Brush with Disaster Year Four of Upturn-Modest or Moderate 12/2012 Employment 4 Million below 1/2008 but
4.78 million above 2/2010 Trough QE4 Underway Weakness in Europe and Japan Net Worth Rising Largest Increase in Domestic Oil Production in
History of Industry in 2012 Less then Year to Next Stage of the Patient
Protection and Affordable Care Act Lone Ranger Returning-Twinkies GONE!
Late January, 2013
Q1 Q2 Q3
GDP 2% 1.3% 3.1%
Consumption 2.4 1.5 1.6
Equip & Software 5.4 4.8 -2.6
Non-Res Structures 12.9 .6 0
Residential 20.5 8.5 13.5
Federal -4.2 -.2 9.5
State and Local -2.2 -1 .3
Exports 4.4 5.3 1.9
Imports 3.1 2.8 -.8
Real GDP (SAAR) Commerce Department2012
Consu
mpt
ion
Goods
Serv
ices
Inve
stm
ent
Stru
ctur
es
Equi
pmen
t& S
oft
Resid
entia
l
Inve
ntor
y Cha
nge
-.23%
Expo
rts
Impo
rts
Fede
ral
Defen
se
Non-D
efen
se
Stat
e an
d Lo
cal
-0.40%
0.00%
0.40%
0.80%
1.20%Source: BEA
Contributions to GDP GrowthQ3 2012
Janu
ary
Mar
chMay Ju
ly
Sept
embe
r
Novem
ber
Janu
ary
Mar
chMay Ju
ly
Sept
embe
r
Novem
ber
0
50
100
150
200
250
300
Source: BLS
2011-12 Nonfarm Payroll Employment Change(,000 SA) Average 153,000 Per Month in
2012 same as 2011
Mining
& Log
ging
Constru
ction
Man
ufac
turin
g
Trad
e
Tran
s, W
are
& Util
Info
rmat
ion
Finan
ce
Prof
essio
nal S
ervic
es
Ed &
Hea
lth
Leisu
re &
Hospita
lity
Other
Ser
vices
Fede
ral
Stat
eLo
cal
tota
l
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
Annual Job Change December, 2011-December, 2012 (1.4%)
Janu
ary
Mar
chMay Ju
ly
Sept
embe
r
Novem
ber
Janu
ary
Mar
chMay Ju
ly
Sept
embe
r
Novem
ber
-0.40%
-0.20%
0.00%
0.20%
0.40%
0.60%
0.80%
Source:BLS
Consumer Price Index Monthly Changes 2011-121.7% in December
Core 1.9%, Annual Average 3.2% in 2011
Beige Book January 16, 2013 Stable Price Pressures
Energy Commodities 8.6% in Aug, 6.7% in Sept. -.5% in October and -6.9% in November and -2.2 in December
Non-Farm Business Year over Year 1.8% Compensation and 1.7% Productivity-Unit Labor Costs .1% Q3
Inflation
1 m
onth
3 m
onth
s
6 m
onth
s
1 ye
ar
2 ye
ars
3 ye
ars
5 ye
ars
7 ye
ars
10 y
ears
20 y
ears
30 y
ears
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
1/18/20137/25/2012
Interest Rates Source: US Treasury
Seven Years of Zero Short Term Rates ? 30 Year Mortgage 3.4% on Week Ending
1/11/13 10 Year 1.9% on Week Ending 1/11/13 Fed will tolerate 2.5% Inflation All Treasuries Under 5 Years Yield Less than 1% Personal Interest Income Q4 2007 $1.32
Trillion by Q3 2012 $975.3 Billion Pension Obligations? Earnings on Reserves?
Rates
GDP Growth Fed Central Tendency 2012 1.7-1.8% and 2013 2.3-3%, 3-3.5% in 2014
Consensus Moving from 2% in 2013 to 2.6% in 2014
Drag from Recent Policy Actions ? Inflation Staying Near 2% Through 2014 Fed on Hold Until at Least Mid 2015
Prospects
What happens Overseas ? Dealing with the debt ceiling and
sequesters in the next few months? How will the actors behave ? Taxes,
Healthcare, Uncertainty
Known Unknowns
Jan-
05
Jul-0
51-
Jan
Jul-0
6
Jan-
07
Jul-0
7
Jan-
08
Jul-0
8
Jan-
09 July
Janu
ary
July
Janu
ary
July
Janu
ary
July
0
500
1,000
1,500
2,000
2,500
Residential Permits (SAAR) Census Bureau December 2012 Up 30.3% For the Year
Bend
Corva
llis
Euge
ne
Med
ford
Portl
and
Sale
m
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
I Year5 Years
FHFA House Price Index Q3 2012
2006
/1 4 3 2
2009
/1 4 3 2
2012
/1
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
12 Month Change
FHFA Purchase Only Index for Oregon
Residential Permits 2004 to 2012 Oregon (Up 48.9% to November 2012)
Source: Census
2004 2005 2006 2007 2008 2009 2010 2011 2012/110
5,000
10,000
15,000
20,000
25,000
30,000
35,000
27,309
31,024
26,623
21,101
11,676
7,039 6,868 7,93110,361
2007
/4 2 4 2 4 2 4 2 4 2
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
Source: Rockefeller Institute
Total State Tax Collections Above Previous Year for 11 Quarters
The First Cliff Payroll Tax Holiday Ends Bush Tax Cuts Expire for Over $450,000 Sequester Process Delayed 2 Months New Medicare Taxes Start Phase Outs and Deduction Limitations Back Estate Tax Rate Bumped AMT Fix, Doc Fix
Long Term Spending Issues-Not Addressed Debt Ceiling Unresolved Short Term Problem-Long Term Problem Geithner-”And you can’t count indefinitely on the world having
more confidence in our political system than is justified”
Policy Cauldron
Different Tools Twist to the End of December-Then Buy $45 Billion of
Treasuries with maturities from 4 Years to 30 Years Continue to Buy $40 Billion Mortgage-Backed
Securities Per Month Total $85 Billion Per Month Exceptionally low rates as long as unemployment
remains above 6.5% and inflation is no more than .5 point above 2% longer run goal (12/12/12)
Will it make any difference? How and When does one unwind it? Federal Debt
Costs when rates increase?
