Growth “… Will Guide You Home” … “and Fix You”

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011

JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723) 1

Growth “… Will Guide You Home” … “and Fix You”

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Everyone is growing againReal GDP in selected regions (percent change from four quarters earlier)

Sources: US Department of Commerce; JPMorgan Chase & Co.

-9-8-7-6-5-4-3-2-10123456789

1011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-9-8-7-6-5-4-3-2-101234567891011

USEU-11 (black)Japan (red)

Emerging economies in Asia, Eastern Europe and Latin America (blue)

Global (shaded region)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


The 2011-12 US outlook … gradually speeding upUS real GDP (annualized percent change)

Source: US Department of Commerce

2.9

0.4

1.9

3.8

3.12.7 2.4

0.2

2.93.4

4.0

-2.8

2.3

-7-6-5-4-3-2-10

12345678

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-7-6-5-4-3-2-10

12345678

Forecast ofquarter-to-quarter realGDP growth

Quarter-to-quarteractual realGDP growth

Annualgrowth ofreal GDP(Q4 to Q4)

Change inreal GDPfrom fourquartersearlier

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


A big mistake corrected …Nominal gross income per household and house prices (ratio to 1970 Q1 level)

Sources: Loan Performance Corporation; US Department of Commerce

0

1

2

3

4

5

6

7

8

9

10

11

12

13

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120

1

2

3

4

5

6

7

8

9

10

11

12

13LoanPerformance Corporation

Gross nominal income per household

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and that’s why house prices are stabilizingSelected surveys of house prices (ratio of price indexes to the 2000 Q1 level)

Sources: Loan Performance Corporation; FHFA’; NAR; Standard & Poor’s; Radar Logic

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.2

2.3

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20101.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

2.1

2.2

2.3

Case-Shiller composite 10Case-Shilller composite 20

Case-Shiller national index

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011

JAMES GLASSMAN ([email protected], 212-834-5093, 212–270–0778, OR mobile 609-510-3723)

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

1980 1985 1990 1995 2000 2005 2010-250

-200

-150

-100

-50

0

6

“Under water” losses …Mortgage losses by vintage* ($ billions) Cumulative amount of loans under water* ($ billions)

Sources: MBA; CoreLogic; JPMorgan Chase & Co.

* Assuming that all loans taken out at the time were 100% loan-to-value

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Mortgage losses by vintage* ($ billions) Cumulative amount of loans under water* ($ billions)

Sources: MBA; CoreLogic; JPMorgan Chase & Co.

7

… mostly “recognized”

43213

374508

686

952 1040 1133 1175 1241 1272 1275 1275 1275

10

53

95

109

152

212212

212 212212 212 212 212 212

12

23

48

76

115

154194

251 245260 272 272 272 272

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2007Q3

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

2009Q4

2010Q1

2010Q2

2010Q3

2010Q4

GSEs

Insurance companies

Banks

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Cumulative houses built and new households formed since 1970 (thousands)


8

Builders are still hibernating, owing to the glut …

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1970 1975 1980 1985 1990 1995 2000 2005 20100

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Housing units built since December 1960

Number of new households since December 1969 (adjusted for breaks in population controls in the 2000 Census)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Stock of housing (thousands) Housing starts and household formation (millions at an annual rate)

Source: US Department of Commerce9

… but current activity is in a work-off range …

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 20200

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

An estimate of the new housing glut:new homes built over the most recent 10 years less number of new households (left)

Total housing starts (right)

New households per year (right)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Home building and growth (contribution of res construction to % ch in real GDP over 4 qtrs, pct pts)

Sources: NBER recession bars; US Department of Commerce

10

… so builders will help us out eventually

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Actual/forecast

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Business is positioning for the future again …Business investment for capital goods and software (percent change from a year earlier)

