RECESSION AND RECOVERY IN MISSOURI AND THE U.S.

Transcription

1 RECESSION AND RECOVERY IN MISSOURI AND THE U.S. Alison Felix Senior Economist Federal Reserve Bank of Kansas City The views expressed are those of the presenter and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

2 After slowing in the first half of 11, growth is picking up Real Gross Domestic Product change from previous period, annualized FOMCForecast Forecast -3 Central Tendency (Nov. 11) Source: Bureau of Economic Analysis; FOMC

3 Business investment increased sharply in the second and third quarters of last year. Growth in Components of Real GDP 1 change from previous period, annualized 1 1 1:Q :Q1 11:Q 11:Q Total GDP Consumer Spending Residential Business Investment Investment Exports Government Spending - Source: Bureau of Economic Analysis

4 Unemployment rates have fallen over the past year but remain stubbornly high Unemployment Rate FOMC Forecast Central Tendency (Nov. 11) Source: Bureau of Labor Statistics; FOMC

5 After increasing in the first half of 11, inflation has moderated and is expected to be below % in PCE Inflation change fromprevious period, annualized FOMC Forecast -3 CentralTendency (Nov. 11) Source: Bureau of Economic Analysis; FOMC

6 FOMC December Statement: The Committee currently anticipates that economic conditions including low rates of resource utilization and a subdued outlook for inflation over the medium run are likely to warrant exceptionally low levels for the federal funds rate at least through mid-13. Fed Funds Rate Fed Funds Rate Dec-1 Dec-3 Dec- Dec-7 Dec-9 Dec-11 Source: FOMC

7 FOMC December Statement: the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction Millions of Dollars Federal Reserve Balance Sheet Fed Agency Debt Mortgage-Backed Securities Purch Liquidity idi to Key Credit Markets Lending to Financial Institutions Long Term Treasury Purchases Traditional Security Holdings Millions of Dollars Jan-7 Sep-7 Jun-8 Feb-9 Nov-9 Jul-1 Apr-11 Dec-11 Source: FOMC

8 The Tenth District of the Federal Reserve

9 Despite some gains, employment is still well below pre-recession recession levels. Total Nonfarm Employment Seasonally adjusted Index Index 1 1 US 1 MO Nov-1 Nov-3 Nov- Nov-7 Nov-9 Nov-11 Source: Bureau of Labor Statistics

10 The unemployment rate in Missouri is similar to the national rate. 1 Unemployment Rate Seasonally adjusted 1 1 U.S. MO Nov-1 Nov-3 Nov- Nov-7 Nov-9 Nov-11 Source: Bureau of Labor Statistics

11 The industry mix in Missouri is very similar to the national average. 18 Employment Share by Industry Seasonally adjusted 18 1 US 1 1 MO Trade Educ. & Health State & Loc. Govt. Prof. & Busi. Leis. & Hosp. Manuf. Fin. Svcs. Constr. Trans. & Util. Info Source: Bureau of Labor Statistics

12 Manufacturing employment growth outpaced every other industry in Missouri over the past year. Employment Growth by Industry Nov-11 over Nov-1 US MO Prof. & Busi. Educ. & Health Leis. & Hosp. Manuf. Trans. & Util. Trade Constr. Fin. Svcs. State & Loc. Govt. Info -1 Source: Bureau of Labor Statistics

13 Since the recession started, employment has fallen in every industry except healthcare. 1 Employment Growth by Industry Nov-11 over Dec US MO Educ. & Health Leis. & Hosp. State & Loc. Govt. Prof. & Busi. Trans. & Util. Trade Fin. Svcs. Info Manuf. Constr. -3 Source: Bureau of Labor Statistics

14 Nationally, the manufacturing sector has been expanding for over two years. Index Manufacturing Activity Seasonally adjusted Index 3 US MO Rest of Tenth District month ahead expectations 3 3 1:Q 3:Q :Q 7:Q 9:Q 11:Q 3 Sources: ISM, FRBKC Manufacturing Survey Note: = zero change

