Update on the New England Economy and Housing Markets

Transcription

1 Update on the New England Economy and Housing Markets Greater Boston Association of Realtors November 7, 2012 Alicia Sasser Modestino, Senior Economist New England Public Policy Center Federal Reserve Bank of Boston The views expressed in the presentation are not necessarily those of either the Federal Reserve Bank of p p y Boston or the Federal Reserve System.

2 Areas of Focus Employment situation Consumer and business confidence round up Housing situation Economic outlook for New England

3 New England Employment Situation GoodNews: Employment andincomes are higherthan they were one year ago. Employment grew by 0.7 percent over the past 12 months. Unemployment rate decreased, still below national rate. Personal income grew by an annual rate of 2.4 percent. BadNews: Growthhasbeenslower has slower thanthethe nationand and unemployment has ticked up in recent months. Job growth has been unsteady and lags behind the nation. Unemployment rate has increased slightly since July. Growth of personal incomes has slowed during each quarter since 2011 Q1.

4 Employment growth I in New England has been unsteady in Monthly Employment Change, New England Thousand ds of Jobs Source: Bureau of Labor Statistics, NBER, Haver Analytics

5 As a result, year over year employment gains for New England were below that t of the U.S. Annual Employment Growth rlier 6 4 New England Last 12 months: +0.7% Since peak: -3.3% United States Last 12 months: +1.4% Since peak: -3.2% Perc cent Change fr rom a Year Ea US NE Source: Bureau of Labor Statistics, NBER, Haver Analytics

6 By industry, employment growth in New England was mixed compared to a year earlier. Annual Employment Growth by Industry Percent Change, September 2011 September 2012 Professional & Business Services Leisure & Hospitality Information New England US Retail Trade Education & Health Transportation, Warehousing, and Utilities Wholesale Trade Manufacturing Oh Other Services Government Construction Finance Source: Bureau of Labor Statistics, NBER, Haver Analytics

7 After two years of steady improvement, New England s unemployment rate has been rising i since July and now stands at 7.4%. 12 Unemployment Rates 10 US 8 Percent 6 NE Source: Bureau of Labor Statistics, NBER, Haver Analytics

8 Year over year, the unemployment rate was virtually unchanged for the region, but improved markedly in Massachusetts and RI. Unemployment Rates United States New England Connecticut Maine Massachusetts New Hampshire Rhode Island Vermont Source: Bureau of Labor Statistics, Haver Analytics

9 Personal income continued to grow in New England, although at a slower rate than the U.S. 12 Annual Personal Income Growth Perce ent Change fro om Year Earlie er NE US 8 Q2 98 Q2 00 Q2 02 Q2 04 Q2 06 Q2 08 Q2 10 Q2 12 Source: Bureau of Economic Analysis, NBER, Haver Analytics

10 Consumer and dbusiness Confidence The Good: Consumerconfidence among New England residents jumped in September and October, reversing declines over the summer. The Bad: Business confidence fell in Massachusetts in September, wiping out the gains made over the summer. The Hopeful: Forward looking indicators indicate greater expected growth over the coming six months for all six New England states.

11 Overall, New England consumer confidence jumped din October and dis now higher h than the US U.S. Consumer Confidence Index, 1985 U.S. US Average = Oct 11 Oct 12 US NE US NE US NE Consumer Confidence Present Situation Future Expectations Source: The Conference Board, Haver Analytics

12 Yet confidence among Massachusetts employers flli fell in September to levels l last seen in June AIM Business Confidence Index Massachusetts Index Source: Associated Industries of Massachusetts, NBER

13 Housing Market Situation Good News: There are some positive signs of recovery. Price declines have moderated in much of New England. Single family permits were up 20% compared to a year ago. Foreclosure have fallen from their peak levels. Bad News: The housing recovery continues to be slow. House prices are growing slower than the U.S. US Existing home sales and single family permits lag the nation. Foreclosures are persistently high and even rising in some parts of New England.