Sources: US Department of Commerce; Federal Reserve Board

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-30

-25

-20

-15

-10

-5

0

5

10

15

20

25Shaded area denotes real

business spending for equipment &

software

Industrial output of business equipment

Orders for capital goods excluding civilian aircraft and defense

Nonauto capital goods imports

Shipments of nondefense capital goods

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… because it has restored profitabilityAfter-tax GDP profits (percent of nominal Gross Domestic Income)


0

1

2

3

4

5

6

7

8

9

1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 20120

1

2

3

4

5

6

7

8

9

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Consumers are back in the game too …Real consumer spending and income (percent change from 12 months earlier)


-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

Real consumer spendingReal disposable personal income

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Private sector employment (thousands per month)

Source: US Department of Labor

14

… with hiring starting …

-900

-800

-700

-600-500

-400

-300

-200

-100

0

100200

300

400

500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-900

-800

-700

-600-500

-400

-300

-200

-100

0

100200

300

400

500

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Personal saving rate (percent of disposable personal income)


15

... households saving more again ...

0123456789

101112131415

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100123456789101112131415

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and the equity market recoveringEquity P-E Wilshire 5000 index

Sources: Federal Reserve Board; Dow Jones; US Department of Commerce

6

8

10

12

14

16

18

20

22

24

26

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Price-earnings ratio (left scale)

Wilshire 5000 (right scale)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Low inflation gives the Fed a lot of latitudeSelected core consumer price indexes (percent change from 12 months earlier)

Sources: NBER recession bars; US Department of Commerce; US Department of Labor

0

2

4

6

8

10

12

14

16

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 20200

2

4

6

8

10

12

14

16

Core CPI

Core chain PCE price index

The Federal Reserve's long-run inflation

target (for chain core PCE price inflation)¹

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


A vision of the future …US potential and real GDP (chained 2005 dollars)

Sources: US Department of Commerce; Macroeconomic Advisers LLC

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 207,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

Real GDP associated with 5% unemployment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… but there’s lots of work to do …US unemployment rate (percent of the labor force)

¹ Range of FOMC members’ viewsSources: NBER recession bars; US Department of Labor; Federal Reserve Board

0

1

2

3

4

5

6

7

8

9

10

11

12

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150

1

2

3

4

5

6

7

8

9

10

11

12

The Fed's view about the near-term and sustainable (Nairu) unemployment level¹

Note: thin line represents my forecast, which is more cautious than the Fed's

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… the damage is greater than we measure …Official and hidden unemployment (thousands)


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 20120

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Working part time because can't find full-time work

Actively looking for a job and unemployed

Gave up looking and are doing other things

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


The employment status of folks …Status of people in the job market (thousands)


130,000

135,000

140,000

145,000

150,000

155,000

160,000

1999 2001 2003 2005 2007 2009 2011130,000

135,000

140,000

145,000

150,000

155,000

160,000Dot.com dropouts

Recession 2008 dropouts

Frictional unemployment (4%)

Long-term unemployment

Short-term unemployment

Underemployment (part-timers, beyond the norm, for economic reasons)

Full-time, part-time by choice, and "normal" part-time for economic reasons

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and what it takesStatus of people in the job market (thousands)


Dot.com dropouts

Recession 2008 dropouts

Frictional unemployment (4%)

Long-term unemployment

Short-term unemployment

Underemployment (part-timers, beyond the norm, for economic reasons)

Full-time, part-time by choice, and "normal" part-time for economic reasons

130,000

135,000

140,000

145,000

150,000

155,000

160,000

165,000

170,000

175,000

180,000

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019130,000

135,000

140,000

145,000

150,000

155,000

160,000

165,000

170,000

175,000

180,000

Projection

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


0.90

1.00

1.10

1.20

1.30

1.40

2007 2008 2009 2010 20110.90

1.00

1.10

1.20

1.30

1.40Emerging Markets

Trend global real GDPGlobal

EU-11USJapan

Global slack

23

Ditto for the rest of the world …Actual real GDP in selected regions (chained 2005 dollars)

