US U.S. and dcolorado Economic Conditions Mark C. Snead Vice President and Branch Executive Federal Reserve Bank of Kansas City Denver Branch 1 We only need a few things for recovery Moderate growth in GDP Steady private sector job gains Resumption of income growth Normal spending by consumers Reduction in household debt Increase in the savings rate An end to the real estate debacle right? 2
Colorado job gains now positive yr/yr, jobs lost; 1, recovered; 1 qtr lag behind U.S. Growth in Total Nonfarm Employment Year-over-year 4. 4. 3. 3. 2. 1. U.S. 2. 1... -1. -1. -2. -2. -3. -3. -4. CO -5. -. -4. -5. -. -7. 7-7. 7 Feb- Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 3 Goods sector remains the story of the recession Govt. modest drag in CO late in cycle Colorado Nonfarm Employment Gains/Losses 1 Thousands Thousands 1 8 8 4 Government 4 2 2-2 -4 Total Services -2-4 - - -8 Goods -8-1 -1 Feb- Aug- Feb-7 Aug-7 Feb-8 Aug-8 Feb-9 Aug-9 Feb-1 Aug-1 Feb-11 4
CO in the middle of the pack among labor markets in the Tenth District Total Nonfarm Employment 112 : Feb-=1 112 11 11 18 18 1 1 14 14 Wyoming 12 1 12 1 Nebraska Oklahoma 98 98 Colorado Kansas 9 9 New Mexico Missouri 94 94 Feb- Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 5 Agricultural and energy states continue to lead KS has recent data anomaly in construction Total Nonfarm Employment Year-over-year 2. 1. 1. 1.3 1. 2..7.7 1..2. -.2. -1. -.8 8-1. -.9-2. -2. -3. 3 Feb-1-3. 3-4. Feb-11-4. -5. US DIST NE OK CO WY MO KS NM -5.
Divergence between U.S. and CO job gains in several key sectors Total Nonfarm Employment by Industry Feb-11 over Feb-1 4 2-2 -4 1.3/9. 2.7 1.5 4.1 2.3 2.2 2.2 1.1.9 4.5 1.7 1.2.7.2.4 -.4 -. -2. -.5-1.2-1.7 4 2-2 -4 - -4.7 - -8 Mining (.1) Prof. & Bus. (.) Other Serv. (.4) Educ. & Health (.12) Trans. & Util. (.3) Manuf. (.) Leisure & Hosp. (.12) Trade (.) -.5 Constr. (.5) Finance (.) Gov't. (.18) Information (.3) -8 7 Colorado jobless rate now above U.S. number unemployed remains persistently high Unemployment Rate 11 11 1 1 9 9 8 7 US CO 8 7 5 5 4 4 3 3 Feb- Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 8
CO/NM putting upward pressure on District jobless rate Unemployment Rate by State 1. 9 9. 8.9 Feb-1 Feb-11 87 8.7 9.3 9.4 1. 9 9. 8. 8. 8. 7...2 5.5.8 7.. 5. 43 4.3 5. 4. 4. 3. 3. 2. US 1J NE WY OK KS NM CO MO 2. 9 Rising Tech activity has not turned into net hiring 23 Thousands Colorado Advanced Technology Employment Thousands 23 21 21 19 19 17 17 Statewide 13 Denver MSA 11 9 7 5 Feb-9 Feb-92 Feb-94 Feb-9 Feb-98 Feb- Feb-2 Feb-4 Feb- Feb-8 Feb-1 13 11 9 7 5 1
Survey data suggest surge in 1J mfg. activity CO receiving little mfg. boost Manufacturing Indices, Month-over-month 5 5 U.S. 55 55 5 45 1J 5 45 4 4 35 35 3 3 Mar- Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 Source: ISM, FRBKC Manufacturing Survey Note: 1J index is computed on ISM basis (5 = zero change) 11 Gains in both capital spending and hiring in mfg. Tenth District Manufacturing Indices Year-over-year 4 3 2 Expected in next t mo. 4 3 2 1 1-1 -2 Capital Spending -1-2 -3-4 -5 - Employment -3-4 -5 - -7-7 Mar- Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 12 Source: FRBKC Manufacturing Survey
Survey data confirm rise in raw materials prices finished goods prices now rising, expected to rise further Tenth District Manufacturing Price Indices, Month-over-month over 9 75 Expected in next t mo. 9 75 45 3 - Prices paid for raw materials Prices received for finished goods 45 3 - -3-3 Mar- Mar-7 Mar-8 Mar-9 Mar-1 Mar-11 13 Source: FRBKC Manufacturing Survey Q4 bounce in U.S. and CO existing home sales but weakness returns in latest monthly U.S. data Sales of Existing Homes 12 : 25:Q4=1 12 11 11 1 1 9 8 U.S. 9 8 7 7 5 CO 5 4 4 25:Q4 2:Q4 27:Q4 28:Q4 29:Q4 21:Q4 14 Source: National Association of Realtors
