Tandy Executive Speaker Series Economic Summit 2012 October 25, O. Homer Erekson John V. Roach Dean

Transcription

1 Tandy Executive Speaker Series Economic Summit 2012 October 25, 2011 O. Homer Erekson John V. Roach Dean

2 Things will get better... But when...

3

4 Texas: 2.8% Growth Rate

5 Source: Federal Reserve Bank of Dallas

6 The U.S. Economy is uncomfortably close to contracting, with a chance of falling into recession. The key silver lining is that if it does tip into a downturn, it is likely to be short and shallow as resource usage in both the product and labor markets remains so low. The unemployment rate hovers at 9% and the capacity utilization rate at a low of 77.4 percent. These metrics reflect much more slack in the economy than is typically the case before a recessionary downturn. Thus, the benefit of so little recovery is that, absent an unexpectedly large downward shock, there isn t that much room to fall. - Bart van Ark, Chief Economist, The Conference Board, October 11, 2011

7 How Did We Get Here? Housing and Financial Crises Unsustainable debt for federal and state & local governments European sovereign debt crises and the contagion effect Shocks weather, earthquakes, international events

8 Are We On a Path to Recovery? Unemployment Claims for U insurance decreased by 6,000 for week ending October 15 U rates fell in 25 states, increased in 14, and stayed same in 1 in September (increased in 26 states in August) Texas created 15,400 jobs in September, 2 nd best in the country Inflation Overall CPI increased.3% in September/.4% in August Core CPI increased.1% in September/.2% in August Business Activity Retail sales increased 1.1% in September, biggest gain in 7 months Businesses added to inventory for 20 th consecutive month, and sales rose for 3 rd consecutive month Leading Economic Indicator gained.2% in September, 5 th consecutive monthly increase Corporate cash holdings continue growing to over $2 trillion Source: Federal Reserve Bank of Dallas, BEA, CBO, Comerica Bank Reports, Kiplinger Newsletters

9 Two Main Challenges Consumer Confidence Consumers assessment of current conditions declined for 5 th consecutive month Conference Board Consumer Confidence Index shows stagnation consumers expecting business conditions to worsen staying at over 20% Unemployment Hovering right at 9% Cyclical U Demand still depressed 4 million online job openings relative to 14 million unemployed Retirement delays Structural U Jobless Americans lacking computer and other technical skills Extension of unemployment benefits Average length of unemployment is 40 weeks, twice that of recession of 1982 Limited mobility of workers Source: Federal Reserve Bank of Dallas, BEA, CBO, Comerica Bank Reports, Kiplinger Newsletters

10 A Bigger Challenge... The Irons

11 Policy Uncertainty According to Scott Baker, Nicholas Bloom, and Steven Davis: A major factor behind the weak recovery and gloomy outlook is a climate of policy-induced economic uncertainty: Deliberate policy decisions Harmful rhetorical attacks on business Failure to tackle entitlement reform and fiscal imbalances Political brinkmanship

12 Index of U.S. Policy Uncertainty, Jan to Aug Source: Measuring Economic Policy Uncertainty, by S. Baker, N. Bloom and S. Davis, Sept 2011

13 Economic Forecast Real GDP Real Consumer Spending Unemployment CPI Inflation Core Inflation Things will get better