The U.S. Macro Outlook: Reasons for Optimism and Concern MARISA DI NATALE, DIRECTOR

Transcription

1 The U.S. Macro Outlook: Reasons for Optimism and Concern MARISA DI NATALE, DIRECTOR

2 Fiscal Headwinds Are Set to Fade Contribution to real GDP growth, % Private economy Fiscal policy Total F 14F 15F Source: Moody s Analytics 2

3 Shutdown Impact Is Concentrated Impact on real gross product, 2013Q4 Less than U.S. Near U.S. More than U.S. Sources: BLS, BEA, Moody s Analytics 3

4 Budget Battles Weaken Confidence University of Michigan consumer confidence index debt limit Fiscal cliff Sources: University of Michigan, Moody s Analytics 4

5 Significant Fiscal Austerity Real GDP growth impact of federal fiscal policy, fiscal yr, ppts Source: Moody s Analytics Bush tax cuts Recovery Act Fiscal austerity 5

6 Uncertainty Weighs on Hiring Number of monthly hires, ths 6,000 5,500 5,000 4,500 4,000 3, Sources: BLS, Moody s Analytics 6

7 Global Investors Worry About Default Yield on U.S. Treasury bills, % mo 3 mo /03/13 9/10/13 9/17/13 9/24/13 10/01/13 10/08/13 10/15/13 Sources: Treasury, Moody s Analytics 7

8 And Political Uncertainty Remains High Fiscal policy uncertainty index, 2007Q4= Budget battles Fiscal cliff ARRA fiscal stimulus Debt-limit debacle Source: Moody s Analytics 8

9 Businesses Have Never Been as Profitable After-tax corporate profit margin, % Sources: BEA, Moody s Analytics 9

10 Banks Are on Solid Financial Ground Commercial banks Core capital ratio (L) Return on assets (R) Sources: FDIC, Moody s Analytics 10

11 And Households Have Deleveraged % of disposable income Debt service (L) Financial obligations (R) Sources: Federal Reserve, BEA, Moody s Analytics 11

12 But Where Are Those Animal Spirits? Job gains at opening establishments, ths, 4-qtr moving sum 8,000 7,500 7,000 6,500 6,000 5,500 5,000 4, Sources: BLS, Moody s Analytics 12

13 Housing Will Soon Be Undersupplied Vacant homes for sale, for rent, and held off market, ths 11,500 10,500 9,500 8,500 7,500 6,500 5,500 Trend vacancy Sources: Census Bureau, Moody s Analytics 13

14 But the Mortgage Credit Box Is Tight Avg credit score for purchase loans at origination Conventional Ginnie Mae Sources: CoreLogic, Moody s Analytics 14

15 And the Fed s Exit Will Be Tricky Assets held outright on Fed s balance sheet, $ bil 4,500 Forecast 4,000 3,500 3,000 2,500 2,000 1,500 1, Mortgage-backed securities Federal agency debt Treasury securities Source: Moody s Analytics 15

16 New York 16

17 New Employment Peaks Spread From Center Total employment, % of previous business cycle peak, 2013Q2 U.S.=98 New peaks: 25% by count 35% by employment New peak 95 to 99 <95 Sources: BLS, Moody s Analytics 17

18 Payroll Employment Northeast MSAs 1-yr vs. 3-mo performance (3-mo MA) Improving Annualized 3-mo % change Middle Atlantic New England South Atlantic Providence Bridgeport Rochester Contracting Pittsburgh Note: Size reflects relative total employment Newark Nassau Washington Boston % change yr ago New York February August 2013 Expanding Portland Manchester Springfield Syracuse New Haven Wilmington Camden Hartford Buffalo Albany U.S. Bethesda Philadelphia Trenton Harrisburg Edison Baltimore Slipping 18

19 New York Factory Growth Is Lagging Manufacturing activity diffusion index, >50=expansion 60 Empire State National ISM Sources: NY Fed, NAPM, Moody s Analytics 19

20 Slow Income Growth in New York State Total personal income, % change yr ago, 2013Q U.S. New York Connecticut New Jersey Sources: BEA, Moody s Analytics 20

21 Lower-Paying Jobs Dominate the Recovery Jobs by wage tier as % of all jobs added since Jun 2009 High New York U.S. Mid Low Sources: BLS, Moody s Analytics 21

22 Translating to Lower Output Growth Real GDP, % change yr ago 5 4 New York U.S E 14F 15F Sources: BEA, Moody s Analytics 22

23 Housing Markets Tighten Across the Nation Homeowner vacancy rate, ppt change, 2008Q4 to 2013Q2 U.S. decline=1 Decline >1.5 Decline >0 to 1.5 Increase U.S. rate=1.9% Sources: Census Bureau, Moody s Analytics 23

24 Foreclosures Continue to Mount Distress home sales as % of total (L) Foreclosure inventory per 1,000 households (R) Sources: CoreLogic, RealtyTrac, Moody s Analytics

25 But Are Concentrated Outside New York Total foreclosure inventories per 1,000 households Sep U.S.=10.6 State avg=7.8 < to 11.2 >11.2 Sources: RealtyTrac, Moody s Analytics 25

26 New York City s Lead Narrows Employment, % change yr ago, 3-mo MA 3 New York City 2 1 New York U.S Sources: BLS, Moody s Analytics

27 Better Job Mix Next Year in New York City Payroll job growth, % change yr ago High- and mid-wage -4 Low-wage E 14F 15F 16F 17F Sources: BLS, Moody s Analytics 27

28 Hurricane Reconstruction Drives Downstate Residential construction permit issuance, units, Jan 2011= Nassau-Suffolk metro division New York City metro division 110 New York state Sources: Census Bureau, Moody s Analytics

29 Growing Foreclosure Inventory Downstate Foreclosure inventory per 1,000 households U.S New York City New York Sources: RealtyTrac, Moody s Analytics

30 Employment Outlook for 2014 Favors the West Payroll employment, 2014Q4, % change yr ago U.S.=2.1 Oct 2013 forecast > to 2.2 <1.7 Sources: BLS, Moody s Analytics 30

31 United States 121 North Walnut Street Suite 500 West Chester PA Australia Level 10 1 O'Connell Street Sydney, NSW, 2000 Australia United Kingdom One Canada Square Canary Wharf London E14 5FA Prague Washingtonova Prague 1 Czech Republic

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