Nov 2012 Bay Area Economic Forecast · 4 November 2012! © 2011 UCLA Anderson Forecast. All rights...

1

November 2012! 1!© 2011 UCLA Anderson Forecast. All rights Reserved. !

a unique approach. critical answers. Accurate.!

2012

The U.S. and California (and Bay Area)A Slowing Recovery!

Jerry Nickelsburg!Senior Economist!

UCLA Anderson Forecast!November 2012!

!

Bay Area Economic Forecast!



Main Themes!•  The US: Muddling Through with 1-3% Growth!•  Monetary and Fiscal Policy!•  California !•  Some Risks to The Forecast!•  Fiscal Cliff Looms!

2



GDP Growth Remains Sluggish!

20142012201020082006

6

4

2

0

-‐2

-‐4

-‐6

-‐8

-‐10

(Percent Change, SAAR)



Unemployment Remains Too High!

20142012201020082006

10%

9%

8%

7%

6%

5%

4%

(Rate)

3



Tepid Consumption Growth : 2%!

20142012201020082006

4%

3%

2%

1%

0%

-‐1%

-‐2%

-‐3%

(Percent Change)

Real Consumer Spending, Annual Data



Housing is Bright Spot!

20142012201020082006

2500

2000

1500

1000

500

0

(Thousands of Units)

Housing Starts, Annual Data

4



Growth in Exports Slowing with Europe in Recession and Asia Slowing!

20142012201020082006

15%

10%

5%

0%

-‐5%

-‐10%

-‐15%

(Percent Change)



Growth Slowing in Equipment And Software Spending!

20142012201020082006

15%

10%

5%

0%

-‐5%

-‐10%

-‐15%

-‐20%

(Percent Change)

5



Investment in Business Structures Stalls in 2013!

20142012201020082006

15%

10%

5%

0%

-‐5%

-‐10%

-‐15%

-‐20%

-‐25%

(Percent Change)



Zero Rate Policy To Continue Through Late 2014!

Federal Funds Rate Vs. 10-year U.S. Treasury Bonds!

20142012201020082006

6%

5%

4%

3%

2%

1%

0%

-‐1%

(Rates)

Fed Funds 10-‐Yr. T-‐bonds

6



The Fed Goes All-Out!



Inflation Remains Quiescent!

20142012201020082006

5%

4%

3%

2%

1%

0%

-‐1%

-‐2%

(Percent Change Year-‐Ago)

Price Deflator for Personal Consump4on Expenditures

7



State & Local Government Retrenching!

Sources: U.S. Department of Commerce and UCLA Anderson Forecast!



Federal Deficits as Far as the Eye Can See (with modest compromise)!

20222019201620132010200720042001

$500

$0

$-‐500

$-‐1000

$-‐1500

$-‐2000

(Annual Data, Billions $)

Federal Surplus/Deficit, FY 2000-FY2022

8



Federal Purchases Actually Declining!

20142012201020082006

8%

6%

4%

2%

0%

-‐2%

-‐4%

(Annual Data, Percent Change)



California Outlook!

9



-155 -130 -105 -80 -55 -30 -5 20 45 70 95

2008 2009 2010 2011 2012

Tho

usan

ds

Change In Total Employment

-1.36M

+0.50M

Employment – 2 Different Measures Slow and Perhaps Slowing Growth!

-155 -130 -105 -80 -55 -30 -5 20 45 70 95

2008 2009 2010 2011 2012 T

hous

ands

Change in Non-Farm Employment

-1.08M

+0.52M



Running Faster in a Slow Race!

10



Gains Are Widespread Across Sectors

-30 -20 -10

0 10 20 30 40 50 60

Tho

usan

ds

Change In Payroll Employment YTD 2012



But Geographically Uneven!

11



Multi-family housing begins a recovery!

Source: CIRB, US Census, UCLA Anderson Forecast



Residential Construction Improvement!

•  43% of all CA sales are still distressed sales!

•  Local Market Improvement!– Job Growth!– Foreign Sales!

•  multi-family building recovering!•  Preliminary statistical evidence of overall

recovery!

12



2012 2013 2014 Payroll Employment 1.7% 1.5% 2.3% Unemployment 10.7% 9.8% 8.5% Personal Income 0.9% 2.2% 3.1%

California Forecast



Some Risks of the Forecast!– Europe & China – What are the risks?!!

– The Election!• Transfers!• Defense vs Social Spending!• Regulation and Uncertainty!• The Political Economy of Policy!

!

13



The Fiscal Cliff!

•  Bush and Obama Tax Cuts Expire $399B!•  Spending Cuts of $207B!•  Deficit Reduction of $607B!•  Total Fiscal Impact – Recession in First

Half of 2013!– From about -1.3% GDP to -2.0% GDP!



Some Thoughts On The Fiscal Cliff!

•  Going over the cliff = lower Fed Transfers!•  More Important = recession!

– Lower state income taxes!– Lower state sales and use taxes!– Continued stall in housing!– Prolonged structural adjustment!

14





Summary!

•  US in transition to a post-industrial society!•  That means slow growth & exposure to

external shocks !•  Fiscal Policy threatens a return of 1937!•  Most likely scenario – 3% growth in 2014 but

higher variance to forecast!•  California to Grow More Rapidly, but it is still

a bifurcated economy!!

15



The Anderson Forecast Bay Area Model!

•  2nd Annual Bay Area Forecast!•  Forecast flows from U.S. to CA to Bay Area!•  Variables Forecast!

– Employment!– Unemployment!– Personal Income!– Taxable Sales!– Employment By Industry!



UCLA Bay Area Employment Model!

16



UCLA Bay Area Unemployment Model!



Bay Area Forecast Growth Rates!

0.0%

1.0%

2.0%

3.0%

4.0%

Real Personal Income Payroll Job Growth

2013

Bay Area California US

0.0%

1.0%

2.0%

3.0%

4.0%

Real Personal Income Payroll Job Growth

2014

Bay Area California US

Nov 2012 Bay Area Economic Forecast · 4 November 2012! © 2011 UCLA Anderson Forecast. All rights...

Documents

Transcript of Nov 2012 Bay Area Economic Forecast · 4 November 2012! © 2011 UCLA Anderson Forecast. All rights...