Economic Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:

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2 Economic Forecast OUTPUT AND EMPLOYMENT United States Real GDP $ billions (fourth quarter) $1,996 $1,575 $1,5 $1,9 $15, $15,5 $15,9 $16,51 $17,1 % change over the four quarters 1.9% -.8% -.%.8%.%.%.6% 3.5% 3.8% Nonfarm employment Job count (fourth quarter) 138,6, 135,93,667 19,877,667 13,65, 13,6,667 13,853, ,7, ,69,88 11,679,6 % change over the four quarters.9% -.% -.1%.6% 1.5% 1.7% 1.8% 1.8% 1.% Average monthly change 11,667-9,361-68, 6,58 165,889 18,5 18,5 18,5 18,5 WHAT THE TABLE SHOWS: s GDP forecast is derived from the national forecast by allocating output to each of the 5 states based on employment shares. So, forecast misses reflect surprises in the aggregate forecast as well as unexpected shifts in a state s GDP share. s economic recovery has lagged the nation s but its employment metrics have fared better than would be expected, reflecting New York s robust economy, where many of the state s residents work. Real GDP $ billions (fourth quarter) $ $37 $7 $3 $35 $1 $9 $59 $73 % change over the four quarters.5% -1.6% -.1% 1.%.6% 1.5% 1.8%.3%.9% Nonfarm employment Job count (fourth quarter),8, 3,993,333 3,86,867 3,81,67 3,861,8 3,93,33 3,939,733 3,95,718 3,97,17 % change over the four quarters.% -.% -3.3% -.6%.5% 1.1%.9%.3%.5% Average monthly change 736-7, -1,87-1,783 1,69 3,36 3, ,79 The Garden State s economy is forecast to speed up only slightly into 1 and 15. Note: GDP figures are based on quarterly values that are interpolated from annual GDP estimates using quarterly employment changes. Unbolded figures are reported actual values and bold figures represent forecasts. Sources: US Department of Commerce; US Department of Labor. Regional Perspectives: Economic Outlook Commercial Banking

3 Agriculture Mining Utilities Construction Durable manufacturing Nondudrable manufacturing Wholesale trade Retail trade Transportation Information Finance and insurance Real estate Professional and technical services Management of companies Administrative and waste management services Educational services Health care and social assistance Arts, entertainment, and recreation Hotel and food service Other services Government June 3, 1 The Economy s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES The figure compares the relative importance of selected industries to the state s economy with the national footprint of each industry (state and national figures reflect the value added of each industry as a percent of aggregate state or US nominal GDP, respectively). depends more than most states on the real estate and trade businesses. The outsized footprint of real estate is a liability, especially with the pharmaceutical industry consolidating and in many cases shifting its manufacturing base to lower-cost centers. The state s manufacturing sector now is an economic plus. Source: US Department of Commerce. Updated through 11. Regional Perspectives: Economic Outlook Commercial Banking 3

4 Bankruptcies RATIO OF BANKRUPTCY FILINGS TO THE 7 Q NUMBER The figure illustrates trends in bankruptcy 5 5 filings by businesses and persons relative to the number of filings in 7 Q, prior to the Business bankruptcy filings Nonbusiness bankruptcy filings recession. Bankruptcy filings are receding. 3 All US bankruptcy filings (shaded area) 3 Indicators of financial stress are a useful coincident indication of economic distress. From this angle, economic conditions may be turning slightly better. 1 1 Source: Administrative Office of the U.S. Courts; Updated through March Regional Perspectives: Economic Outlook Commercial Banking

5 FRB New York Business Survey REAL GDP (% CHANGE 1 MONTHS EARLIER) DIFFUSION INDEXES ( = NO CHANGE) 8 6 Forecast The New York Federal Reserve Bank survey of local businesses has recovered some from last year s slide and the outlook remains constructive. The index readings represent the net difference in the percent expecting improving conditions and those expecting worsening conditions. - real GDP (left scale) FRB-NY's Empire State Survey, current conditions (right scale) FRB-NY's Empire State survey, expected conditions (right scale) The business outlook remains favorable in northern region of the state. Note: Survey data unavailable prior to 1. Sources: Federal Reserve Bank of New York; US Department of Commerce. Updated through November 13 (surveys) and 13 Q3 (GDP). Regional Perspectives: Economic Outlook Commercial Banking 5

6 FRB Philly Business Survey REAL GDP (% CHANGE 1 MONTHS EARLIER) DIFFUSION INDEXES ( = NO CHANGE) The Philadelphia Federal Reserve Bank 8 6 real GDP (left scale) Philly survey of current conditions (right scale) Philly survey of future expectations (right scale) Forecast 75 5 survey of local businesses has recovered some from last summer s lull. The index readings represent the net difference in the percent expecting improving conditions and those expecting 5 worsening conditions. Respondents remain optimistic about the outlook but current conditions have moderated The business climate remains constructive for the southern region of the state Sources: Federal Reserve Bank of Philadelphia; US Department of Commerce. Updated through November 13 (surveys) and 13 Q3 (GDP). Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage reporting no change in activity. Regional Perspectives: Economic Outlook Commercial Banking 6

7 Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 7 Q LEVEL The figure tracks layoffs in and.. the national level of claims. Weekly layoffs, both the state and national 1.75 US (solid area) 1.75 tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of 7, prior to the recession. Jobless claims are back to normal-low levels The low level of layoffs implies that headwinds have died down Source: US Department of Labor. Updated through May 17, 1 (state) and May, 1 (US) Regional Perspectives: Economic Outlook Commercial Banking 7

