Update on the New England Economy and Housing Markets Banker & Tradesman Real Estate Outlook Breakfast February 27, 2013 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 Boston or the Federal Reserve System.
Areas of Focus Employment situation Consumer and business confidence round up Housing situation Economic outlook for New England
New England Employment Situation Good News: Employment and incomes are higher than they were one year ago. Employment is growing in most major industries. Regional unemployment still below the national rate. Personal incomes grew over the past year. Bad News: Growth has been slower than the nation and unemployment ticked up over the summer. Job growth has been unsteady and lags behind the nation. Unemployment rate increased slightly in July and August. Growth of personal incomes has been below that of the U.S. each quarter over the past year.
Employment growth in New England has been I unsteady in 2012. Thousands of Jobs 40 30 20 10 0 10 20 30 40 50 60 Monthly Employment Change, New England Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Source: Bureau of Labor Statistics, NBER, Haver Analytics
As a result, year over year employment gains for New England were below that of the U.S. Annual Employment Growth Percent Change from a Year Earlier 6 4 2 0 2 4 New England Last 12 months: +0.8% Since peak: -3.1% United States Last 12 months: +1.6% Since peak: -2.5% US NE 6 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Source: Bureau of Labor Statistics, NBER, Haver Analytics
By industry, employment growth in New England was mixed compared to a year earlier. Annual Employment Growth by Industry Professional & Business Services Information Leisure & Hospitality Education & Health Other Services Transportation, Warehousing, and Utilities Retail Trade Finance Wholesale Trade Government Manufacturing Construction Percent Change, December 2011 December 2012 2.7 2.9 NE US 0.0 2.5 1.7 3.0 1.4 2.2 0.7 1.3 0.6 3.2 0.5 1.6 0.1 1.4 0.1 2.0 0.4 0.2 0.4 1.2 1.1 1.9 Source: Bureau of Labor Statistics, NBER, Haver Analytics 4 2 0 2 4
After two years of steady improvement, New England s unemployment rate ticked up over the summer and now stands at 7.3%. 12 Unemployment Rates 10 US 8 Percent 6 NE 4 2 0 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Source: Bureau of Labor Statistics, NBER, Haver Analytics
Year over year, the unemployment rate was up slightly for the region, but improved markedly in Connecticut and Rhode Island. Unemployment Rates United States 7.8 8.5 Dec 11 New England 7.2 7.3 Dec 12 Connecticut 8.1 8.6 Maine 7.0 7.3 Massachusetts 6.9 6.7 New Hampshire 5.2 5.7 Rhode Island 10.2 11.0 Vermont 5.2 5.1 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Source: Bureau of Labor Statistics, Haver Analytics
Personal income continued to grow in New England, although at a slower rate than the U.S. 12 Annual Personal Income Growth Percent Change from Year Earlier 10 8 6 4 2 0 2 4 6 US NE 8 Q3 98 Q3 00 Q3 02 Q3 04 Q3 06 Q3 08 Q3 10 Q3 12 Source: Bureau of Economic Analysis, NBER, Haver Analytics
Consumer and Business Confidence Good News: Confidence is higher than one year ago and forward looking indictors suggest greater growth. Business confidence increased in Massachusetts in January, reversing several months of declines. Consumer confidence among New England residents had been falling since October, but rebounded in February. Forward looking indicators point to greater expected growth over the coming six months for most of the New England states.
Confidence among Massachusetts employers ticked up in January, just above the neutral mark. 70.0 AIM Business Confidence Index 65.0 60.0 Massachusetts 55.0 Index 50.0 45.0 40.0 35.0 30.0 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Source: Associated Industries of Massachusetts, NBER
Overall, consumer confidence in New England is slightly higher than a year ago but below the U.S. 100 90 80 70 60 50 40 30 20 10 Consumer Confidence Index, 1985 U.S. Average = 100 Feb 12 Feb 13 0 US NE US NE US NE Consumer Confidence Present Situation Future Expectations Source: The Conference Board, Haver Analytics
Forward looking indicators suggest greater expected growth over the coming six months. Federal Reserve Bank of Philadelphia Leading Economic Index 4 2 Percent 0 Recession 2 US CT ME MA 4 NH RI VT 6 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Source: Federal Reserve Bank of Philadelphia.
Housing Market Situation Good News: There are positive signs of recovery. Price declines have moderated in much of New England. Sales and permits are up compared to a year ago. Foreclosures have fallen sharply over the past year. Bad News: The housing recovery continues to be slow. Regional house prices grew more slowly than the U.S. Existing home sales and single family permits lag the nation. Foreclosures are persistently high compared to historical levels.