14 House prices in New England continued to soften through h 2012 Q2, but started t to climb nationally. 20 Repeat Sales Home Price Index Perc cent Change fr rom Year Earli ier Recession NE FHFA US FHFA US S&P Case Shiller 25 Q2 98 Q2 00 Q2 02 Q2 04 Q2 06 Q2 08 Q2 10 Q2 12 Source: FHFA, NBER, S&P/Case Shiller, Haver Analytics

15 Year over year, house prices fell in three of six NewEngland states, including Massachusetts. House Price Changes Percent Change, Q Q United States 3.1 New England 1.2 Connecticut 4.6 Maine 0.3 Massachusetts New Hampshire FHFA Purchase Only Rhode Island 1.1 Vermont Source: FHFA, NBER, S&P/Case Shiller, Haver Analytics

16 In Boston, prices never fell as much as in some metropolitan areas, although lh hrecovery is still slow. 25 S&P/Case Shiller Home Price Indices 20 m a Year Earli ier Percen nt Change fro Composite Index, Top 20 Cities Composite Index, Top 10 Cities 20 Boston Aug 98 Aug 00 Aug 02 Aug 04 Aug 06 Aug 08 Aug 10 Aug 12 Source: S&P/Case Shiller, NBER, Haver Analytics

17 Over the past year, prices in Boston are up but lag behind most of the Composite 10 cities. S&P/Case Shiller Home Price Indices Percent Change, Aug 11 to Aug 12 Composite 20 Composite 10 Boston Chicago Denver Las Vegas Los Angeles Miami New York San Diego San Francisco Washington DC Source: S&P/Case Shiller, Haver Analytics

18 Existing home sales in the Northeast continue to lag behind the rest of the nation. 1.6 Total Existing Home Sales Seasonally Adjusted at Annual Rates 1.4 Index, 1999 Average = US Northeast 0.6 Midwest South West Source: National Association of Realtors, NBER, Haver Analytics

19 Single family housing permits in New England are higher than a year ago but lag behind the U.S. 2.0 Single Family Permits erage = 1 In ndex, 1988 Av United States 0.0 New England Source: Census Bureau, NBER, Haver Analytics

20 Foreclosures have fallen from their peak but remain persistently high h compared to historical i levels. l 1.8 Foreclosures Started, All Loans Percent of Mortgages RI US CT ME NH NE MA VT Q2 98 Q2 00 Q2 02 Q2 04 Q2 06 Q2 08 Q2 10 Q2 12 Source: Mortgage Bankers Association, NBER, Haver Analytics

21 New England Economic Partnership ss Economic Outlook Employment Employment forecast to grow slowly at 1.2 percent per year over the next five years, slightly below the national forecast. Housing House prices expected to decrease through the 2nd half of 2012 with slow recovery going g forward, lagging g the nation. Overall Economic Growth Real gross product for the region is expected to grow 2.8 percent per year for 2011 through h2016, slower than the nation. Economic crisis in Europe, slowing Chinese economy and the looming fiscal cliff are expected to slow growth but not derail the region s recovery.

22 Employment in New England is expected to grow slowly over the next 5 years. 2.5 Annual Growth Rate : 16: Employment Perce ent US NE CT MA ME NH RI VT Source: New England Economic Partnership

23 House prices are expected to fall through the second half of f2012 then slowly l recover Median House Price Change Perc cent Change fr rom Previous Year US NE CT MA ME NH RI VT Source: New England Economic Partnership

24 New England is expected to grow slower than the nation on average through Annual Growth Rate : 16: Gross State Product Percen nt US NE CT MA ME NH RI VT Source: New England Economic Partnership

25 But New England has been through tough times before... Index 1920=1 1 (B Babe Ruth trade ed to the Yankee es, the curse beg gins) Celtics Reign of Terror (57-69) Boston Sports Index (BSI) Multiple Bruins and Celtics Championships Buckner! Red Sox 2007 Red Sox come back to beat WS Champs Yankees in ALCS and win WS Patriots Super Bowl Wins Yankees win Game 7 ALCS with walk-off homerun Celtics beat Lakers to win 17 th NBA Championship Sox miss playoffs Bruins win the Stanley Cup Note: Red Sox given favorable weights. Patriots 5-3 atop the AFC East Pats defeated by Giants in Superbowl, AGAIN Celts defeated by Heat in Eastern Conference Finals Sox first losing season since 1997, worst since 1965 Day 53 of the NHL lockout