1J existing home sales trail U.S. through 4 th quarter NE and NM experience sharpest reversals Growth in Existing Home Sales Year-over-year 4 29:Q4 21:Q4 33.3 4. 44.4 4 2 25.9 2.4 12. 25.3 2.9 8.2 2-8.3-2 -4-1.2-19.5-23.9-24.5-25.1-2.2-28.1-3.8 US 1J WY CO NM MO KS OK NE -2-4 Source: National Association of Realtors 1J homes price gains now range around U.S. gain CO has smallest gain in cycle among 1J states, but highest price FHFA Repeat Sales Home Price 18 17 1 14 13 : 22:Q4=1 Median Home Price 22Q2 21Q2 %Chg CO $19,477 $217,558 1.7 KS 99,938 118,87 18.8 MO 17,451 123,754.2 NE 1,99 12,4 19.2 NM 117,5 11,17 37. OK 85,845 118,771 38.4 WY 1,21 183,22 59. US 149,971 18,17 2.1 U.S. WY NM OK 18 17 1 14 13 12 KS MO 12 11 1 1 22:Q4 23:Q4 24:Q4 25:Q4 2:Q4 27:Q4 28:Q4 29:Q4 21:Q4 NE CO 11 1 Source: FHFA
Commercial and residential construction continue to bounce along bottom Value of Residential and Commercial Construction Contracts, 3-mo. moving average 175 : Feb-=1 175 125 1 CO (commercial) US (commercial) US (residential) CO (residential) 125 1 75 75 5 5 25 25 Feb- Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 17 Source: F.W. Dodge Hoteliers in Mtn. states report mixed lodging results Hotel Occupancy Rates 75 75 7 Denver 7 5 NM 5 55 55 5 WY 5 45 45 4 Colorado Resorts 4 35 35 Feb- Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 18 Source: Rocky Mountain Lodging Report
Denver air traffic resumes long-run growth trend other 1J cities well below pre-recession levels Airport Passenger Traffic 12 : Jan-=1 12 Denver 11 11 1 Kansas City U.S. 1 9 Other 1J Cities 9 8 8 Jan- Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 19 Source: District Airports 1J population gains exceed U.S. in 2s high in-migration states of CO and NM decelerate sharply py Growth in Population Decade-over-decade 35 31.4 35 3 3 25 2 1 5 13.4 9.5.5 1.3 17.7 2.2 11.7 2 21 1.9 9.8 89 8.9 9. 7.8 85 8.5 87 8.7 7.2 5.7 5.5 25 2 1 5 US 1J CO NM WY OK MO NE KS 2 Source: U.S. Census Bureau
Crude futures suggest $1+/bbl through 212 West Texas Intermediate Oil Spot Price & NYMEX Futures 14 $/Barrel $/Barrel 14 12 12 1 1 8 8 4 Oil Spot Prices 4 2 Oil Futures 2/7/211 2 Oil Futures 4/5/211 Feb- Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 Feb-12 21 Source: Bloomberg Energy Services Natural gas futures suggest ceiling around $5/mcf Henry Hub Natural Gas Spot Price & NYMEX Futures $/Million Btu $/Million Btu 12 Nat Gas Spot Prices Nat Gas Futures 2/7/211 12 Nat Gas Futures 4/5/211 9 9 3 3 Feb- Feb-7 Feb-8 Feb-9 Feb-1 Feb-11 Feb-12 22 Source: Bloomberg Energy Services
Shift in exploration toward crude accelerates in U.S. and CO 1,8 Count of Active Drilling Rigs Number of Rigs Number of Rigs 3 1, 1 U.S. Natural Gas (left axis) 9 9 1,5 25 8 8 1,2 2 7 7 9 5 U.S. Crude Oil (left axis) 5 4 4 1 3 3 2 2 3 5 CO Crude Oil CO Natural Gas (right axis) 1 (right axis) 1 Jun-7 Mar-8 Dec-8 Sep-9 Jun-1 Mar-11 Jun-7 Mar-8 Dec-8 Sep-9 Jun-1 Mar-11 23 Source: Baker-Hughes Risks to the recovery? Rising interest rates (mortgage rates) Rising energy/commodity prices International ti instability Federal/state/local budget overhang Another down-leg in real estate Household de-leveraging takes longer than expected Short expansion 24
What makes the recovery sustainable? Federal Reserve stimulus current (and future?) Fiscal stimulus tax package, ARRA wanes after 211 Strong financial i position of corporate sector Resumption in household debt growth Growing replacement needs households/firms Virtuous cycle capitalism, invisible hand 25 U.S. and Colorado Economic Conditions mark.snead@kc.frb.org Presentation ti will be available at: http://www.kansascityfed.org/denver 2