The Dog Ate My Home On Behalf of MCAA By: Anirban Basu Sage Policy Group, Inc. May 3, 2012
Penny wise, Euro foolish
Annual % Change Historic and Projected World Output Growth 2004 through 2013* 6.0% 5.0% 4.0% 4.9% 4.6% 5.2% 5.4% 5.3% 3.9% 3.5% 4.1% 3.0% 2.9% 2.0% 1.0% 0.0% -1.0% -2.0% -0.5% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: International Monetary Fund *2012-2013 data are projections
Top 12 Stock Exchanges 2008 Growth Rank Exchange Index 2008 % Change 3 London SE FTSE 100-31.3% 1 NYSE Group DJI A -33.8% 12 Swiss Exchange Swiss Market -34.2% 9 TSX Group S&P TSX Composite -35.4% 2 Nasdaq NASDAQ Composite -39.6% 8 Bolsa De Medrid Madrid General -40.0% 6 Frankfurt SE DAX -40.2% 4 Tokyo SE Nikkei 225-41.5% 5 Euronext CAC 40-42.6% 11 Hong Kong Exchanges Hang Seng Index -47.9% 10 Borsa Italiana MIBTel -48.5% 7 Shanghai SE Shanghai Composite -65.4% Source: Yahoo! Finance
Top 12 Stock Exchanges 2009 Growth Rank Exchange Index 2009 % Change 7 Shanghai SE Shanghai Composite 77.2% 11 Hong Kong Exchanges Hang Seng Index 51.4% 2 Nasdaq NASDAQ Composite 43.7% 9 TSX Group S&P TSX Composite 31.2% 6 Frankfurt SE DAX 29.9% 1 NYSE Group DJI A 26.8% 8 Bolsa De Medrid Madrid General 26.7% 3 London SE FTSE 100 22.1% 5 Euronext CAC 40 21.5% 10 Borsa Italiana FTSE MIB 19.5% 12 Swiss Exchange Swiss Market 18.4% 4 Tokyo SE Nikkei 225 16.6% Source: Yahoo! Finance
Top 12 Stock Exchanges 2010 Growth Rank Exchange Index 2010 % Change 2 Nasdaq NASDAQ Composite 16.9% 6 Frankfurt SE DAX 16.1% 9 TSX Group S&P TSX Composite 14.4% 1 NYSE Group DJI A 11.0% 3 London SE FTSE 100 9.0% 11 Hong Kong Exchanges Hang Seng Index 5.3% 12 Swiss Exchange Swiss Market -1.7% 4 Tokyo SE Nikkei 225-3.0% 5 Euronext CAC 40-3.3% 10 Borsa Italiana FTSE MIB -13.2% 7 Shanghai SE Shanghai Composite -14.3% 8 Bolsa De Medrid Madrid General -19.2% Source: Yahoo! Finance
Top 12 Stock Exchanges 2011 YTD Growth through Third Quarter Rank Exchange Index % Change 1 NYSE Group DJI A -5.7% 2 Nasdaq NASDAQ Composite -9.0% 3 London SE FTSE 100-13.1% 9 TSX Group S&P TSX Composite -13.5% 8 Bolsa De Medrid Madrid General -14.0% 12 Swiss Exchange Swiss Market -14.1% 4 Tokyo SE Nikkei 225-14.9% 7 Shanghai SE Shanghai Composite -16.0% 6 Frankfurt SE DAX -20.4% 5 Euronext CAC 40-21.6% 11 Hong Kong Exchanges Hang Seng Index -23.6% 10 Borsa Italiana FTSE MIB -26.5% Source: Yahoo! Finance
Top 12 Stock Exchanges 2011 Growth Rank Exchange Index % Change 1 NYSE Group DJI A 5.5% 2 Nasdaq NASDAQ Composite -1.8% 3 London SE FTSE 100-5.6% 12 Swiss Exchange Swiss Market -7.8% 9 TSX Group S&P TSX Composite -9.2% 8 Bolsa De Medrid IGBM -14.6% 6 Frankfurt SE DAX -14.7% 5 Euronext CAC 40-17.0% 4 Tokyo SE Nikkei 225-17.3% 11 Hong Kong Exchanges Hang Seng Index -20.0% 7 Shanghai SE Shanghai Composite -21.7% 10 Borsa Italiana FTSE MIB -25.2% Source: Yahoo! Finance
All dressed up with no place to go
Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Index (2007 = 100) 105 Industrial Production January 2001 through March 2012 100 95 90 85 80 Source: Federal Reserve The industrial production index measures the real output of the manufacturing, mining, and electric and gas utilities industries.
