The U.S. Economy at Mid-Year: Is This as Good as it Gets?

Transcription

1 The U.S. Economy at Mid-Year: Is This as Good as it Gets? TELERGEE Executive & Financial Conference May 14, 2015 Lee McPheters

2 The Economy at Mid-Year Two Cheers for 2014 Growth! Consumers Remain Cautious Jobs Up, Real Income Not Up Inequality an Issue for % Annual GDP Gains Elusive

3 GDP Still Sluggish in 2014 GDP Components 2013 Growth 2014 Growth U. S. GDP (Output) 2.2% 2.4% Consumer Spending Gross Investment Residential Construction Non-Resid. Construction Government Spending U. S. Bureau of Economic Analysis, GDP Accounts, April 29, 2015

4 GDP Growth Deflates in Q GDP Components 2014 Growth 2015 Q1 U. S. GDP (Output) 2.4% 0.2% Consumer Spending Gross Investment Residential Construction Non-Resid. Construction Government Spending U. S. Bureau of Economic Analysis, GDP Accounts, April 29, 2015

5 GDP at Below Average Pace 23 Quarters into Recovery 4.2% 2.2% 10 Recessions Latest U. S. Bureau of Economic Analysis, average growth 23 quarters post recession

6 Why No Great Recovery After Great Recession??

7 Hurdles On Road To Recovery Uncertainty Persists Confidence is Weak Consumers Cautious Dollar Hurts Exports Construction Stalls Government Cuts What Drives Growth?

8 Small Business Confidence Not Recovered Normal You Are HERE National Federation of Independent Businesses

9 Government Contribution to GDP Has Been Negative This Recovery Government Contribution to Percent Change in Real GDP Stimulus U.S. Bureau of Economic Analysis

10 Consumer is Key to GDP Accounts for 70% of GDP but.. Consumer not driving recovery Paying off debt & saving more Long-term growth 3.6% year 2014 growth in low gear (2.5%) Is this as good as it gets?

11 Four Decades of Real Growth (3.6% Avg.) Average Quarterly Real Growth = 3.6% U.S. Bureau of Economic Analysis

12 Six Years of Sub-Par Growth (2.3% Avg.) Average Quarterly Real Growth This Recovery = 2.3% U.S. Bureau of Economic Analysis

13 Telecommunication Spending Has Been Stronger Annual Real Growth in Recovery = 3. 3%

14 Consumer Confidence Dips Back Down Below Normal (100) Up Up Down Down The Conference Board Index (Overall), April 2015

15 Consumers Still Cautious As Job Market Improves Still Paying Off Debt Many Homes Under Water But Job Market is Better Wages Barely Improve Can Low Gas Prices Help?

16 Wages as Percent of GDP Continue Long Decline U.S. Bureau of Economic Analysis

17 Middle Class Families Make Less Than Ten Years Ago $56,434 $54,865 $51,939

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19 Is Inequality Holding Back the Recovery? Obama: inequality defining challenge of our time. Pope denounces trickle-down theories.

20 Is Inequality Holding Back the Recovery? Joseph Stiglitz Nobel Laureate Stiglitz Says: Consumer spending is too weak to support recovery - real wages are stagnant and middle class share of income is in decline.

21 Income Gains by Top 1% in Recent Years Reverse Earlier Trend of Declining Share Income Share of Top 1% of tax filers (> $398,900 in 2007) 1928: 23.9% 2007: 23.5% 1976: 8.8%

22 How is Income Determined in a Market Economy? From each according to their ability, to each according to their needs. From each according to their ability, to each according to their work. From each according to their ability, to each according to their productivity.

23 It s Simple Economics! Low Productivity High Productivity Low Wages High Wages So wages will increase as productivity rises that s it?

24 Most Americans Are Not Benefitting From Greater Productivity Productivity is up But Real Hourly Worker Pay Little Changed Since 1978 Productivity Real Hourly Pay

25 What Has Caused Income Inequality to Increase? Technology & Education Gap Global Outsource of Jobs Corporate/Executive Power Cultural/Political Shifts

26 Corporate Profits As % GDP At Record High - Wages As % GDP At Record Low Profits Wages Profits/GDP Wages/GDP

27 In 1930, how did Babe Ruth explain why his salary of $80,000 was higher than that of U.S. President Herbert Hoover? That s because I Had a better year than Hoover! Babe Ruth, Baseball Player Herbert Hoover, President

28 Labor Market Full Recovery (Return to Prior Peak) Finally Attained After 7.5 Years!

29 U.S. Regains Lost Jobs Finally! Jan Peak (138,365,000) May 2014 Recovery Time Period: 7.5 Years Feb Bottom U. S. Bureau of Labor Statistics, Nonfarm Employment, Seasonally Adjusted