At the end of 2012, house prices in New England were slightly higher than a year ago, but growing much more slowly than the nation. 20 15 Repeat Sales Home Price Indices Percent Change from Year Earlier 10 5 0 5 10 15 20 Recession NE FHFA Purcharse Only US FHFA Purchase only US S&P Case Shiller 25 Q4 98 Q4 00 Q4 02 Q4 04 Q4 06 Q4 08 Q4 10 Q4 12 Source: FHFA, NBER, S&P/Case Shiller, Haver Analytics
Year over year, house prices fell in four of six New England states. FHFA Purchase Only House Price Index Percent Change, Q4 2011 Q4 2012 United States 5.5 Boston New England 0.5 Connecticut 0.8 Maine 0.1 Massachusetts 1.8 New Hampshire 1.0 Rhode Island 1.4 Vermont 0.5 2.00 1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 Source: FHFA, NBER, S&P/Case Shiller, Haver Analytics
In Boston, prices never fell as much as in some metropolitan areas, although recovery is still slow. Percent Change from a Year Earlier 25 20 15 10 5 0 5 10 15 S&P/Case Shiller Home Price Indices Composite Index, Top 20 Cities Composite Index, Top 10 Cities Boston 20 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Source: S&P/Case Shiller, NBER, Haver Analytics
Over 2012, prices in Boston increased but lagged behind most of the Composite 10 cities. S&P/Case Shiller Home Price Indices Percent Change, Dec 11 to Dec 12 Composite 20 Composite 10 Boston Chicago Denver Las Vegas Los Angeles Miami New York San Diego San Francisco Washington DC 0.5 2.2 3.6 6.0 5.8 6.9 8.5 9.2 10.2 10.7 12.9 14.4 2 0 2 4 6 8 10 12 14 16 Source: S&P/Case Shiller, Haver Analytics
Existing home sales in the Northeast lag behind the rest of the nation but are starting to catch up. 1.6 Total Existing Home Sales Seasonally Adjusted at Annual Rates 1.4 Index, 1999 Average = 1 1.2 1.0 0.8 0.6 US Northeast Midwest South West 0.4 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Source: National Association of Realtors, NBER, Haver Analytics
Single family housing permits in New England have shown little increase over the past year. Index, 1988 Average = 1 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 Single Family Permits 0.2 United States New England 0.0 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Source: Census Bureau, NBER, Haver Analytics
Multi family housing permits in New England are rebounding more strongly. 1.4 Multi Family Permits 1.2 United States New England Index, 1988 Average = 1 1.0 0.8 0.6 0.4 0.2 0.0 Dec 98 Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Source: Census Bureau, NBER, Haver Analytics
Foreclosures have fallen from their peak but remain persistently high compared to historical levels. Percent of Mortgages 1.8 1.6 1.4 1.2 1.0 0.8 0.6 Foreclosures Started, All Loans Recession CT ME MA NH RI VT NE US 0.4 0.2 0.0 Q4 98 Q4 00 Q4 02 Q4 04 Q4 06 Q4 08 Q4 10 Q4 12 Source: Mortgage Bankers Association, NBER, Haver Analytics
New England Economic Partnership s Economic Outlook Employment Employment forecast to grow more slowly than the nation. Housing House prices expected to post steady gains through 2016. Overall Economic Growth Real gross product for the region is expected to grow moderately along with the nation. Continued fiscal cliff negotiations are expected to slow growth but not derail the region s recovery.
Employment in New England is expected to grow more slowly than the U.S. over the next 4 years. 3 Annual Growth Rate 2012 16: Employment 2 2.0 Percent 2 1 1.3 1.1 1.4 1.1 1.5 1.3 1.5 1 0 US NE CT MA ME NH RI VT Source: New England Economic Partnership
House prices are expected to post steady gains through 2016 for most New England states. 15.0 2006 2016 Median House Price Change 10.0 Percent Change from Previous Year 5.0 0.0 5.0 10.0 US CT ME NE MA NH RI VT 15.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: New England Economic Partnership
New England is expected to grow slower than the nation on average through 2016. Percent 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Annual Growth Rate 2012 16: Gross State Product 3.6 3.1 3.1 3.1 3.1 2.4 2.3 2.8 0.0 US NE CT MA ME NH RI VT Source: New England Economic Partnership
But New England has been through tough times before... Index 1920=1 (Babe Ruth traded to the Yankees, the curse begins) 2.5 2 1.5 1 0.5 Celtics Reign of Terror (57-69) New England Sports Index (NESI) Multiple Bruins and Celtics Championships Red Sox 2007 Red Sox come back to beat WS Champs Yankees in ALCS and win WS Patriots Super Bowl Wins Celtics beat Lakers to win 17 th NBA Championship Sox miss playoffs Bruins win the Stanley Cup Bruins are back in black after NHL lockout Buckner! Yankees win Game 7 ALCS with walk-off homerun 0 1950 1957 1964 1971 1978 1985 1992 1999 2006 2013 Note: Red Sox given favorable weights. Pats defeated by Giants in Superbowl, AGAIN Celts defeated by Heat in Eastern Conference Finals Sox first losing season since 1997, worst since 1965