Economic Outlook Conference 2012: Maryland's Economic Outlook

The Light at the End of the Tunnel

Facing Sunshine or Oncoming Train?

Daraius Irani, PhD

November 8, 2012

© Towson University, Division of Economic and Community Outreach

1982

Q1

1984

Q1

1986

Q1

1988

Q1

1990

Q1

1992

Q1

1994

Q1

1996

Q1

1998

Q1

2000

Q1

2002

Q1

2004

Q1

2006

Q1

2008

Q1

2010

Q1

2012

Q1-10%

-5%

0%

5%

10%

15%

Light?Real Gross Domestic Product,

Seasonally Adjusted 1981Q1 - 2012Q3


2.0 %

An

nua

l Ra

te o

f Exp

ansi

on

Bureau of Economic Analysis

JobsUS Monthly Change(Thousands)

© Towson University, Division of Economic and Community Outreach Bureau of Labor Statistics

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12-1000

-800

-600

-400

-200

0

200

400

600

Unemployment, by Party in Office

1952

1956

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

2012

0%

2%

4%

6%

8%

10%

12%

Na

tion

al U

ne

mp

loym

en

t R

ate

Republican Democrat

© Towson University, Division of Economic and Community Outreach Bureau of Labor Statists

Job Hires vs. Job Separations

July

2006

12/1

/200

6

5/1/

2007

10/1

/200

7

3/1/

2008

8/1/

2008

Jan

2009

6/1/

2009

11/1

/200

9

4/1/

2010

9/1/

2010

2/1/

2011

July

2011

12/1

/201

1

5/1/

2012

2.5%2.7%2.9%3.1%3.3%3.5%3.7%3.9%4.1%4.3%

Hires Separations

Ra

te


Seasonally Adjusted Jan 2008 through Aug 2012

Measures of Labor Underutilization

Maryland District of Columbia United States0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

6.9%

9.3%8.3%8.5%

11.2%

9.7%

12.1%

14.5% 15.0%

U-3 U-5 U-6

Average Unemployment, 2011Q4 through 2012Q3

Un

em

plo

yme

nt P

erc

en

t


Unemployment Heat Map


Pre-Recession



Mid-Recession



Current Levels

Personal Income Percent Change

© Towson University, Division of Economic and Community Outreach Bureau of Economic Activity

Home Prices 2

000Q

1

200

1Q1

2

002Q

1

200

3Q1

2

004Q

1

200

5Q1

2

006Q

1

200

7Q1

2

008Q

1

200

9Q1

2

010Q

1

2011

Q1

20

12Q

1

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

U.S. and Maryland Home Prices, Seasonally Adjusted, 2000Q1 - 2012Q3

Avg

. Pri

ce o

f Ho

me

s S

old

© Towson University, Division of Economic and Community Outreach Bureau of Economic Analysis

Consumer Spending

US May June July August September

Personal Income

0.3% 0.3% 0.2% 0.1% 0.4%

Disposable Personal Income

0.5% 0.2% 0.1% -0.3% 0.0%

Personal Consumption

0.0% -0.1% 0.3% 0.1% 0.4%

Percent Change from Previous Month


Jan-

05

7/1/

2005

Jan-

06

7/1/

2006

Jan-

07

7/1/

2007

Jan-

08

7/1/

2008

Jan-

09

7/1/

2009

Jan-

10

7/1/

2010

Jan-

11

7/1/

2011

Jan-

12

7/1/

2012

$8,000 $8,200 $8,400 $8,600 $8,800 $9,000 $9,200 $9,400 $9,600 $9,800

-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

Consumption Exp. Percent change

Consumer SpendingPersonal Consumption, Seasonally Adjusted, Jan 2005 - Sept 2012

Per

sona

l Con

sum

ptio

n E

xpen

ditu

res

Bill

ions

of

Cha

ined

200

5 D

olla

rs

An

nua

l Per

cent

Ch

ang

e


Consumer Sentiment Index

40.0

50.0

60.0

70.0

80.0

90.0

100.0

110.0

120.0

Inde

x F

irst

Qua

rter

196

6=10

0

Jan 2007 through April 2012

© Towson University, Division of Economic and Community Outreach University of Michigan

Pulse of Commerce

Jan-

02

Sep-0

2

May

-03

Jan-

04

Sep-0

4

May

-05

Jan-

06

Sep-0

6

May

-07

Jan-

08

Sep-0

8

May

-09

Jan-

10

Sep-1

0

May

-11

Jan-

1270

75

80

85

90

95

100

105

110

PCI CERIDIAN INDEX GDP

Ind

ex

PCI Monthly Index, GDP, Seasonally Adjusted Jan 2002 through May 2012

© Towson University, Division of Economic and Community Outreach Ceridian-UCLA Pulse of Commerce Index