30 Jobs Returned Sooner in the Past 1991 Recession Recession 2001 Recession 4 Years 7.5 Years

31 U.S. May Add 3 Mil. Jobs This Year 6 Month Avg. Growth: 255,000/month 500 Thousands of Jobs (Monthly) June July August Sept Oct Nov Dec Jan Feb March April U. S. Bureau of Labor Statistics, Payroll Employment, Seasonally Adjusted

32 West and Southeast Lead In New Job Creation Ranked by % Change: March 2015 vs March Top 10 Growth States U. S. Bureau of Labor Statistics

33 Fastest Growing Small Metros (Percent Growth New Jobs: March 2015 vs. 2014) Bend 6.7% Merced 5.8% Longview 5.7% Carson Cty 1.1% Missoula 2.3% Bismarck 3.5% Midland 7.7% St. Cloud 2.1% Monroe 2.9% Coeur Springfield d Alene Rapid City Janesville 3.4% Barnstable 3.1% Kingston 6.0% Casper 1.1% 5.2%% 2.0% Danbury 1.7% 2.6% Ocean Cty 7.0% Grand Island Ames Chambersburg 4.8% Kankakee Dover 1.6% St. George 1.7% 2.8% 2.3% Cumberland 2.0% Columbus 2.4% Greeley Manhattan 3.0% Morgantown 7.0% Blacksburg 2.6% 2.3% Columbia 0.5% 3.0% Bowling Green Lawton 2.7% Burlington 4.8% Prescott Farmington Jonesboro Clarksville 2.7% -1.3% 4.3% 5.4% 4.6% Auburn Hilton Head 4.1% 3.8% Dalton 4.6% Hattiesburg 1.8% Lewiston 1.0% U. S. Bureau of Labor Statistics Labor Force 100,000 or less Lake Charles 7.7% Ocala 3.6%

34 Health Care Grew By Two mil Jobs Since Recession Began All Jobs (Left Scale) Health Care Jobs (Right Scale)

35 Consensus on Future Conditions From Panel Of Leading Economists Category 2015 Average Monthly Job Growth 225,000 Change in Hourly Pay (Annual) 2.7% Price of Oil at Year-End $62 First Rate Hikes by Fed September Change in Residential Investment 5.8% W. P. Carey School of Business, ASU & Blue Chip Economic Indicators

36 What Is Holding Back Home Building? Some Want A House But Cannot Buy One Low credit score Prior foreclosure Home under water Student loan debt Some (Millennials) Don t Want A House At All! Live with parents Marry much later Want urban lifestyle Prefer to rent Housing seen as bad investment

37 Millennials Replace Boomers Age today; in 20 years A larger group (83 mil.) than Boomers Millennials will dominate economy as Boomer group shrinks over time

38 U.S. Economic Outlook GDP Below 3% Growth for 10 th Year! Indicator Real GDP Growth 2.2% 2.4% 2.6% 10 Year Treasury Note 2.4% 2.5% 2.2% Inflation (CPI) 1.5% 1.5% 1.0% Employment (Jobs) 2.3 mil. 2.6 mil. 3.0 mil. Unemployment Rate 7.4% 6.2% 5.4% W. P. Carey School of Business, ASU & Blue Chip Economic Indicators, May 2015

39 3% GDP Growth? The Last Time GDP Grew By 3% Was 10 Years Ago! U. S. Bureau of Economic Analysis

40 Unemployment Rate Falls As Workers Drop Out (U.S. Unemployment Rate vs. Labor Force Participation Rate)

41 Support Expands for Those Not Working Population on Food Stamps 60,000 50,000 40,000 30,000 20,000 10, The U.S. population on food stamps has doubled (to 46 million) since 2004 Not Working Due To Disability The U.S. population not working due to disability has increased by 20% ( to 24 million) since 2010

42 What Optimists Expect What Pessimists Expect Job Growth Continues as U.S. Adds 3 million Jobs This Year Tighter Labor Markets Push Up Wages for Workers Incomes Rise, Confidence Up, Consumers Get Back in Game National Economic Growth Breaks out of 2.5% GDP Band Global Conditions Worsen, Oil Prices Go Up, Uncertainty Fed Raises Rates Too Soon And Recovery Stalls Out Home Building Stays Slow as Rates, New Home Prices Rise Wages Stay Low, Stock Market Tops Out, Growth Stagnates

43 2015: Best Year Yet For GDP - But 3% Growth Stays Elusive W. P. Carey School of Business

44 TELERGEE Executive & Financial Conference Lee McPheters