Economic Outlook Annual Economic Forecast Breakfast Winthrop University. September 14, 2010

Transcription

1 Economic Outlook Winthrop University September 14, 2010

2 Economic Growth 10.0% 8.0% Real GDP Bars = CAGR Line = Yr/Yr Percent Change GDPR - CAGR: 1. GDPR - Yr/Yr Percent Change: 3.0% 10.0% 8.0% Real GDP is expected to moderate as the lift from fiscal & monetary stimulus and inventory rebuilding winds down 6.0% 4.0% 2.0% 0.0% -2.0% Forecast 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -4.0% -6.0% -6.0% -8.0% % Source: U.S. Department of Commerce and Wells Fargo Securities, LLC 2

3 Consumer Spending 15% 9% Retail Sales Ex. Auto & Gas Stations vs. Income 3-Month Moving Average Stock Market Bubble Tax Cut 1 Tax Cut 2 Housing Refi Boom Tax Rebates 15% 9% Core retail sales rose well ahead of income earlier this year, but have slumped more recently 3% 0% -3% - -9% - Disposable Personal Income, Yr/Yr % Change: 2.2% Retail Sales, ex. Autos & Gas, 3-Month Annual Rate: % % 0% -3% - -9% - -15% Source: U.S. Department of Commerce and Wells Fargo Securities, LLC 3

4 Labor Market The labor market remains the primary concern as job losses exceeded every post-world War II downturn and the recovery has been unusually tepid 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Cycle Cycle Cycle 2001 Cycle 2007-To-Date Forecast Employment Cycles Percent Change from Cycle Peak 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -6.0% -8.0% % Source: U.S. Department of Labor and Wells Fargo Securities, LLC 4

5 Unemployment by County Large Portions of the United States Continue to Face Serious Unemployment Issues Unemployment Rate Unemployment Rate July 2010 Greater than 12.5% 10.0% to 12.5% 8.0% to 10.0% 6.0% to 8.0% Less than 6.0% Source: US Department of Labor and Wells Fargo Securities, LLC 5

6 Income Proxy 9% 3% Income Proxy 3-Month Annual Rate of 3-Month Moving Average 9% 3% Incomes are making up the steep losses incurred during recession, but there is a great deal of lost ground to make up 0% -3% - -9% - Average Hourly Earnings Multiplied By Total Hours Worked -15% Income Proxy: 4.0% % -3% - -9% - -15% -1 Source: U.S. Department of Labor and Wells Fargo Securities, LLC 6

7 Mortgage Rates Conventional Mortgage Rate vs. Spread Basis Points, Percent Spread = Mortgage Rate - 10-Year Treasury Yield 8.0% 7.0% 225 Mortgage rates are currently at an all-time low, even though spreads have returned to their historic norm % 5.0% Mortgage Spread: 180 bps (Left Axis) Conventional 30-Year Fixed Mortg. Rate: 4.3% (Right Axis) % 3.0% Source: Freddie Mac, Federal Reserve Board and Wells Fargo Securities, LLC 7

8 Corporate Bond Spread 700 Baa Corporate Spread vs. S&P 500 Index Basis Points Baa spread = Average Baa Yield - 10-Year Treasury Yield 1, ,600 Corporate spreads fell and the stock market rallied once the Fed began its quantitative easing, but markets have remained stagnant since the end of QE Baa Corporate Spread: 295 (Left Axis) S&P 500: 1,058 (Right Axis) ,400 1,200 1, Source: Federal Reserve Board, Moody s, S&P Corp. and Wells Fargo Securities, LLC 8

9 Homebuilding 2.4 Housing Starts Millions of Units Forecast Since bottoming in January 2009, housing starts have moderately increased, but the ongoing housing correction still imposes challenges for the economy Source: U.S. Department of Commerce and Wells Fargo Securities, LLC 9

10 Home Sales 1.6 Existing & New Single Family Home Sales Seasonally Adjusted Annual Rate - In Millions Both new and existing home sales plummeted following the expiration of the home-buyer tax credit program New Home Sales: 276 Thousand (Left Axis) Existing Home Sales: 3.4 Million (Right Axis) Source: National Association of Realtors, U.S. Department of Commerce and Wells Fargo Securities, LLC 10

11 Charlotte 9% Charlotte MSA Private Nonfarm Employment 3-Month Moving Averages 9% 3% 3% Employment growth is key for renewed growth in Charlotte 0% -3% 0% -3% - 3-Month Annual Rate: 2. Year-over-Year Percent Change: -0. Household: Yr/Yr Percent Change: 2. -9% % Source: U.S. Department of Labor and Wells Fargo Securities, LLC 11

12 Charlotte 1 Charlotte MSA Unemployment Rate Seasonally Adjusted Unemployment Rate: 11.0% 12-Month Moving Average: 12.0% 1 10% 10% The unemployment rate has likely topped out, but remains well above the national average 2% % Source: U.S. Department of Labor and Wells Fargo Securities, LLC 12

13 Charlotte Charlotte MSA Housing Permits Thousands of Permits, Seasonally Adjusted Annual Rate Single-Family: 3,648 Single-Family, 12-Month Mov. Avg.: 5,104 Multi-Family, 12-Month Mov. Avg.: 1, Housing construction has slowed to a crawl Source: U.S. Department of Labor and Wells Fargo Securities, LLC 13