Inflation

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

150.0

170.0

190.0

210.0

230.0

250.0

Inflation Rate CPI

Year Over Year Change in CPI (1982)


The Fiscal Cliff


The Fiscal Cliff

Best Case Most LikelyPlausable Downside Worst Case

-4%

-3%

-2%

-1%

0%

-0.90%

-1.50%

-2.40%

-3.80%

Effects of Sequestration on GDP Growth

© Towson University, Division of Economic and Community Outreach Credit Suisse

The Fiscal Cliff

Total Job LossTotal Gross

State Product Loss

Maryland 114,795 $11,546,000,000

D.C. 127,407 $12,814,000,000

Virginia 207,571 $20,876,000,000

Pennsylvania 78,454 $7,890,000,000

© Towson University, Division of Economic and Community Outreach GMU Center for Regional Analysis

Euro Crisis


Euro Crisis• How is it going to affect the U.S. economy• U.S. Banks are heavily invested in Europe

o About $1.4 Trillion in loansoCould see a tightening in small business

loans in the US• Exports to Eurozone constitute 14% of total,

behind Mexico and Canada. To Europe: 20%o 20% drop in exports to Europe means a 5%

drop in total exports

© Towson University, Division of Economic and Community Outreach ABC New Corp.

Euro Crisis

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

20.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

European Union Euro area Spain Greece United States

Selected European Unemployment Levels

© Towson University, Division of Economic and Community Outreach EuroStat

Euro Crisis

Sep-0

9

Mar

-10

Sep-1

0

Mar

-11

Sep-1

1

Mar

-12

Sep-1

2-0.1

0

0.1

0.2

0.3

0.4 USDJPYGBPCNY

Ind

exe

d A

ga

inst

Oth

er

Ma

jor

Cu

rre

nci

es

© Towson University, Division of Economic and Community Outreach Euro ITS

The falling power of the Euro

Additional Challenges

Debt Crisis

China

Japan

Oil Exporters

Brazil

Other Foreign Investors

Owned Domestically

US Debt Ownership

© Towson University, Division of Economic and Community Outreach Congressional Research Service

Gas Prices

$2.71

$2.91

$3.11

$3.31

$3.51

$3.71

$3.91

Baltimore United States

© Towson University, Division of Economic and Community Outreach GasBuddy.com, U.S. Administration of Energy Statistics

European Gas Prices

2007 2008 2009 2010 2011 2012$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00

$10.00

US Europe

Dollars per Gallon

U.S. Energy Information Administration© Towson University, Division of Economic and Community Outreach

Banking

Quantitative Easing: Round 3

• New Round of Fed Res buying up mortgage backed securities

• Effects on inflations• Encourages higher risk investmentsoStability of the market


Banking Indicators

$0

$30,000

$60,000

$90,000

$120,000

$150,000

Mill

ion

s o

f D

olla

rs

Total Value of Loans for All C&I Loans, All Commercial Banks

© Towson University, Division of Economic and Community Outreach Federal Reserve

Banking Indicators

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Consumer Loans at All Commercial Banks

Bill

ion

s o

f Dol

lars


Banking Indicators

1940

1631

6

1801

9

1972

5

2142

9

2313

2

2483

8

2654

3

2824

6

2995

2

3165

6

3335

9

3506

5

3677

0

3847

320

10$0

$800

$1,600

$2,400

$3,200

$4,000

Real Estate Loans at All Commercial Banks


Bill

ion

s o

f Dol

lars

Banking Indicators

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$500

$700

$900

$1,100

$1,300

$1,500

Real Estate Loans Consumer Loans

Re

al E

sta

te L

oa

ns

Co

nsu

me

r L

oa

ns


Lending at All Commercial Banks (Millions of Dollars)

Maryland Outlook

Maryland Performance•Maryland added 9,800 jobs in September

• 98 percent of these jobs came from the private sectoro Profession and Business Services accounted for 4,100 new jobso Trade/Transportation/Warehousing and Utilities created approximately

2,000 jobso Government responsible for only 200 new jobs

• Unemployment rate down to 6.9% from last month’s 7.1%

© Towson University, Division of Economic and Community Outreach Department of Labor, Licensing and Regulation

