Outlook for the New England Economy

Transcription

1 Outlook for the New England Economy 11th Annual Regional and Community Bankers Conference Mary A. Burke Senior Economist Federal Reserve Bank of Boston Research Department November 5, 2012 Burke (Boston Fed) November 5, / 26

2 Disclaimer The views presented in this talk are my own and not those of the Federal Reserve Bank of Boston or the Federal Reserve System. Burke (Boston Fed) November 5, / 26

3 Economic activity close to pre-recession peak in most NE states Indexed to pre recession peak Coincident indexes Indexed to pre recession peak m1 2004m1 2006m1 2008m1 2010m1 2012m1 CT MA ME NH RI VT US Burke (Boston Fed) November 5, / 26

4 Employment recovery incomplete across U.S. and region Employment Indexed to pre recession peak Indexed to pre recession peak m1 2006m1 2007m1 2008m1 2009m1 2010m1 2011m1 2012m1 CT MA ME NH RI VT US Burke (Boston Fed) November 5, / 26

5 Unemployment rates stagnant in most NE states in past year September 2011 September 2012 United States New England Connecticut Maine Massachusetts New Hampshire Rhode Island Vermont Burke (Boston Fed) November 5, / 26

6 Unemployment edged back up recently in 5 of 6 NE states Unemployment Percent Percent m1 2009m1 2010m1 2011m1 2012m1 CT MA ME NH RI VT US NE Burke (Boston Fed) November 5, / 26

7 Unemployment rate decreases are partly due to people leaving the labor force Change in share of NE population from previous year Percentage points Sept Sept Sept Sept Sept Employed Unemployed Not in labor force Burke (Boston Fed) November 5, / 26

8 Labor-force participation has drifted down over course of recovery Labor force participation rates Percent Percent m1 2008m1 2010m1 2012m1 CT MA ME NH RI VT US Burke (Boston Fed) November 5, / 26

9 Share of employed people lower than at depth of recession for region Employment to population ratio Ratio m1 2008m1 2009m1 2010m1 2011m1 2012m1 CT MA ME NH RI VT NE Ratio Burke (Boston Fed) November 5, / 26

10 Industry-level employment changes in New England Index value (post 2006 peak = 100) New England employment by industry 2007m1 2008m1 2009m1 2010m1 2011m1 2012m1 Govt. Construction Manufacturing Trade/trans. Information Finance/insurance Prof. & bus. services Ed. & health services Leisure & hospitality Other services Burke (Boston Fed) November 5, / 26

11 Employment in NE has shifted to Ed. & Health Services, and Leisure & Hospitality January 2008 September % 4% 14% 10% 4% 14% 4% 3% 19% 10% 20% 9% 13% 7% 2% 18% 13% 7% 2% 18% Govt. Construction Manufacturing Trade/trans. Information Finance/insurance Prof. & bus. services Ed. & health services Leisure & hospitality Other services Burke (Boston Fed) November 5, / 26

12 Prof. & business services posts largest gains from June 2009; construction posts largest losses Employment change from trough to September New England U.S. Govt. Construction Manufacturing Trade/trans Information Finance/insurance Prof. & bus. services Ed. & health services Leisure & hospitality Other services Burke (Boston Fed) November 5, / 26

13 Education and health services only sector with employment gains from December 2007 Employment change from peak to September New England U.S. Govt. Construction Manufacturing Trade/trans Information Finance/insurance Prof. & bus. services Ed. & health services Leisure & hospitality Other services Burke (Boston Fed) November 5, / 26

14 New England information sector a relative strength Manufacturing, Financial activities, and Construction are relative weaknesses Professional & Business Services New England United States Information Leisure & Hospitality Private Education & Health Services Trade, Transportation, & Utilities Other Services Manufacturing Government Financial Activities Construction Percent Change (September 2011 to September 2012) Burke (Boston Fed) November 5, / 26

15 Housing wealth losses more moderate in region than U.S. House price growth Year over year percent change New England (FHFA) Boston (Case Shiller) U.S. (FHFA) U.S. (Case Shiller) 2000q1 2002q1 2004q1 2006q1 2008q1 2010q1 2012q1 Year over year percent change Burke (Boston Fed) November 5, / 26

16 House price growth by state House price index (2004:Q1=100) State house price growth 2004q1 2006q1 2008q1 2010q1 2012q1 CT MA ME NH RI VT Burke (Boston Fed) November 5, / 26

17 Foreclosures in the region and the nation (percent of all loans) 1.5 Exhibit 30: Foreclosures Started as a Percentage of All Loans United States 1 Percent 0.5 New England Burke (Boston Fed) November 5, / 26

18 Foreclosures by state (percent of all loans) Percent CT ME MA NH RI VT Burke (Boston Fed) November 5, / 26

19 Personal income growth in region mirrors U.S. income growth Personal income growth Year over year percent change New England U.S. Year over year percent change q1 2002q1 2004q1 2006q1 2008q1 2010q1 2012q1 Burke (Boston Fed) November 5, / 26

20 U.S. consumption rebounded then relapsed Year over year % change in real U.S. consumption Percent change in real consumption q1 2004q1 2006q1 2008q1 2010q1 2012q1 Burke (Boston Fed) November 5, / 26

21 New England state revenue collections post modest gains in fiscal year 2012 Total Revenues/Taxes Personal Inc. Tax Sales Tax Corp. Tax Connecticut Rhode Island Massachusetts Vermont Maine New Hampshire -1.2 NA Burke (Boston Fed) November 5, / 26

22 Consumer confidence in region mostly tracks U.S. confidence Index value Consumer confidence New England U.S. 2006m1 2008m1 2010m1 2012m1 Index value Burke (Boston Fed) November 5, / 26

23 NE consumers more optimistic about future than one year ago (but not much happier with the present) Consumer confidence Index value Sept Sept Sept Sept U.S. New England Current Future Burke (Boston Fed) November 5, / 26

24 State forecasts oscillating amid uncertainty Leading coincident indexes Index value m1 2012m2 2012m3 2012m4 2012m5 2012m6 2012m7 2012m8 4 Index value CT MA ME NH RI VT US Burke (Boston Fed) November 5, / 26

25 MA business confidence volatile in recent data 5 MassBenchmarks Leading Index AIM Business Confidence Burke (Boston Fed) November 5, / 26

26 What factors will drive region s economic growth and employment? Consumer spending Recent signs of life, growing consumer confidence Rising home and stock prices should provide boost Private investment Multifamily construction strong, but small share of activity Ongoing expansion likely in Health care and education sector Government spending Tight budgets are a drag on short-term growth prospects Resolution of political uncertainty? Burke (Boston Fed) November 5, / 26