Outlook for the US and Japan

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Clemence Jennifer McLaughlin
5 years ago
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1 Celebrating Ten Years of Service to Hawaii Outlook for the US and Japan 50th Anniversary of Statehood Conference! Dr. Byron Gangnes UHERO 2009

2 Overview! State of the global business cycle Is recovery underway?! Near and medium-term growth prospects What kind of economic performance should we expect?! What does this mean for Hawaii? A quick look at UHERO near-term Hawaii forecast

3 Most severe US recession in decades Percent 8% Gulf War Financial Crisis 0-2 9/ Jobs %! Real GDP %!

4 Japan clobbered by exports 2000Y Bil 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 Real Exports 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 Industrial Production 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 Index 2009Q

5 Evidence of US Recovery! The Good News Stock market has rallied» S&P 500 up nearly 50% from early March low New housing starts are beginning to rise Initial claims for unemployment insurance off the April 9 peak

6 Initial unemployment claims have peaked 700,000 Initial U.S. Unemployment Claims (4wk moving avg) 560, , , ,800 1, Jan Aug Feb Aug Feb Aug Feb Aug Feb Sep Mar Sep Mar Sep Mar Sep Mar Aug-09

7 Evidence of US Recovery! The Good News Stock market has rallied New housing starts are beginning to rise Initial claims for unemployment insurance off the April 9 peak! The Less Bad News Non-farm jobs only down by 247K in July Unemployment actually fell from 9.5% to 9.4% in July» Over 400K unemployed dropped out of the labor market entirely

8 Evidence of US Recovery! The Good News Stock market has rallied New housing starts are beginning to rise Initial claims for unemployment insurance off the April 9 peak! The Less Bad News Non-farm jobs only down by 247K in July Unemployment actually fell from 9.5% to 9.4% in July! The Still Waiting For News No clear bottom yet for existing home prices Still waiting on the consumer

9 Consumer spending remains weak $ Bil US Retail Sales Annualized Growth 2000M1 2000M7 2001M1 2001M7 2002M1 2002M7 2003M1 2003M7 2004M1 2004M7 2005M1 2005M7 2006M1 2006M7 2007M1 2007M7 2008M1 Real GDP 2008M7 2009M1 Percent

10 Japan s recovery has begun! Japan s economy expanded in the second quarter A strong revival of Asian trade raised exports Large fiscal stimulus offset lingering private sector weakness! But the recovery is tenuous Domestic demand still shrinking Consumer and business confidence remains low Unemployment has surged from 3.8% last September to 5.4% in June

11 Japan s recovery has begun! Japan s economy expanded in the second quarter A strong revival of Asian trade raised exports Large fiscal stimulus offset lingering private sector weakness! But the recovery is tenuous Domestic demand still shrinking Consumer and business confidence remains low Unemployment has surged from 3.8% last September to 5.4% in June! And Japan has a big hole to crawl out of...

12 Japanese output has edged up Bil 2000 Yen Percent 570, , , , , , , , , Q1 2001Q1 Annualized Growth 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 Real GDP 2007Q1 2008Q1 2009Q

13 Prospects for global recovery! Global recovery has begun Developing Asia is bouncing back European economies are on the mend! Strong US rebound unlikely Consumer confidence and finances are poor! Japan s recovery could be hard to sustain Slow recoveries in Western markets will hold back exports What happens when fiscal stimulus wains?

14 Recovery will be slow Percent US Employment JP Employment -3

15 Challenges to medium-term growth! Wealth losses will restrain US consumption growth! Population aging/decline mean slower Japanese growth! Government finances will be a drag in both countries

16 US wealth losses will restrain spending

17 Japan s shrinking population Thou 129, , , , , , , Percent

18 Challenges to medium-term growth! Wealth losses will restrain US consumption growth! Population aging/decline mean slower Japanese growth! Government finances will be a drag in both countries! Unknowns Can developing Asian demand replace US consumer? Whither oil prices? Will environmental promises be kept?

19 Hawaii Outlook! Protracted tourism slump As recession ends, travel demand will remain weak Lower prices help sales but revenue suffers And the rest of world is on sale too! We should begin to see positive Y-Y growth from July on! Job and real income growth sharply negative in Visitor Sectors and Contracting will suffer the most! Early 2010 bottom but very weak growth until 2011! Unemployment and fiscal problems will persist

20 Arrivals recovery will be anemic 1,900 State Visitor Arrivals (000s) 1,750 1,600 1,450 1, Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1

21 Construction job losses not over Thou % Chg (right scale) Construction Jobs Percent

22 No Job Recovery Until Percent Non-farm Jobs Real Income

23 State Forecast Preview Total Visitor Arrivals U.S. Visitor Arrivals JP Visitor Arrivals Non-farm Jobs Real Personal Income Inflation Rate, Honolulu MSA (%)

26 Mahalo

Carl Bonham and Byron Gangnes University of Hawai'i Economic Research Organization April, 1999

Carl Bonham and Byron Gangnes University of Hawai'i Economic Research Organization April, 1999 1998 YEAR IN REVIEW Hawaii's ailing economy showed signs both of relapse and improvement in 1998. While preliminary