Mid-Atlantic Region Unemployment Rankings

September Unemployment Rates Seasonally Adjusted

State 2010 2011 2012

Maryland 7.4 7.4 6.9

Pennsylvania 8.5 8.3 8.2

Virginia 6.7 6.5 5.9

Delaware 8.3 8.1 6.8

DC 9.7 11.1 8.7

U.S. Unemployment Rate: 8.1 percent in August 7.8 percent in September


Measures of Labor Underutilization

Maryland District of Columbia United States02468

1012141618

7.1

9.7 9.28.8

11.610

12.714.5 15.3

U-3 U-5 U-6

Labor Underutilization, Averages, 2011Q3 - 2012Q2

Pe

rce

nt


Maryland Employment

Jan-

02

Sep-0

2

May

-03

Jan-

04

Sep-0

4

May

-05

Jan-

06

Sep-0

6

May

-07

Jan-

08

Sep-0

8

May

-09

Jan-

10

Sep-1

0

May

-11

Jan-

121,850

1,900

1,950

2,000

2,050

2,100

2,150

420

440

460

480

500

520

Private Government

Employment Level (,000’s)


Slow Down in Maryland’s Recovery

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%MD US

Year over Year Change in Coincidence Index


Co

inci

den

t Ind

ex

Federal Reserve Bank

Maryland Mass Layoffs

Jan-

10

May

-10

Sep-1

0

Jan-

11

May

-11

Sep-1

1

Jan-

12

May

-12

Sep-1

20

5001,0001,5002,0002,5003,0003,5004,0004,500

0510152025303540

Total Initial Claimants Layoff Events

Tota

l In

itial

Cla

ims

Tota

l Mas

s L

ayo

ff E

vent

s


Total Initial Unemployment Claimants and Layoff Events, Monthly, Jan 2010 - Sep 2012

Bureau of Labor Statistics

Housing

Housing and Foreclosures• Maryland - November 2012

o 8,306 Foreclosure Homes for Saleo $170,708 Average Foreclosure Sales

Price

• US – November 2012o 1,571,644 Foreclosure Homes for Saleo $177,975 Average Foreclosure Sales

Price

© Towson University, Division of Economic and Community Outreach RealtyTrac

Story Behind the Numbers

• Positive housing prices trends have a positive wealth effect

• Though inventories have fallen to around 25,000 homes,

research suggest that at least 7% of homes are at least 90 day delinquent, making them suspect to foreclosure

© Towson University, Division of Economic and Community Outreach CoreLogic

0

0.5

1

1.5

2

2.5

3

3.5

REO Inventory FC InventoryDelinquency Inventory

Shadow InventoryM

illio

ns o

f Un

its

Pending Inventory Details Monthly, Jan 2006 through Jul 2012

© Towson University, Division of Economic and Community Outreach CoreLogic, a data and analytics company

MD Homes Sales vs. Inventories

20002001

20022003

20042005

20062007

20082009

20102011

20120

2,000

4,000

6,000

8,000

10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

Number of Homes Sold Inventory

Hom

e S

ales

Seasonally Adjusted Jan 2000 - Sept 2012


Inve

ntor

y

Maryland Association of Realtors

MD Homes Prices vs. Inventories

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0

10,000

20,000

30,000

40,000

50,000

60,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Inventory Price

Seasonally Adjusted Jan 2000 - Sept 2012

© Towson University, Division of Economic and Community Outreach Maryland Association of Realtors

Ave

rage

Hom

e P

rice

Inve

ntor

y

RESI Forecast

RESI Employment Outlook

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2,250,000

2,300,000

2,350,000

2,400,000

2,450,000

2,500,000

2,550,000

2,600,000

2,650,000

2,700,000

Growth TNA

Maryland Historical & Projected TNA Employment Growth, 2007Q1 through 2015Q4

RESI, Bureau of Labor Statistics

Pe

rce

nt c

han

ge

from

sa

me

q

uart

er

on

e y

ear

ago


TN

A E

mp

loym

ent

Lev

el

RESI Employment Outlook

InformationManufacturingFinancial Svcs

Real EstateEducational Svcs.

GovernmentConstruction

Admin/WasteHealthcare Svcs.

Arts/EntertainmentTrade

Professional/Sci.Accomm/Food Svcs

Transp./WarehousingMgmt of Companies

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%

-2.1%-0.4%

0.5%0.6%

0.8%0.9%

1.5%1.6%

1.9%2.3%2.4%2.4%

2.6%2.6%2.7%

Maryland Projected Employment Growth, Percent, 2012 to 2013

RESI, Bureau of Labor Statistics© Towson University, Division of Economic and Community Outreach

RESI Outlook - Summary

RESI, Bureau of Labor Statistics, Bureau of Economic Analysis

Maryland Indicators - Historical & Projected Annual Figures

2010 2011 2012 2013 2014

Total Non-Agricultural Employment

(annual growth)

-.02% 1.2% 1.4% 2.3% 2.3%

Total Personal Income

(annual growth) 3.5% 5.0% 3.3% 2.9% 4.3%


Join us next year to find out how bringing home the World Series will affect

Baltimore’s economic outlook.

EOC 2012

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Economic Outlook Conference 2012: Maryland's Economic Outlook

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