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) $1,99 $1,7 $1, $1,9 $1, $1, $1,97 $1, % change over the four quarters 1.9% -.8% -.%.8%.%.%.% 3.% Nonfarm employment Job count (fourth quarter) 137,93, 13,13,333 19,,7 13,83,7 13,8,7 13,,7 13,79, 138,88,19 % change over the four quarters.9% -.% -.%.% 1.% 1.% 1.7% 1.1% Average monthly change 99,7-3,7-8,889 3,83 1, , , ,333 Real GDP $ billions (fourth quarter) $ $ $ $ $ $7 $8 $ % change over the four quarters -.1% -.1%.%.%.%.9%.% 3.3% Nonfarm employment Job count (fourth quarter) 39, 3,7 11,33 1,1 17,17 1,,88 3, % change over the four quarters.1% -.% -.% 1.1%.3%.9% 1.%.9% Average monthly change , WHAT THE TABLE SHOWS: s GDP forecast is derived from the national forecast by allocating output to each of the 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 economy lost a little momentum in 11 and 1, likely reflecting challenges in the financial sector. The economy is expected to speed up somewhat in 1, spurring a modest improvement in hiring. 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 December 7, 13 The Economy s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES The figure compares the relative importance US industry mix industry mix 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). The financial industry represents an outsized footprint in. The turmoil in the financial industry represents a significant headwind for the state. 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 Business bankruptcy filings Nonbusiness bankruptcy filings filings by businesses and persons relative to the number of filings in 7 Q, prior to the recession. Financial stresses have largely receded since the financial crisis. All US bankruptcy filings (shaded area) Indicators of financial stress are a useful 3 3 coincident indication of economic distress. From this perspective, the signs are positive for the outlook. Source: Administrative Office of the U.S. Courts; Updated through September Regional Perspectives: Economic Outlook Commercial Banking

5 FRB Philadelphia Survey REAL GDP (% CHANGE 1 MONTHS EARLIER) DIFFUSION INDEXES ( = NO CHANGE) The Philadelphia Federal Reserve Bank 8 real GDP (left scale) Philly survey of current conditions (right scale) Philly survey of future expectations (right scale) Forecast 7 survey of local businesses indicates that current activity has moderated somewhat but that expectations for future activity remain strong. Activity is expected to pick up gradually in coming quarters. Sources: Federal Reserve Bank of Philadelphia; US Department of Commerce. Updated through November 13 (surveys) and 13 Q3 (GDP) Regional Perspectives: Economic Outlook Commercial Banking

6 Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 7 Q LEVEL The figure tracks layoffs in and the.. US (solid area).. national level of claims. Weekly layoffs, both the state and national tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of 7, prior to the recession Layoffs in have fallen back to prerecession levels Weekly jobless claims figures are reported on a timely basis and offer a comprehensive view of the state s labor market conditions. They are a credible leading indicator of business activity. The low level of applications for unemployment benefits implies that the recovery is getting traction. Source: US Department of Labor. Updated through November 1, 13 (state) and November 3, 13 (US). Regional Perspectives: Economic Outlook Commercial Banking

7 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). Real GDP growth is tracking the national trends. s economy is expected to pick up speed in the coming year. Source: US Department of Commerce. Updated through 1 (state) and 913 Q3 (US). Quarterly estimates for states after 1 are interpolated from employment figures, based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 7

8 Economic Output REAL GDP LEVEL (RATIO TO Q) Forecast US The figure illustrates the evolution of real GDP of the state and the overall US economy since the fourth quarter of, 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. s economy began to slow in 7, echoing the strains in the financial industry, but then began to recover in 8. The state s economy, although recovering, is improving very slowly. s economy is expected to match the national economy s performance going forward. Source: US Department of Commerce. Updated through 1 (state) and 913 Q3 (US). Quarterly estimates for states after 1 are interpolated from employment figures, based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 8

9 Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM 1 MONTHS EARLIER) Job growth in versus the rest of the nation. 3 US Forecast 3 The economy has been recovering in fits and starts, but seems to be on a firm recovery track again. Hiring has accelerated recently Employment growth is forecast to remain elevated in the coming year. Source: US Department of Labor. Updated through October Regional Perspectives: Economic Outlook Commercial Banking 9

10 Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE Q LEVEL) The figure illustrates the evolution of 1. Forecast 1. 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 US Employment in the state is down 3½ percent from the business cycle peak, a slightly worse performance than the national economy From an employment perspective, the economy has suffered the same fate as the national economy. The trends are expected to be turning up in 1. Source: US Department of Labor. Updated through October 13. Regional Perspectives: Economic Outlook Commercial Banking 1

11 Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO Q LEVEL) Job trends in local communities within the state Employment in many of the state s communities has been moving sideways Forecast US forecast US The financial industry s downswing likely will be a challenge for. Dover Wilmington Source: US Department of Labor. Updated through April forecast Regional Perspectives: Economic Outlook Commercial Banking 11

12 Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) US (shaded) Forecast Unemployment rate trends in, compared with the national average. s unemployment rate has been slowly receding, to just under 7 percent most recently, but may have lost a little momentum. The unemployment rate is the single best indicator of the relative economic performance of a region. The unemployment rate is projected to continue to come down in the coming year. Source: US Department of Labor. Updated through October 13. Regional Perspectives: Economic Outlook Commercial Banking 1

13 Relative House Prices RATIO OF THE STATE S HOUSE PRICES TO THE NATIONAL AVERAGE (199 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 199. 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. House prices are back in normal alignment with the rest of the nation s With inflated values corrected, house prices would be expected to rise gradually in the coming years. Source: FHFA. Updated through 13 Q3. Regional Perspectives: Economic Outlook Commercial Banking 13

14 Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 199 Q LEVEL) The figure tracks the cumulative percentage.. deviation in house prices since 199 in selected local markets and compares those.. with the national average. Real estate markets have been mirroring the 1.7 US Wilmington 1.7 national trend in house prices, but have yet to turn up. 1. Dover 1. KEY MESSAGE: Housing markets soon should be stabilizing Source: FHFA. Updated through 13 Q Regional Perspectives: Economic Outlook Commercial Banking 1

15 New Home Building HOUSING STARTS (RATIO TO THE JULY 199 LEVEL) Home construction is down to the lowest.. pace in two decades. New home construction came down significantly after but not as sharply in 1. US Forecast 1. proportionate terms as it did nationwide. New home construction is picking up Home building increasingly will become a source of support in coming years. Source: Census Department. Updated through August Regional Perspectives: Economic Outlook Commercial Banking 1

16 Office Markets PERCENT OF OFFICE SPACE THAT IS VACANT Office vacancy rates in Wilmington, 3 3 compared with the national office vacancy rate. Wilmington With the economy slowing, stresses in the commercial real estate area are intense, but may be stabilizing. 1 1 Commercial real estate markets respond to general economic conditions in the state 1 1 with a bit of a lag. Source: CB Richard Ellis (formerly CB Commercial Property Information Systems), Office Vacancy Index of the United States. Updated through 13 Q. All metropolitan areas (shaded area) Regional Perspectives: Economic Outlook Commercial Banking 1

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