Monetary Policy
North Dakota 1 Utah 2 Hawaii 3 Texas 4 Arizona 5 Oklahoma 6 Colorado 7 Idaho 8 Indiana 9 Montana 10 Minnesota 11 Louisiana 12 Kentucky 13 Ohio 14 California 15 South Carolina 16 Washington 17 Georgia 18 Massachusetts 19
Job Growth Update November 2012 Data-Year over Year Change-44 States Up
Oregon 21 Florida 22 Nevada 23 Arkansas 30 Michigan 33 Alabama 34 New Jersey 38 Illinois 35 South Dakota 36 New Jersey 38 Maine 43 Connecticut 44 Mississippi 45 Alaska 46 New Hampshire 47 Rhode Island 48 New Mexico 49 West Virginia 50
Aug-0
7
Novem
ber
Feb
May
Aug
ust
Novem
ber
Febr
uary
May
Augus
t
Novem
ber
Febr
uary
May
Augus
t
Novem
ber
Febr
uary
May
Augus
t
Novem
ber
Febr
uary
May
Augus
t
Novem
ber
1,500
1,550
1,600
1,650
1,700
1,750
1,800
Oregon Wage and Salary Employment ( ,000-SAAR) Employment Department
Oregon Job Change Year to December, 2012 (1.3%) Employment Department
ManufacturingMine&Log
ConstructionTrade
InformationTP,W,Util
FinanceProf. Services
Ed&Health
Leisure&Hosp.
Other ServicesGovt.Total
-5,000 0 5,000 10,000 15,000 20,000 25,000
Mine&Log
Trade
TP,W,Util
Prof. Services
Leisure&Hos.
Govt.
Portland Job Change Year to November, 2012 (1.5%) Employment Department
ManufacturingMine&Log
ConstructionTrade
InformationTP,W,Util
FinanceProf. Services
Ed&HealthLeisure&Hosp.Other Services
Govt.Total
-5,000 0 5,000 10,000 15,000 20,000
Mine&Log
Trade
TP,W,Util
Prof. Services
Leisure&Hos.
Govt.
Oregon Job Growth Year to November, 2012
Source: Department of Employment
Metro Job Change Percentage
Bend 360 .6
Corvallis 130 .3
Eugene/Springfield 2,900 2.1
Medford 1,140 1.5
Portland 15,300 1.5
Salem 700 .5
Coos 90 .4
Douglas 580 1.7
Lincoln -80 -.5
Umatilla -40 -.1
Union 60 .6
Wasco 180 .9
Personal Income in Q3 Oregon up .8%, US .5% Census Population Estimates for 2010-2012 up 1.8%
versus the US up 1.7% PSU Oregon Population Up .7% in 2012 Brookings Institution- Q3 Portland 4th of the top 100
Metros-Employment, Unemployment, Output, and House Prices
Preliminary Oregon Employment Data .8-.9% Gain in Annual Average Employment
Oregon Jobs Gap in October 133,000 Brookings Hamilton Project
December Data-Total Employment in Oregon down 25,546 in Year to December?
Recent Data Points
2005 2006 2007 2008 2009 2010 2011 2012/P
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
Source: Employment Department
Annual Change in Oregon Wage and Salary Employment
Youth Un and Underemployment -Scarring December U-6 14.4%, Mean Unemployment
38.1 Weeks, 39.1% of Unemployed more than 27 Weeks
Labor Force Participation Rate December 63.6%-The last Time it was there was December 1981. Recession Start 66%
Real Family Median Net Worth Down 38.8% 2007-2010 Survey of Consumer Finances
Leftovers
Sustainability Popular Here- Fiscal Situation is Not- The Current Path leads to sclerosis or stagnation.
How does it end? Simpson-Bowles, Confidence Collapse –Endgame-Mauldin, Rogoff and Reinhart- Slow Growth
Is December/January the best that we can do?
Do we still have the recipe for growth?
Nagging Questions
Stella and The Fairies
Stella Fairies
The Tooth Fairy Free Medical Services
Fairy The No New Taxes
Fairy The Rich Will Pay Fairy The Entitlement Fairy