8 Economic Growth REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) US Forecast Real GDP growth in (the line in the figure) is superimposed on top of US real GDP growth (bars in the figure). s real GDP growth has lagged the national recovery pace for most of the decade, although it did not contract in the recession. Job growth now is speeding up. Wall Street s chill and consolidation in the pharmaceutical industry represent headwinds for the state s recovery. Source: US Department of Commerce. Updated through 1 (state) and 1 Q1 (US). Quarterly estimates for states after 1 are interpolated from employment figures (through April 1), based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 8

9 Economic Output REAL GDP LEVEL (RATIO TO Q) The figure illustrates the evolution of real GDP of the state and the overall US economy since the fourth quarter of, Forecast the peak of the previous business cycle that is, at any point in time the lines trace the ratio of real GDP to its level in Q US s economy lagged the growth of the national economy in the s expansion and the recovery remains on a slow track The natural growth of the economies in the industrial Northeastern states tends to be a little slower than the national average Source: US Department of Commerce. Updated through 1 (state) and 1 Q1 (US). Quarterly estimates for states after 1 are interpolated from employment figures (through April 1), based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 9

10 Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM 1 MONTHS EARLIER) Job growth in the state, compared with the national pace. 3 1 US Forecast 3 1 Employment growth has lost momentum in the last year. Job growth may be slow for a while. Source: US Department of Labor. Updated through April 1 (state) and April 1 (US) Regional Perspectives: Economic Outlook Commercial Banking 1

11 Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE Q LEVEL) 1.7 Forecast US The figure illustrates the evolution of employment in the state compared with the nation since Q, the peak of the previous business cycle. The lines trace out the ratio of employment at the time to employment in Q. s jobs recovery has stalled recently. The state s recovery is lagging most, judging by the trends in employment. Source: US Department of Labor. Updated through April 1 (state) and April 1 (US). Regional Perspectives: Economic Outlook Commercial Banking 11

12 Industry Employment Trends EMPLOYMENT IN PHARMACEUTICAL MANUFACTURING (RATIO TO Q) The figure illustrates employment trends in US manufacturing of pharmaceutical and medical products for the state of compared with the national trend Nationwide, employment has stabilized at a level that is five percent above the level at the end of the 199s. has lost more than 5 percent of the, jobs that were in this industry The shrinkage of s pharmaceutical industry likely will continue to be a headwind for Source: US Department of Labor. Updated through April 1 (state) and April 1 (US). Regional Perspectives: Economic Outlook Commercial Banking 1

13 Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO Q LEVEL) Job trends in local communities within the Forecast US Forecast US Trenton Edison Camden Ocean City Vineland Newark Bergen Atlantic City forecast state. The state has seen a wide disparity of economic performance from community to community, with activity in the Atlantic City area and some northern suburbs faring reasonably well. Employment in many communities is still a mixed picture. Northern will likely be held back by the cloud hanging over the financial services industry but still is likely to gain ground as the national economy recovers. Source: US Department of Labor. Updated through April 1 (state) and April 1 (US). Regional Perspectives: Economic Outlook Commercial Banking 13

14 Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) Unemployment rate trends in, 1 1 Forecast 1 1 compared with the national average. The region s rise in unemployment is a mirror image of the national unemployment trend. 8 US (shaded) 8 The unemployment rate has come down to about 7 percent. 6 6 The unemployment rate is the single best indicator of the relative economic performance of a region. The economy is growing in line with its potential pace, judging by the stability of s unemployment rate Source: US Department of Labor. Updated through April 1 (state) and April 1 (US). Regional Perspectives: Economic Outlook Commercial Banking 1

15 Relative House Prices RATIO OF THE STATE S HOUSE PRICES TO THE NATIONAL AVERAGE (1995 Q = 1.) The figure tracks the relative price of houses in the state versus the nation that is, it reflects the ratio of the state price index to the national house price index, with that ratio set to unity in the summer of A drop in the line means that house prices in the state lag the national trend. States that did not suffer from speculative conditions saw a decline in the relative price of houses in this last decade. s real estate markets followed the national trend up and remain pricey by national average standards. faces a challenging future, with its key financial services and pharmaceutical industries consolidating. Source: FHFA. Updated through 1 Q1. Regional Perspectives: Economic Outlook Commercial Banking 15

16 Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 1995 Q LEVEL) The figure tracks the cumulative percentage US Edison Metro Division Newark-Union Metro Division deviation in house prices since 1995 in selected local markets and compares those with the national average. House prices in have stabilized.75.5 Ocean City Camden Metro Division Atlantic City.75.5 and in some markets are rising at a moderate pace..5.5 KEY MESSAGE:.. Trends across the state are similar Source: FHFA. Updated through 1 Q Regional Perspectives: Economic Outlook Commercial Banking 16

17 New Home Building HOUSING STARTS (RATIO TO THE JULY 199 LEVEL) New home building has not slowed as much in the state as the national averages. New home building is rebounding steadily..5. US Forecast.5. s housing recovery appears to be pacing most states Source: Census Department. Updated through March 1 (state) and April 1 (US) Regional Perspectives: Economic Outlook Commercial Banking 17

18 Office Markets PERCENT OF OFFICE SPACE THAT IS VACANT 3 3 Commercial real estate conditions are beginning to stabilize. 5 All Northern Mid- 5 The modest improvement in the state s economy is beginning to help the office markets. Note: Data unavailable for All prior to Source: CB Richard Ellis (formerly CB Commercial Property Information Systems), Office Vacancy Index of the United States. Updated through 1 Q All metropolitan areas (shaded area) Regional Perspectives: Economic Outlook Commercial Banking 18

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