washington, helped by technology, weak $
and Boeing’s backlog, should outperform.
Key takeaways (cont.)Two-speed global recovery. Developing/
emerging fast, advanced economies slow.
U.S. recovery has reached Wall Street,
banking, corporations. Not Main Street.
Policy uncertainty – health care, energy,
taxes – keeps corporations hoarding cash.
-6
-4
-2
0
2
4
6
8
10
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
2005 2006 2007 2008 2009 2010 2011
Emerging economies lead the way Per cent change in inflation-adjusted output from same quarter a year earlier
Emerging economies
Advanced economies
World
Forecast
Data: International Monetary Fund
Courtesy McKinsey Global Institute
Courtesy McKinsey Global Institute
0
5
10
15
20
25
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
P e r c e n t sh a re o f g lo b a l o u tp u t
Forecast
U nited S ta tes
C h ina
International Monetary Fund; purchasing power parity (PPP) basis
Copyright © 2011 Random Lengths Publications Inc; used with permission
80
100
120
140
160
180
200
2005 2006 2007 2008 2009 2010 2011 2012
China 204
U.S. 110
Brazil 135
India 174
Japan 104Euro 106
What recession?Forecast
Data: International Monetary Fund
GDP 2005-20122005 = 100
2.8
-4.9
-6.8
3.1
-8
-6
-4
-2
0
2
4
6
Real U.S. gross domestic product Per cent change from previous quarter
2005 200820072006 2009 2010
Forecast
2011
Data: Bureau of Economic Analysis.Forecast: CIBC World Markets
-900
-700
-500
-300
-100
100
300
500
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 J F M
2008 2009 2010 11
U.S. nonfarm payroll employment
Data: Bureau of Labor Statistics
Change from prior month (thousands)
128
130
132
134
136
138
140
Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
U.S. nonfarm payroll employment
Data: Bureau of Labor Statisticsmillion
70
75
80
85
90
95
100
105
Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
U.S. payroll employment
Data: Bureau of Labor Statistics
Total
Index: March 2001 = 100
Goods producing
Goods-producing:manufacturing,construction,mining
4
6
8
10
12
14
16
18
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 J F M A M J J A S O N D J F M
2007 2008 2009 2010 11
U.S. unemployment rates
Headline rate: 8.8%
Broad definition: Involuntary part-time'marginally attached,' etc.: 15.7%
Data: Bureau of Labor Statistics
%
It can't go onGovernment spending as % of GDP
0
10
20
30
40
50
1870 1913 1920 1937 1960 1980 1990 2000 2005 2009
United States
Average*
*Advanced economies. Data: The Economist
Why PIMCO dumped Treasuries
Medicare, Medicaid and Social Security = 44% of federal spending; rising steadily.
We have relied on the assumption that we can grow our way out of the resulting debt.
Unless entitlements are reformed, the U.S. will likely default -- via inflation, currency devaluation, and/or low returns to savers.
Bill Gross, Pacific Investment Management Co. April 2011
-8
-6
-4
-2
0
2
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35
Recessions and the Evergreen StatePer cent employment change following U.S. economic peaks
Data: Federal Reserve Bank of MinneapolisMonths
1969-70 (11 months)
Will the last person leaving SEATTLE - Turn out the lights (1971)
-8
-6
-4
-2
0
2
4
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35
Recessions and the Evergreen State
Data: Federal Reserve Bank of Minneapolis
Months
1969-70 (11 months)
1981-82 (16 months)
Per cent employment change following U.S. economic peaks
-8
-6
-4
-2
0
2
4
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35
Recessions and the Evergreen State
Per cent employment change following U.S. economic peaks
Data: Federal Reserve Bank of Minneapolis
Months
1969-70 (11 months)
1981-82 (16 months)
Great Recession 2008-09 (18 months)
2,600
2,700
2,800
2,900
3,000
00 01 02 03 04 05 06 07 08 09 2010 2011
Washington nonfarm payroll employment
Jan 00-Mar 11
Dec 00-Dec 049/11 and 2001 recession
Thousands
Peak 02/08
Washington Employment Security Department
Mar 11:Y/Y +1.2%
from peak -5.7%from GR start -5.3%
-40
-30
-20
-10
0
10
20
2007 08 09 10 11
Washington payroll employment
Data: Washington Employment Security Department
Change from prior month (thousands)
-5
-4
-3
-2
-1
0
1
2
3
4
5
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Washington nonfarm payroll employmentPer cent change
Forecast
Data: Washington Economic and Revenue Forecast Council
390
410
430
450
470
490
510
1998 99 2000 01 02 03 04 05 06 07 08 09 2010 2011
Washington goods-producing employment
Jul 98-Jan 04:-90.4, -18%
Washington Employment Security Department
From Jan 08-114.1, -22%
Thousands
Jan 04-Nov 07 +87.2, +17%
50
60
70
80
90
100
110
1998 99 2000 01 02 03 04 05 06 07 08 09 2010 '11
Washington aerospace employment
Washington Employment Security Department
S
S
S
S=strike
Thousands
Apr 08-May 04:-52.2, -46%
May 04-Jul 08:+25.1, +41%
Jul 08-Jun 10:-5.7, -7%
120
130
140
150
160
170
180
190
200
210
96 97 98 99 2000 01 02 03 04 05 06 07 08 09 2010 2011
Jan 96-Jan 01+32%
to June 07+40%
to Mar 11-37%
Washington construction employment
Washington Employment Security Department
Thousands
to Mar 02 -8%
E
1500
1750
2000
2250
2500
1990 '92 '94 '96 '98 2000 '02 '04 '06 '08 '10 '11
Washington service-producing employment
Washington Employment Security Department
Thousands
Aug 08-Mar 11-68.8, -2.8%
GovernmentTrade, transportation and utilitiesEducation and health servicesProfessional and business servicesLeisure and hospitalityFinancial activitiesOther servicesInformation
0
500
1,000
1,500
2,000
2,500
1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10
Washington service-related employment
Trade, transportation & utilities
Government
Education and health services
Washington Employment Security Department
Professional and business services
Leisure and hospitality
Thousands
Financial
Other
Information
Boeing backlog by model
737 2,186
747107
76750
777253
787847
Through Dec 2010 Data: Boeing
3.5
4.2
5.8
6.7
7.1
Busy, busy at the 'Lazy B'
787 (20 per month*)
Through Dec 2010 Data: Boeing*'Guessimate'
747 (1.25 per month*)
737 (31 per month)
777 (6 per month)
767 (1 per month*)
Years to deliver backlog at current/guesstimated production
$4,871
$5,178
$6,577
$7,261
$7,781
Exports per person
Data: WISERTrade (for 2009)
Washington
Delaware
Vermont
Texas
Louisiana
Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10
Washington 114.1Oregon 112.4United States 109.5
Index: July 2000 = 100
Population growth to July 2010
Data: Census Bureau, February 2011
120
130
140
150
160
170
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Magnet Washington, again
Washington Department of Licensing
S
S
S
S=strikeThousands
Driver's licenses issued to out-of-staters(12 month moving sum)
40
60
80
100
120
2006 2007 2008 2008 2010
S&P/Case Shiller home-price indices
Index: Jan 2006=100
Seattle 82
Data: Standard & Poor's
Los Angeles 64
Las Vegas 43
Monthly 2006 through Jan 11
Basic 2011 forecast:Partly cloudy, but fairer weather. Washington will outperform thanks to Boeing backlog, strong exports, in-migration, weak $.
What to monitor in ’11: U.S.-China relations Value of the dollar Sovereign risk Interest rates Global growth rate