The U.S. and California Is The Recovery Here at Last? UCLA Anderson School of

Transcription

1 The U.S. and California Is The Recovery Here at Last? Jerry Nickelsburg Senior Economist UCLA Anderson Forecast State of the County January 20, 2010

2 SEPTEMBER 2008

3 In September 2008 Financial Markets Stopped Functioning Baa Spread Over 10 Year Treasuries (daily, basis points) Billions of Dollars Commercial Paper Outstanding Non-Financial Financial ABS

4 And Consumers Stopped Spending 2.0% Real Retail Sales and Food Service Less Autos YoY % Change 2008, % 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% Jan. Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

5 Leading to a collapse of consumption and investment Unemployment Rises Sharply 6.1% in September 08 to 10.2% in October U.S. Payroll Employment Monthly Changes, S.A., 000 Jobs Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan

6 WHAT DOES THE END OF A RECESSION LOOK LIKE?

7 Payroll Job Losses Do Not End Before The Recession 1% Cumulative Recession Payroll Job Loss six months surrounding troughs (%) % change from peak employment 0% -1% -2% -3% -4% -5% -6% Nov March 1975 July 1980 Nov March 1991 Nov Nov. 2009

8 The Stock Market Bottoms Out 5-6 Months Before the End S&P 500 % of Pre-Recession Peak six months surrounding troughs 140% % of peak 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% Nov March 1975 July 1980 Nov March 1991 Nov Dec. 2009

9 The Recession Ends 2-3 Months After Peak Initial Claims for Unemployment Claims Peaked in March Monthly Average Initial Claims S.A. / Monthly S.A. Labor Force

10 The Recession Ends Soon After the Trough in Manufacturing Activity ISM Manufacturing Index Hit 50 in August

11 The Recession Ends Several Months After the Trough of Building Permits Building Permits Established a New Low in April

12 THE FORECAST

13 Savings Rate Gradually Rises Saving Rate, F, Quarterly Data (Rate) 5.0% 4.0% 3.0% 2.0% 1.0% Sources: Dept. of Commerce and UCLA Anderson Forecast

14 Consumption Growth Modest Real Consumption Growth, F (Annual Data, Percent Change) 6% 5% 4% 3% 2% 1% 0% -1% Sources: Dept. of Commerce and UCLA Anderson Forecast

15 Housing Starts Rebound off Lows Housing Starts, F (Annual Data, Millions of Units) Sources: Dept. of the Census, UCLA Anderson Forecast

16

17 Exports to Outpace Imports Growth in Real Imports and Exports, 2000:Q1 2011:Q4F (SAAR, Percent) 20% 10% 0% -10% -20% -30% -40% Imports Exports Sources: Dept. of Commerce, UCLA Anderson Forecast

18 Closer Look at the Forecast Growth in Real Imports and Exports, 2010:Q1 2011:Q4 (SAAR, Percent) 10% 9% 8% 7% 6% 5% 4% I 2010 II III IV I 2011 Imports II Exports III IV Sources: Department of Commerce, UCLA Anderson Forecast

19 Sluggish GDP Growth Real GDP Growth, 2000Q:1 2011:Q4F (SAAR, Percent) 10% 5% 0% -5% -10% Sources: U.S. Dept. of Commerce, UCLA Anderson Forecast

20 Unemployment Hangs Way too High Unemployment Rate, 2000:Q1 2011Q4F (Percent) 11% 10% 9% 8% 7% 6% 5% 4% 3% Sources: Bureau of Labor Statistics, UCLA Anderson Forecast

21 Zero Interest Rate Policy to End in Late 2010 Fed Funds Vs. 10-Year U.S. Treasury Bonds, 2000:Q1 2011:Q4F (Rates) 7% 6% 5% 4% 3% 2% 1% 0% -1% Fed. Funds 10-Yr T-Bond Sources: Federal Reserve Board, UCLA Anderson Forecast

22 What We Worry About Protectionism and Trade Wars Deficits, Inflation, and Fed Policy Government Intervention Geopolitical Risk

