Post on 27-Jun-2015
transcript
Strength of the United States Economy
Bank and Capital Markets Tax Institute WestSan Francisco Marriott MarquisSan Francisco, CA
December 2, 2014
Rob StrandSenior EconomistAmerican Bankers Association
“The world is a mess.” Madeline Albright, July 27, 2014
Source: Council on Foreign Relations, CNN, POLITICO
The World is a Mess
• Argentinean debt crisis• Palestinian-Israeli conflict • Syrian civil war• Ukrainian – Russian conflict• Egyptian coups • Lebanese crisis• Iraqi war and ISIS• Iranian nuclear crisis• North Korean turmoil• Thai coup• Ebola in West Africa• Yemeni terrorist insurgence• Military coup in Burkina FasoSource: Council on Foreign Relations, CNN, POLITICO
Quarterly Inflation-Adjusted GDP Growth
‐9%
‐6%
‐3%
0%
3%
2008 2009 2010 2011 2012 2013 2014Source: U.S. Bureau of Economic Analysis
90
100
110
120
130
2005 2008 2011 2014
GDP by Country
Sources: U.S. Bureau of Economic Analysis and OECD
Index (1Q05=100)
United States
Germany
France
Japan
Source: National Bureau of Economic Research
-40
0
40
80
120
WWII ends
Post WW II Average
Business Cycles
MonthsExpansion
Recession
Current
0
400
800
1200
1600
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
S&P 500 Index
Source: Standard & Poor’s
Up 156%
Source: U.S. Bureau of Economic Analysis
-5%
0%
5%
2012 2013 2014
InventoriesNet ExportsGovernmentFixed InvestmentPersonal Consumption
Contrib
ution to GDP
Growth
Total GDP Growth
Consumption Drives Growth
Consumer Confidence
Source: Thomson Reuters and University of Michigan
50
60
70
80
90
100
2007 2008 2009 2010 2011 2012 2013 2014
Debt Talks
Index Value
RecessionFiscal Cliff
Debate
FederalShutdown
-900
-700
-500
-300
-100
100
300
500
2005 2007 2009 2011 2013
Source: U.S. Bureau of Labor Statistics
8.7 Million Lost
9.8 Million Recoveredin 48 months of growth
Monthly Payroll Growth
0%
4%
8%
12%
16%
1994 1998 2002 2006 2010 2014
Source: U.S. Bureau of Labor Statistics
Underemployed 11.8%
5.9%Unemployed
Unemployment Rate
0%
4%
8%
12%
1994 1998 2002 2006 2010 2014
Source: U.S. Bureau of Labor Statistics, Eurostat
U.S. 6.1%
Unemployment Rate Comparison
Euro Area 11.6%
June
Initial Claims Back to Normal Levels
0
100
200
300
400
500
600
700
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Source: U.S. Department of Labor (4-week moving average)
Initial Unemployment Claims, 000s
400K
295K
Voluntary Quits and Layoffs Picking Up
Source: U.S. Bureau of Labor Statistics
0
1,000
2,000
3,000
2000 2002 2004 2006 2008 2010 2012
Recession
Layoffs
Voluntary Quits
0
5
10
15
1971 1976 1981 1986 1991 1996 2001 2006 2011
Less than 5 Weeks
5–14 Weeks
Millions
27+ Weeks
Duration of Unemployment
Source: U.S. Bureau of Labor Statistics
-24% -20% -16% -12% -8% -4% 0% 4% 8%
Health Services
Prof. & Bus. Services
Leisure & Hospitality
Education
Trade & Transportation
Financial Services
Government
Information
Manufacturing
Construction
Change in Employment from Pre-2011 Peak
Source: U.S. Bureau of Labor Statistics
Over 3%
2%—3%
1½%—2%
1%—1½%
¼%—1%
Employment Growth Since 2010
Source: U.S. Bureau of Labor Statistics, May 2014
6.5%
Home Prices
Source: Case-Shiller/S&P 20-City Index. Not seasonally adjusted
0
50
100
150
200
2002 2004 2006 2008 2010 2012 2014
Conventional 30-Year Mortgage Rate
0%
2%
4%
6%
8%
10%
1990 1993 1996 1999 2002 2005 2008 2011 2014
Source: Federal Reserve
Home Sales
-
3
6
9
1999 2004 2009 2014
Millions of UnitsSAAR
Sources: U.S. Census Bureau, National Association of Realtors
New Homes
Existing Homes
0
1
2
1963 1970 1977 1984 1991 1998 2005 2012
Housing Starts