1990Q1 1990Q4 1991Q3 1992Q2 1993Q1 1993Q4 1994Q3 1995Q2 1996Q1 1996Q4 1997Q3 1998Q2 1999Q1 1999Q4 2000Q3 2001Q2 2002Q1 2002Q4 2003Q3 2004Q2 2005Q1 2005Q4 2006Q3 2007Q2 2008Q1 2008Q4 2009Q3 2010Q2 2011Q1 2011Q4 Percent Change from Preceding Period (SAAR) Gross Domestic Product 1990Q1 through 2012Q1 8.0 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0 2012Q1: +2.2% -10.0 Source: Bureau of Economic Analysis
Thousands Net Change in U.S. Jobs, BLS January 2001 through March 2012 500 300 100-100 -300-500 -700 Between March 2011 and March 2012, the nation gained 1,899,000 jobs. 3/12: +120K -900 Jan-12 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10 Sep-09 May-09 Jan-09 Sep-08 May-08 Jan-08 Sep-07 May-07 Jan-07 Sep-06 May-06 Jan-06 Sep-05 May-05 Jan-05 Sep-04 May-04 Jan-04 Sep-03 May-03 Jan-03 Sep-02 May-02 Jan-02 Sep-01 May-01 Jan-01 Source: Bureau of Labor Statistics
National Nonfarm Employment by Industry Sector Groups March 2011 v. March 2012 Professional and Business Services 597 Education & Health Services 464 Leisure & Hospitality Trade, Transportation, and Utilities 328 310 Manufacturing 238 Mining and Logging 79 Construction 55 Financial Activities 38 Other Services Information Government -200-40 30 All told 1,899K Jobs Gained -400-200 0 200 400 600 800 Thousands, SA Source: Bureau of Labor Statistics
Issues with the Federal Budget The automatic sequestration mandated by the Budget Control Act of 2011 is set to begin in January 2013. Both defense and non-defense programs will be cut by $54.7 billion each year from 2013 through 2021 a total of approximately $109.3 billion per year or $984 billion through 2021. In addition, if Congress does not act by the end of the year, nearly 50 items in the tax code will expire. Among the most significant items are the Bush tax cuts and the payroll tax cut. Bush Tax Cuts: If tax cuts are not extended, approximately 60 percent of taxpayers will see an increase in their tax rate between 3 and 5 percentage points (e.g. a couple that makes $90,000/year will pay an extra $2,700 in federal income taxes). Expiring tax cuts also mean reductions to investment income. If the current rates expire, the tax rate for capital gains would increase from 15 percent to 20 percent and dividends would be taxed as normal income, instead of the current 15-percent rate. Payroll Tax Cut: If allowed to expire, roughly 160 million workers will see a 2 percentage point tax increase in payroll taxes, or an average of $714 or more/year for each worker. The Joint Committee on Taxation reports that the payroll tax cut will save workers $114 billion in 2012.