Sources: US Department of Commerce; various international agencies

Estimated level of potential global real GDP (US dollars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Conclusion: things to cheer and fearTo cheer To fear

Recession shines light on state finances State fiscal sector challenged

Private sector in good shape Builders restrained by work-off of housing glut

Double-digit cap X spending growth Europe’s sovereign / banking issues

Record business profitability Understanding relative prices versus inflation (the

Consumers spending again winter commodity pressures)

Equities 15% from record

Household balance sheets better

Private employment growing 1%

Global economy booming

Risk assets pricing a recovery

Layoffs back to normal in half our states

Auto industry on the rebound

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Appendix 1. The Empire State …

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


The pulse of New York …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

New YorkUS (bars)

New York accounts for 2.6% of auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Unemployment has crested …Unemployment in New York versus the nation (percent of the labor force)


0

2

4

6

8

10

12

1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 20180

2

4

6

8

10

12

New York

US

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… employment is rising again …Employment in New York versus the nation (ratio to 2000 Q4)


-5

-4

-3

-2

-1

0

1

2

3

4

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13-5

-4

-3

-2

-1

0

1

2

3

4

New YorkUS

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and tracking national trends, like it usually doesEmployment in New York versus the nation (ratio to 2000 Q4)


0.95

0.96

0.97

0.98

0.99

1.00

1.01

1.02

1.03

1.04

1.05

1.06

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.95

0.96

0.97

0.98

0.99

1.00

1.01

1.02

1.03

1.04

1.05

1.06

US

New York

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


But real estate is a little pricey …Ratio of New York’s house prices to the US average (1995 Q1 = 1.0)

Source: FHFA

0.9

1.0

1.1

1.2

1.3

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20100.9

1.0

1.1

1.2

1.3

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


New York home building activity (thousands of units at an annualized rate)


31

... and we’re still working off a glut too

0

50

100

150

200

250

300

350

400

450

500

1970 1975 1980 1985 1990 1995 2000 2005 20100

50

100

150

200

250

300

350

400

450

500

Average units put up over the most recent decade

Current new home building pace

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Appendix 2. State of the states …

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Financial red flags ...State and local debt obligations per capita (dollars)

Source: Bureau of the Census

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

IdahoW

yoming

ArkansasM

ississippiO

klahoma

Iowa

Georgia

West Virginia

North C

arolinaN

orth Dakota

TennesseeM

aineAlabam

aO

hioU

tahSouth D

akotaN

ew M

exicoArizonaM

ontanaM

arylandM

issouriVirginiaVerm

ontLouisianaIndianaKansasW

isconsinM

ichiganFloridaO

regonN

ebraskaM

innesotaN

ew H

ampshire

South Carolina

Haw

aiiTexasKentuckyD

elaware

California

PennsylvaniaN

evadaIllinoisW

ashingtonC

oloradoN

ew Jersey

Connecticut

Rhode Island

New

YorkM

assachusettsAlaska

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Headwinds remain stiff in the Sunshine State, but ....Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

FloridaUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


A new breeze from the Great Lakes … Illinois … Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

IllinoisUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Indiana …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

IndianaUS (bars)

Indiana accounts for 21.6% of auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Kentucky …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

KentuckyUS (bars)

Kentucky accounts for 9.1% of auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Michigan …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

MichiganUS (bars)

Michigan accounts for 33.5% of US auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Minnesota … Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

MinnesotaUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Ohio …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

OhioUS (bars)

Ohio accounts for 19.8% of auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Wisconsin … Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

WisconsinUS (bars)

Wisconsin accounts for 1.8% of auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and from other “auto” states … North Carolina …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

North CarolinaUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and South Carolina Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

South CarolinaUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Good news from the Farm Belt too … Arkansas …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

ArkansasUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Iowa …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

IowaUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Kansas …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

KansasUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… MississippiApplications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

MississippiUS (bars)

Mississippi accounts for 0.6% of auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Missouri …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

MissouriUS (bars)