15 Manufacturers in Missouri expect increased activity over the next six months. 3 Index Missouri Manufacturing Expectations Seasonally adjusted; six months ahead Index 3 11 Q1 11 Q 11 Q3 11 Q Production Volume of new orders New orders for exports Capital expenditures Employment Source: FRBKC Manufacturing Survey

16 After sharp increases in 1, Missouri manufacturing exports fell in Missouri Manufactured Exports Year-over-year YTD Oct Total Transp Equip Chemicals Machinery Food Computers & (7.8%) (.%) (11.9%) (11.%) Electronics (.%) Source: Wiser Trade Note: Number in parantheses represents the share of Missouri manufactured exports

17 Crop prices have fallen somewhat from high levels last summer. 18 $/Bushel Crop Prices $/Bushel Beans Wheat Corn Jan- Jan- Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-1 Source: Commodity Research Bureau

18 Farmland prices have increased sharply in Missouri. 3 Missouri Non-irrigated Farmland Values Year-over-year Q3 Q3 8 Q3 11 Q3 - Source: FRBKC Agricultural Credit Survey

19 Home sales activity remains slow. Exis ting Home Sales 1 Index: 1:Q3=1 Seasonally adjusted Index 1 13 US MO :Q3 3:Q3 :Q3 7:Q3 9:Q3 11:Q3 Source: NAR

20 Residential construction activity remains weak but has increased over the past few months. Value of Residential Construction Contracts Index Nov-1=1 Seasonally adjusted Index US 17 MO Nov-1 Nov-3 Nov- Nov-7 Nov-9 Nov-11 Source: FW Dodge

21 Home prices in Missouri increased in the third quarter but remain well-below peak levels. Home Prices 1 Index: 1:Q3=1 Seasonally adjusted Index 1 1 US MO :Q3 3:Q3 :Q3 7:Q3 9:Q3 9 11:Q3 Source: FHFA - purchase only index

22 Foreclosure rates in Missouri are lower than in other parts of the nation. Foreclosure Rate U.S. MO :Q3 3:Q3 :Q3 7:Q3 9:Q3 11:Q3 Source: Mortgage Bankers Association

23 U.S. commercial construction activity is weaker than pre-recession recession levels Value of Commercial Construction Contracts Seasonally adjusted, 3-month moving average Index Nov-1=1 Index 3 3 Nov-1 Nov-3 Nov- Nov-7 Nov-9 Nov-11 Source: FW Dodge US MO

24 Federal government debt levels have increased significantly over the past few years. Federal Government Debt as a of GDP 18 1 Actual Extended-Baseline Scenario Alternative Fiscal Scenario CBO Projection June Source: Congressional Budget Office Note: According to the CBO, "The extended-baseline scenario adheres closely to current law, following CBO's 1-year baseline budget projections through 1 and then extending the baseline concept for the rest of the long-term projection period. The alternative fiscal scenario incorporates several changes to current law that are widely expected to occur or that would modify some provisions that might be difficult to sustain for a long period."

25 State government tax revenues increased in FY 11 but remained below pre-recession recession levels. 1 Index: =1 State Tax Revenue Index 1 1 US MO FY FY 3 FY FY FY FY 7 FY 8 FY 9 FY 1 FY 11 Source: US Census Bureau

26 Among the top Missouri export countries, EU countries combine for 1% of exports. Missouri Exports by Destination Canada Mexico China % 31% Korea, South Japan Belgium Singapore Germany Brazil United Kingdom 1% Australia % % % 8% Netherlands Venezuela Argentina Other

27 The baby boom generation is nearing retirement. 1 Missouri Population by Age Source: US Census Bureau

28 Conclusions The pace of the U.S. economic o c recovery slowed in the first half of 11, but growth picked up in the second half of last year. The U.S. and Missouri economies are still expected to recover at a moderate pace over the next few years. However, economic growth may rely more heavily on private demand in the U.S. as problems persist in Europe and the U.S. federal government faces high debt levels.

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