14 South Carolina South Carolina Nonfarm Private Employment 3-Month Moving Averages 3-Month Annual Rate: 1.1% Year-over-Year Percent Change: 0.2% Household: Year/Year Percent Change: -0. Employment growth is steadily moving back toward positive territory; however, manufacturing employment remains very weak 0% - 0% Source: U.S. Department of Labor and Wells Fargo Securities, LLC 14

15 South Carolina 1 South Carolina Unemployment Rate Seasonally Adjusted Unemployment Rate: Month Moving Average: 11.9% 1 10% 10% The unemployment rate has likely topped out, but remains above the national average 2% % Source: U.S. Department of Labor and Wells Fargo Securities, LLC 15

16 South Carolina 1 15% Rural vs. Metro Unemployment Rate Seasonally Adjusted Rural Unemployment Rate: 13.7% Metro Unemployment Rate: 10.5% 1 15% The disconnect between rural and metropolitan unemployment is becoming more apparent 9% 9% 3% % Source: U.S. Department of Labor and Wells Fargo Securities, LLC 16

17 York County, SC 1 1 York County, SC Unemployment Rate Seasonally Adjusted Unemployment Rate: 15.0% 12-Month Moving Average: The unemployment rate remains very high relative to the national average 10% 10% 2% % Source: U.S. Department of Labor and Wells Fargo Securities, LLC 17

18 York County, SC 3,000 York County, SC Housing Permits Seasonally Adjusted Annual Rate 3,000 2,500 2,500 2,000 2,000 Housing construction remains weak 1,500 1,500 1,000 1, Single-Family: 1, Source: U.S. Department of Commerce and Wells Fargo Securities, LLC 18

19 Lancaster County, SC 20% Lancaster County, SC Unemployment Rate Seasonally Adjusted 20% Lancaster county s job market has begun to improve 10% 10% 2% Unemployment Rate: 15.5% 12-Month Moving Average: 17.7% 0% % 0% Source: U.S. Department of Commerce and Wells Fargo Securities, LLC 19

20 Chester County, SC 22% 20% Chester County, SC Unemployment Rate Seasonally Adjusted Unemployment Rate: 17.0% 12-Month Moving Average: 20.1% 22% 20% Unemployment is finally declining, but remains extremely high 1 10% 1 10% Source: U.S. Department of Labor and Wells Fargo Securities, LLC 20

21 Wells Fargo Economics Group Publications A Sampling of Our Recent Special, Regional & Industry Commentary Recent Special Commentary Date Title Authors September-01 How Steep Is The Japan Slowdown? Anderson September-01 Indian Economy Booming Again Bryson To view any of our past research please visit: economics To join any of our research distribution lists please visit: economics August-17 Housing Data Wrap-Up: August 2010 Vitner & Khan August-12 Petroleum Markets: Comparing Two Crises Aleman August-11 Russia Bans Grain Exports Amid Drought, Fires Anderson & Kashmarek August-02 Understanding the Risk of Deflation Vitner & Iqbal July-28 Minnesota Economic Outlook: July 2010 Anderson July-28 Colorado Economic Outlook: July 2010 Anderson & Kashmarek July-27 America's Unemployment Experience: Diversity in the Details Silvia & Whelan July-22 Georgia Economic Outlook: July 2010 Vitner July-21 Four Wobbly Legs Beneath Throne of Economic Growth Silvia July-21 Nothing New From The Fed Vitner July-15 Global Chartbook: July 2010 July-15 New Jersey Economic Outlook: July 2010 Vitner & Khan July-12 California Economic Outlook: July 2010 Anderson July-09 Housing Chartbook: July 2010 Vitner & Khan July-09 What Really Drives Growth in the Industrial Sector? Bryson & Quinlan July-02 Florida Economic Outlook: July 2010 Vitner & Kamaruddin July-02 A Long Recovery for the Arizona Economy Aleman June-28 Character of Recovery III: Midyear Assessment Silvia & Iqbal June-24 U.K. Announces Major Deficit Reduction Plan Bryson June-21 China Reintroduces Currency Flexibility Bryson June-08 Credit Quality Monitor: June 2010 Anderson & Kashmarek June-02 Will Europe Pull Down Asia? Bryson & Kamaruddin 21

22 Wells Fargo Securities, LLC Economics Group Diane Schumaker-Krieg Global Head of Research & Economics John E. Silvia, Ph.D. Chief Economist Mark Vitner Senior Economist Jay H. Bryson, Ph.D. Global Economist Scott Anderson, Ph.D. Senior Economist Eugenio Aleman, Ph.D. Senior Economist U.S. Macro Economy Real Estate Global Economies U.S. Macro Economy U.S. Macro Economy Business Investment U.S. Macro Economy Prices/Inflation Sam Bullard Senior Economist Anika Khan Economist Azhar Iqbal Econometrician U.S. Macro Economy Prices/Inflation Commercial Real Estate Residential Real Estate Quantitative Macro- Economic Modeling Ed Kashmarek Economist U.S. Macro Economy Current Account Tim Quinlan Economist Global Economies U.S. Consumer Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A, Wells Fargo Advisors, LLC, and Wells Fargo Securities International Limited. The information and opinions herein are for general information use only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company 2010 Wells Fargo Securities, LLC. SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE 22