Monthly Net Change (thousands) National Construction Employment Monthly Net Change February 2000 March 2012 Feb-00 Aug-00 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 100 50 0-50 -100-150 -200 Industry Sector Mar-12 Feb-12 Mar-11 1-net 12-net 12-% Construction 5,551 5,558 5,496-7 55 1.0% Residential Building 569 574 567-5 3 0.4% Nonresidential Building 659.4 665.0 652.1-6 7 1.1% Heavy and Civil Engineering Construction 844.9 840.7 825.3 4 20 2.4% Specialty Trade Contractors 3,477.4 3,477.9 3,452.4-1 25 0.7% Source: Bureau of Labor Statistics
Employment Growth, U.S. States (SA) March 2012 v. March 2011 Percent Change Rank State % Rank State % Rank State % 1 North Dakota 6.5% 18 West Virginia 1.3% 35 Hawaii 0.6% 2 Oklahoma 2.4% 19 California 1.3% 36 New Mexico 0.6% 3 Utah 2.4% 20 Indiana 1.3% 37 Illinois 0.6% 4 Texas 2.3% 21 Florida 1.2% 38 Nevada 0.4% 5 Louisiana 2.3% 22 Minnesota 1.2% 39 Arkansas 0.4% 6 Arizona 2.1% 23 Ohio 1.2% 40 Nebraska 0.4% 7 Colorado 2.0% 24 Virginia 1.0% 41 South Dakota 0.3% 8 Maryland 2.0% 25 New Jersey 1.0% 42 Delaware 0.3% 9 Kentucky 1.9% 26 North Carolina 1.0% 43 Maine 0.2% 10 District of Columbia 1.8% 27 Wyoming 1.0% 44 Missouri 0.2% 11 New York 1.8% 28 Massachusetts 0.9% 45 Oregon 0.1% 12 Tennessee 1.7% 29 Iowa 0.9% 46 New Hampshire 0.1% 13 Kansas 1.6% 30 Vermont 0.9% 47 Alabama 0.0% 14 Washington 1.6% 31 Georgia 0.8% 48 Mississippi -0.3% 15 Idaho 1.5% 32 Pennsylvania 0.8% 49 Montana -0.3% 16 Michigan 1.4% 33 Alaska 0.7% 50 Rhode Island -0.5% 17 South Carolina 1.3% 34 Connecticut 0.6% 51 Wisconsin -0.9% Source: Bureau of Labor Statistics U.S. Year-over-year Percent Change: 1.5%
Unemployment Rates, U.S. States (SA) March 2012 Rank State Rate Rank State Rate Rank State Rate 1 NORTH DAKOTA 3.0 18 DELAWARE 6.9 35 WASHINGTON 8.3 2 NEBRASKA 4.0 18 WEST VIRGINIA 6.9 36 MICHIGAN 8.5 3 SOUTH DAKOTA 4.3 20 ALASKA 7.0 36 NEW YORK 8.5 4 VERMONT 4.8 20 TEXAS 7.0 38 ARIZONA 8.6 5 IOWA 5.2 22 LOUISIANA 7.1 38 KENTUCKY 8.6 5 NEW HAMPSHIRE 5.2 23 MAINE 7.2 38 OREGON 8.6 7 WYOMING 5.3 23 NEW MEXICO 7.2 41 ILLINOIS 8.8 8 OKLAHOMA 5.4 25 ALABAMA 7.3 42 SOUTH CAROLINA 8.9 9 VIRGINIA 5.6 26 ARKANSAS 7.4 43 FLORIDA 9.0 10 MINNESOTA 5.8 26 MISSOURI 7.4 43 GEORGIA 9.0 10 UTAH 5.8 28 OHIO 7.5 43 MISSISSIPPI 9.0 12 KANSAS 6.2 28 PENNSYLVANIA 7.5 43 NEW JERSEY 9.0 12 MONTANA 6.2 30 CONNECTICUT 7.7 47 NORTH CAROLINA 9.7 14 HAWAII 6.4 31 COLORADO 7.8 48 DISTRICT OF COLUMBIA 9.8 15 MASSACHUSETTS 6.5 32 IDAHO 7.9 49 CALIFORNIA 11.0 16 MARYLAND 6.6 32 TENNESSEE 7.9 50 RHODE ISLAND 11.1 17 WISCONSIN 6.8 34 INDIANA 8.2 51 NEVADA 12.0 Source: Bureau of Labor Statistics U.S. Unemployment Rate: March 12= 8.2%
Unemployment Rates, Largest 20 Metros (NSA) February 2012 Rank MSA UR Rank MSA UR 1 Washington-Arlington-Alexandria, DC- 5.8 11 Philadelphia-Camden-Wilmington, VA-MD-WV PA-NJ-DE-MD 8.8 2 Minneapolis-St. Paul-Bloomington, MN- Atlanta-Sandy Springs-Marietta, 6.2 12 WI GA 9.0 3 Boston-Cambridge-Quincy, MA-NH 6.6 Chicago-Joliet-Naperville, IL-IN- 12 WI 9.0 4 San Antonio-New Braunfels, TX 6.8 Miami-Fort Lauderdale-Pompano 12 Beach, FL 9.0 5 Dallas-Fort Worth-Arlington, TX 7.1 New York-Northern New Jersey- 15 Long Island, NY-NJ-PA 9.3 6 Houston-Sugar Land-Baytown, TX 7.2 San Diego-Carlsbad-San Marcos, 15 CA 9.3 7 Baltimore-Towson, MD 7.5 Tampa-St. Petersburg-Clearwater, 17 FL 9.4 8 Phoenix-Mesa-Glendale, AZ 7.8 18 Detroit-Warren-Livonia, MI 10.2 9 Seattle-Tacoma-Bellevue, WA 8.3 19 10 San Francisco-Oakland-Fremont, CA 8.7 20 Source: Bureau of Labor Statistics Los Angeles-Long Beach-Santa Ana, CA Riverside-San Bernardino-Ontario, CA 11.1 12.5