Source: U.S. Census Bureau
Millions of Units
1959‐2010 Average
Retail Sales
Inflation & Seasonally‐Adjusted Semi‐Annual Growth Rate on Quarter Average
‐15%
‐10%
‐5%
0%
5%
1994 1999 2004 2009 2014Source: U.S. Bureau of Economic Analysis
Retail Sales without Gas
Source: U.S. Department of the Census
$100
$110
$120
$130
$140
2007 2008 2009 2010 2011 2012 2013 2014
Thou
sand
s
$Billions, Seasonally Adjusted
Price of a Gallon of Gas vs. Milk
$3.00
$3.50
$4.00
2012 2013 2014
Premium Gas
Whole Milk
Source: BLS and US Energy Information Administration
Crude Oil Exports
0
100
200
300
400
2002 2004 2006 2008 2010 2012 2014
Source: U.S. Energy Information Administration
Thousands of Barrels per Day
$0
$5
$10
$15
1960 1970 1980 1990 2000 20100%
8%
16%
24%
Debt / Assets
Trillions
Household Liabilities
Source: Federal Reserve Flow of Funds
Household Financial Obligation Ratio
10%
12%
14%
16%
18%
1980 1985 1990 1995 2000 2005 2010Source: Federal Reserve
Overhang of Student Debt
$0
$5,000
$10,000
$15,000
$20,000
$25,000
0%
10%
20%
30%
40%
50%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Proportion with Student Loans at age 25
Source: Federal Reserve Bank of New York
Balance of those with Student Loans
Corporate Profits
Source: U.S. Bureau of Economic Analysis
$0
$5
$10
$15
2002 2004 2006 2008 2010 2012 2014
With inventory valuation and capital consumption adjustments, SAAR, $Billions
Business Indexes
80
90
100
30
40
50
60
2006 2007 2008 2009 2010 2011 2012 2013 2014
Industrial ProductionISM Non-
Manufacturing
Contraction Expa
nsion
ISM Manufacturing
Sources: Federal Reserve, Institute for Supply Management
Small Business Optimism
Source: National Federation of Independent Business
Index Values (2
005=10
0)
50
60
70
80
90
100
2006 2008 2010 2012 2014
-2%
0%
2%
4%
6%
2007 2010 2013
Target
Source: U.S. Bureau of Labor Statistics (CPI), ECB
U.S. and Euro Inflation
United States
Euro Zone
Source: FOMC (September 2014)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
2014 2015 2016 Long Run
FOMC Federal Funds Rate Forecast
FOMC Fed Funds Forecast for 2015
0%
1%
2%
3%
March 2014 FOMC Meeting
September 2014 FOMC Meeting
Source: Federal Reserve Federal Open Market Committee
Federal Reserve Timeline
$25
$15
$0Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
Asset Purchases ($B)Fed Funds Rate
0.125%
2.75%
6 Months
20152014
Federal Funds Rate Outlook
1.25%
2016Source: Federal Reserve Federal Open Market Committee
Periods of Federal Reserve Tightening
0%
1%
2%
3%
4%
5%
6%
7%
-1 1 3 5 7 9 11 13 15 17 19 21 23 25
Fed
Fund
s Ta
rget
Rat
e
Months Since Tightening Began
19942004
2000
Long Term Forecast
Source: Federal Reserve
$0
$1
$2
$3
$4
2008 2009 2010 2011 2012 2013 2014
Federal Reserve Balance Sheet Growth
Source: Federal Reserve
$Trillion
MBS & Agency Debt U.S. Treasury
Securities
LiquidityPrograms
$1.8 Trillion
$2.5 Trillion
Yield Spreads Shrink when the Fed Tightens
0%
2%
4%
6%
8%
10%
1990 1994 1998 2002 2006 2010 2014
Tightening Begins
Source: Federal Reserve
10-Year Bonds
3-Month Bills
Economic Uncertainties
• Interest Rates
• Consumer and Business Confidence
• Housing Recovery
• Income and Wealth Inequality
• Government Finances
• International Turmoil
U.S. Traditional Advantages
• Strong global competitor
• Robust entrepreneurial culture
• Flexible capital and labor markets
• Technological leader
• Highly diverse mix of industries
Patent Applications
0
200,000
400,000
600,00019
6319
6619
6919
7219
7519
7819
8119
8419
8719
9019
9319
9619
9920
0220
0520
0820
11
Source: United States Patent and Trademark Office