Missouri accounts for 1.3% of auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… North DakotaApplications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.50

0.75

1.001.25

1.50

1.75

2.002.25

2.50

2.75

3.00

3.253.50

3.75

4.00

2008 2009 2010 20110.50

0.75

1.001.25

1.50

1.75

2.002.25

2.50

2.75

3.00

3.253.50

3.75

4.00North DakotaUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


The Energy Belt too … Oklahoma …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

OklahomaUS (bars)

Oklahoma accounts for 0.3% of auto manufacturing employment

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


The Home Building Footprint … Oregon …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

OregonUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


And in some unexpected places … Connecticut …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25ConnecticutUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Delaware …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25DelawareUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… MassachusettsApplications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

MassachusettsUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… New Jersey …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

New JerseyUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Pennsylvania …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

PennsylvaniaUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… Vermont …Applications for unemployment insurance (ratio to 2007 Q4 level of claims for respective item)


0.75

1.00

1.25

1.50

1.75

2.00

2.25

2008 2009 2010 20110.75

1.00

1.25

1.50

1.75

2.00

2.25

VermontUS (bars)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Appendix 3. Fiscal red herrings …

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


The red ink … big in absolute terms …Federal budget balance (billions of dollars over the most recent 12 months)

Sources: NBER recession bars; NBER Macroeconomic database

-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

200

400

1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

200

400

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and relative terms too …Federal budget balance (percent of GDP)

Sources: NBER recession bars; NBER Macroeconomic database

-0.30

-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

1879 1889 1899 1909 1919 1929 1939 1949 1959 1969 1979 1989 1999 2009-0.30

-0.25

-0.20

-0.15

-0.10

-0.05

0.00

0.05

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and all about the recession (remember the bonds)Federal budget indicators (rolling 12-month tally as a percent of GDP)

Sources: Congressional Budget Office; US Treasury

-11-10-9-8-7-6-5-4-3-2-101234

1960 1970 1980 1990 2000 2010-11-10-9-8-7-6-5-4-3-2-101234

Actual federal deficit

Cyclically-adjusted federal deficit (excludes impact of fiscal initiatives and automatic stabilizers)

Cyclically-adjusted federal deficit (excludes automatic stabilizers

2010

2011

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Appendix 4. Fiscal Red Storm Rising

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Healthcare entitlement costs … OMG!Long-term projections (percent of GDP)

Source: Congressional Budget Office

0

5

10

15

20

25

30

35

40

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 20800

5

10

15

20

25

30

35

40

Debt service

Other

Coverage of uninsured

Medicare and Medicaid

Social Security

Revenues (historical average of 18.1%)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Ultimately all about economics, economic growth, …Long-term projections (billions of dollars, fiscal year basis)

Source: Congressional Budget Office

-15

-10

-5

0

5

10

15

20

1851 1876 1901 1926 1951 1976 2001 2026 2051 2076-15

-10

-5

0

5

10

15

20

Average historical growth = 3.75% annually

CBO assumption

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… which can bend the curve …Long-term projections (percent of GDP)

Sources: Congressional Budget Office; JPMorgan Chase & Co.

0

5

10

15

20

25

30

35

40

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 20800

5

10

15

20

25

30

35

40

Revenues

Debt service

Other

Medicare and MedicaidSocial Security

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… and basic economic principles

Three Questions

(1)You know the price of 87-octane gasoline at the local gas station. How much did your annual physical cost? How much does your employer contribute to your health insurance coverage? Right.

(2) You can arrange air travel and get your boarding pass from your home computer. Why do doctors need to be told to automate records? No financial incentive to do this.

(3) We’ve known about smoking risks for 50 years; why only in the last two years are non-smoker discounts offered on health insurance premiums? Why are there no incentives to reduce other post-65 risks?