Jan-99 Aug-99 Mar-00 Oct-00 May-01 Dec-01 Jul-02 Feb-03 Sep-03 Apr-04 Nov-04 Jun-05 Jan-06 Aug-06 Mar-07 Oct-07 May-08 Dec-08 Jul-09 Feb-10 Sep-10 Apr-11 Nov-11 Thousands, SAAR 2,700 U.S. Housing Starts January 1999 through March 2012 2,200 1,700 1,200 700 200 Source: Economy.com
Net Percentage of Domestic Respondents Supply and Demand for Commercial Real Estate Loans 1995Q2 through 2012Q1 100 Tightening Standards for Loans 80 Stronger Demand for Loans 60 40 20 0-20 -40-60 -80 Source: Federal Reserve
Sales ($billions) U.S. Commercial Real Estate Investment Sales 2003 through 2011 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Retail Office Industrial Hotel Apartment 2011 Total Investment Sales: $216 billion; Up 55.1% from 2010 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Real Capital Analytics
Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 60 Architecture Billings Index December 2007 through March 2012 55 50 45 40 35 30 Source: The American Institute of Architects
Months of Backlog ABC s National Construction Backlog Indicator (CBI) Average 2009Q1 through 2011Q4 8.5 8.0 7.5 7.0 6.5 6.0 2010Q4 2011Q4: +9.9% 6.5 6.0 5.9 5.8 6.1 7.2 7.0 7.1 7.3 8.1 8.1 7.8 5.5 5.0 Source: ABC
SAAR ($billions) Nonresidential Construction Put-in-Place June 2006 through March 2012 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 800 700 Public Private Oct. 08: $719.0 billion Mar. 12: $556.9 billion -22.5% 600 500 400 300 200 100 0 Source: U.S. Census Bureau
National Nonresidential Construction Spending by Subsector March 2012 v. March 2011 Manufacturing Power Commercial Public safety Health care Lodging Office Sewage and waste disposal Educational Highway and street Communication Amusement and recreation Transportation Religious Water supply Conservation and development -15.6-10.1-5.9-6.6-0.4-0.9-1.7 8.9 7.0 4.9 2.8 2.4 0.7 0.4 19.2 39.6-20 -10 0 10 20 30 40 12-month %Change Source: U.S. Census Bureau
Feb-01 Sep-01 Apr-02 Nov-02 Jun-03 Jan-04 Aug-04 Mar-05 Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 Jun-10 Jan-11 Aug-11 12-month % Change Inputs to Construction PPI February 2001- March 2012 15% 10% 5% 0% -5% -10% Source: Bureau of Labor Statistics
Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Jul-04 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Jul-04 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 12-month % Change 12-month % Change Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Jul-04 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Jul-04 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12 12-month % Change 12-month % Change Key Commodity Prices January 2001- March 2012 50 40 30 20 10 0-10 -20-30 -40 Iron & Steel PPI 40 Softwood Lumber PPI 30 20 10 0-10 -20 12 10 8 6 4 2 0-2 -4 Concrete Products PPI 100 80 60 40 20 0-20 -40-60 NYMEX Crude Oil Source: BLS: EIA
Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 One-month Percent Change Conference Board Leading Economic Indicators Index August 2007 through March 2012 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% March 2012 = 95.7 where 2004=100-1.5% Source: Conference Board
It s difficult to forecast, particularly the future Economy hit a soft patch; 2013 could be very different depending on ; Recession no longer imminent; Black swan threats: (1) Iran (2) Israel/Iran (3) Europe; Many headwinds remain and the nascent recovery could easily falter; and Leading threats to the U.S. recovery are political, not economic.
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