23 CALIFORNIA: EMPLOYMENT, TRADE, HOUSING, AND GOVERNMENT

24 But, Payroll Job Loss is Declining Thousands Monthly Change In Payroll Jobs (SA, 000)

25 Many sectors now adding jobs Change In Payroll Jobs (SA, 000) 20 Thousands QI QII QIII QIV Transp. Whse. & Util. Finance Information Wholesale Health Care & Soc. Svc Education Adm. & Sup. Svc Prof. & Tech. Svc

26 Many sectors now adding jobs Change In Payroll Jobs (SA, 000) 20 Thousands QI QII QIII QIV Retail Construction Durable Goods Hospitality Nondurable Goods

27 Public Sector cuts not yet sufficient Cumulative Employment Change State and Local Government Thousands FY '08 FY '09 State Government Local Government

28 Housing Markets: Home Prices 180 California FHFA Home Price Index (Adjusted For Inflation, ) AVERAGE REAL APPRECIATION Case Shiller and FHFA Purchase Only Confirm a Bottoming of Prices

29 Housing Markets: Inventories are low Inventory of Homes For Sale / Household (January 4, 2010) San Jose Philadelphia San Francisco Los Angeles Orange County New York San Diego Boston Washington, DC Dallas Honolulu St. Louis Chicago Seattle Minneapolis Houston Kansas City Sacramento Baltimore San Antonio Denver Riverside Indianapolis Tucson Memphis Phoenix Austin Detroit Miami Cleveland Milwaukee Cincinnati Orlando Tampa Jacksonville Las Vegas Atlanta Portland

30 Housing Markets: Inventories are falling Inventory of Homes For Sale Per Household June August November January Los Angeles San Diego Orange County Inland Empire San Francisco San Jose Sacramento

31 Exports are showing a pulse Thousands California Outbound Seaport Traffic (000 TEU's, Sept. '08 to Oct. '09 shaded, SA) Los Angeles Long Beach Oakland California Outbound International Air Cargo (Tons Loaded, SA, Sept. '08 to Sept. '09 Shaded) SFO LAX California Inbound Seaport Traffic (000 TEU's, Sept. '08 to Oct.'09 shaded, SA) imports remain flatlined Thousands Los Angeles 100 Long Beach 50 Oakland

32 Recap of Employment Trends Private Sector: Most private sectors are no longer losing jobs Construction permits stabilized & poised for growth Manufacturing evidence of increased export demand & declining job loss Trade & Retail await recovery of consumer demand Public Sector More contraction still to come

33 Recession and Recovery Growth Rates CA vs. U.S. A Hybrid Recovery Real Personal Income Difference Between CA and U.S. % Change From Date of U.S. Peak 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% months before and after U.S. peak 1949:Q4 1954:Q2 1958:Q2 1961:Q1 1970:Q4 1975:Q1 1980:Q3 1982:Q4 1991:Q1 2001:Q4 2009:Q1

34 : California Forecast 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Income & Unemployment Forecast Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Real Personal Income % Change Unemployment Rate 14.5% 12.5% 10.5% 8.5% 6.5% 4.5% 2.5% 0.5% -1.5% Real Personal Income: -2.7% 0.4% 2.8% Payroll Employment: -4.3% - 0.3% 1.5% Unemployment 11.7% 12.0% 10.8%

35 Sonoma County & The Recovery 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Distribution of Payroll Jobs in Sonoma County, 2010 Government, & Retail likely to contract in 10 Construction, Hospitality & Mfg. flat in 10 Health Care & Prof. & Bus Svc. Only source of near term growth

36 The UCLA-Anderson Forecast can also provide individual services for your organization. Speaking at conferences and events Economic research consulting services UCLA-Anderson Forecast outlook seminars Corporate promotional sponsorships for UCLA Forecast quarterly and regional events For more information contact: Sherif Hanna Managing Director For general information about the UCLA-Anderson Forecast and upcoming events, please go to