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Appendix 5. QE, not a textbook’s story

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


The Fed buys assets to dampen rates …Assets held by the Federal Reserve (billions of dollars)

Source: Federal Reserve Board

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

Aug 2007 Feb 2008 Aug 2008 Feb 2009 Aug 2009 Feb 2010 Aug 2010

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500Loans to

depositories

Mortgage backed

securities

GSE debt

Treasuries

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… pays for that by creating reserves … Liabilities issued by the Federal Reserve (billions of dollars)


0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

Aug 2007 Feb 2008 Aug 2008 Feb 2009 Aug 2009 Feb 2010 Aug 2010 Feb 2011 Aug 2011 Feb 2012

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500Deposits at the Fedother than those ofdepository institutions,including the Treasury'ssupplementary financingaccountReverse RPs, Treasurycash, and other liabilitiesand capital

Excess reserves

Required reserves(includes vault cashused to satisfy reserverequirements)

Currency in circulationexcluding surplus vaultcash held by depositoryinstitutions

Series5

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… but the reserves remain quarantined (excess) …Selected components of the monetary base (billions of dollars)


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

1970 1975 1980 1985 1990 1995 2000 2005 20100

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Key components of the monetary base =currency in circulation + required reserves + excess reserves

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… i.e., the Fed isn’t “monetizing” debt … not QEingMonetary base (billions of dollars) M2 (billions of dollars)


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

1970 1975 1980 1985 1990 1995 2000 2005 20100

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

Monetary base (left scale)

M2 (right scale)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Desperately seeking a proper label …

Comment

QE (Quantitative Easing) Not

CE (Credit Easing) Sort of

DE (Duration Easing) Better

EE (Expectations Easing) Best answer

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Appendix 6. On inflation … zzzzzzzz

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


WhateverCore PCE inflation (percent change from 12 months earlier) Gold ($/ Troy ounce)

Sources: NBER recession bars; US Department of Commerce; Bloomberg

0

2

4

6

8

10

1970 1975 1980 1985 1990 1995 2000 2005 20100

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

Gold (London

Core PCE

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Inflation is below target ... and this isn’t the final answerSelected core consumer price indexes (percent change from 12 months earlier)

Sources: NBER recession bars; US Department of Commerce; US Department of Labor

0

2

4

6

8

10

12

14

16

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 20200

2

4

6

8

10

12

14

16

Core CPI

Core chain PCE price index

The Federal Reserve's long-run inflation

target (for chain core PCE price inflation)¹

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


A strict interpretation of the Nairu “model” …Core PCE inflation (percent change from 12 months earlier)

Actual unemployment rate less 5% Nairu assumption (percentage points)


0

1

2

3

4

5

6

7

8

9

10

11

-6 -5 -4 -3 -2 -1 0 1 2 3

74

73

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Core PCE inflation (percent change from 12 months earlier)



77

… which comes from the observed short-term tradeoff …

0

1

2

3

4

5

6

7

8

9

10

11

-6 -5 -4 -3 -2 -1 0 1 2 3

78

7776

75

74

79

73

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011





78

… between inflation and slack …

0

1

2

3

4

5

6

7

8

9

10

11

-6 -5 -4 -3 -2 -1 0 1 2 3

80

78

7776

75

74

84

83

82

81

90

88

8786

79

89

85

73

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011





79

… (inflation rises as the economy surpasses Nairu …

0

1

2

3

4

5

6

7

8

9

10

11

-6 -5 -4 -3 -2 -1 0 1 2 3

80

78

7776

75

74

9596

92

84

83

82

81

9899

90

87

93

86

79

97

8594

91

0004

05

0607

73

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011





80

… and falls as the economy falls below it) …

0

1

2

3

4

5

6

7

8

9

10

11

-6 -5 -4 -3 -2 -1 0 1 2 3

80

78

7776

75

74

9596

92

84

83

82

81

9899

90

87

93

86

79

97

8594

91

0004

03

02

01

05

0607

73

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011





81

… should say “deflation”

0

1

2

3

4

5

6

7

8

9

10

11

-6 -5 -4 -3 -2 -1 0 1 2 3

80

78

7776

75

74

9596

92

84

83

82

81

9899

90

87

93

86

79

97

8594

91

0004

03

02

01

05

06

08

0709

73

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Appendix 7. Trauma at the grocery store

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Corn pricesPrice of corn (dollars per bushel)

Source: US Department of Agriculture

0

1

2

3

4

5

6

7

8

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 20110

1

2

3

4

5

6

7

8

Energy Policy Act of 2005 (August 8, 2005)

Energy Independence and Security Act of 2007 (December 19, 2007)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Corn and grocery billsChange in the relative price of corn and food ratio of price indexes to 2005 prices)

Sources: US Department of Agriculture; US Department of Commerce

-2

-1

0

1

2

3

4

5

6

7

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011-2

-1

0

1

2

3

4

5

6

7

Corn's estimated contribution to the relative price of retail food, assuming corn comprises 3% of the typical grocery bill

Relative retail price of food (ratio of chain price index for personal consumption expenditures of food and beverages that werepurchased for off-premises consumption,i.e., groceries and not restaurants tochain price index)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


Appendix 8. Global awakening …

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


A Copernican story …External balance (percent of GDP)


-7

-6

-5

-4

-3

-2

-1

0

1

2

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010-7

-6

-5

-4

-3

-2

-1

0

1

2

US nominal net exportsUS current account balance

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


... a reflection of an economic awakening …Real GDP (chained 2005 US dollars)

Sources: US Department of Commerce; J.P. Morgan

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1990 1995 2000 2005 20100

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Developing economies in Eastern Europe, Latin America, and Asia

US real GDP

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… as impoverished areas manage out of poverty ...GDP per capita

(Ratio to 2010 US level) US level (dollars per person)

Sources: US Department of Commerce; J.P. Morgan

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1877 1887 1897 1907 1917 1927 1937 1947 1957 1967 1977 1987 1997 20070

7,000

14,000

21,000

28,000

35,000

42,000

Chin

a's p

er c

apita

real

GDP

Indi

a's p

er c

apita

real

GDP

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


America sponsors this and …After-tax GDP profits (percent of nominal Gross Domestic Income)


0

50

100

150

200

250

300

350

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 20120

50

100

150

200

250

300

350

US goods imports from China

US goods exports to China

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… America benefits from brand new export marketsUS goods exports to China (percent of all US exports)


0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 20120.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… with decades to go …China’s real GDP per capita (ratio to US level)


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 20500.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… for two sleeping giantsChina and India’s real GDP per capita (ratio to US level)


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 20500.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

China

India

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


52% of growth here to 2050 will come in China and IndiaReal GDP in selected regions (percent change from four quarters earlier)

Sources: US Department of Commerce; JPMorgan Chase & Co.

0

100,000

200,000

300,000

400,000

500,000

600,000

1990 2000 2010 2020 2030 2040 2050

OtherIndiaChinaCurrent developed (North America, Japan, Western Europe)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


How global GDP will evolve …Distribution of real GDP (percent of global output)

Sources: NBER recession bars; US Department of Commerce; various academic sources

0.00

0.20

0.40

0.60

0.80

1.00

2007 2017 2027 2037 2047

Other

India

China

Current developed (North America, Japan, Western Europe)

ECO

NO

MIC

OU

TLO

OK

UPD

ATE

, AFP

OF

WES

TER

N N

EW Y

OR

K, J

AN

UA

RY

26, 2

011


… kind of an Asia storyDistribution of real GDP (percent of global output)

Sources: NBER recession bars; US Department of Commerce; various academic sources

0%

20%

40%

60%

80%

100%

2007 2012 2017 2022 2027 2032 2037 2042 2047

Asia

United States

EuropeLatin AmericaMIddle East and Africa

Growth “… Will Guide You Home” … “and Fix You”

Documents

Transcript of Growth “… Will Guide You Home” … “and Fix You”