BOOM OR BUST:  WHICH SIDE OF THE ECONOMIC RECOVERY DO YOU SIT ON?Janet Harrah, Senior DirectorCenter for Economic Analysis and DevelopmentNorthern Kentucky University

Defining boom and bust• Economic turning points are never neat and tidy. Some

sectors lead while others lag

• Couple economics and politics and you get hyperbole on both sides

• An examination of trends for key indicators shows an economy improving but with a long way to go to reach recovery

Key indicators• Employment by sector• Unemployment and labor force participation rates• Average hours worked • Average hourly wages• Inflation• Gasoline prices• Food prices

EMPLOYMENT TRENDSIn general employment is up for the 12 months ending February 2012, but down compared to the pre-recession peak

Cincinnati Employment by Sector

All others25%

Retail Trade10%

Leisure & Hospitality

11%Manufacture

11%

Government13%

Health Services15%

Professional & Business Ser-

vices15%

989,400 Total Jobs

Employment: boom or bust?Total jobs, Cincinnati MSARecession 2007 through 2009 Level change -54,900 Percent change -5.2%

Recovery 2009 through 2011 Level change (2,942) Percent change -0.3%

Past 12 months (Feb 2012) Level change 16,700 Percent change 1.7%

Feb 2012 versus Feb 2007 Level change (41,200) Percent change -4.0%

Boom: employment is up 1.7% over the past year adding 16,700 jobs

Bust: the Cincinnati metro area has 41,200 fewer jobs today than 5 years ago

Professional & Business Services: boom or bust?Professional services jobs, Cincinnati MSARecession 2007 through 2009 Level change -9,600 Percent change -6.1%

Recovery 2009 through 2011 Level change 5,608 Percent change 3.8%

Past 12 months (Feb 2012) Level change 2,000 Percent change 1.3%

Feb 2012 versus Feb 2007 Level change 500 Percent change 0.3%

Boom: employment is up 1.3% over the past year adding 2,000 jobs

• More jobs today than 5 years ago

Bust:

Health Services: boom or bust?Health services jobs, Cincinnati MSARecession 2007 through 2009 Level change 4,400 Percent change 3.1%

Recovery 2009 through 2011 Level change 3,433 Percent change 2.3%

Past 12 months (Feb 2012) Level change 3,400 Percent change 2.3%

Feb 2012 versus Feb 2007 Level change 10,800 Percent change 7.7%

Boom: employment is up 2.3% over the past year adding 3,400 jobs

• Employment never declined

• More jobs today than 5 years ago

Bust: • economic or

demographic growth?

• transfer of wealth?

Government: boom or bust?Government jobs, Cincinnati MSARecession 2007 through 2009 Level change -1,700 Percent change -1.3%

Recovery 2009 through 2011 Level change (5,367) Percent change -4.1%

Past 12 months (Feb 2012) Level change (200) Percent change -0.2%

Feb 2012 versus Feb 2007 Level change (7,300) Percent change -5.4%

Boom: Government sector is “right sizing”

Bust: • Jobs losses

continue in the sector

• Loss of government services

• Education is key to future economic success

MFG Employment: boom or bust?Manufacturing jobs, Cincinnati MSARecession 2007 through 2009 Level change -14,700 Percent change -12.1%

Recovery 2009 through 2011 Level change (317) Percent change -0.3%

Past 12 months (Feb 2012) Level change 6,100 Percent change 5.9%

Feb 2012 versus Feb 2007 Level change (12,200) Percent change -10.1%

Boom: employment is up 5.9% over the past year adding 6,100 jobs

Bust: the Cincinnati metro area has 12,200 fewer mfg. jobs today than 5 years ago

Leisure & Hospitality: boom or bust?Leisure & Hospitality jobs, Cincinnati MSARecession 2007 through 2009 Level change -3,900 Percent change -3.7%

Recovery 2009 through 2011 Level change 2,700 Percent change 2.6%

Past 12 months (Feb 2012) Level change 7,300 Percent change 7.7%

Feb 2012 versus Feb 2007 Level change 3,400 Percent change 3.4%

Boom: employment is up 7.7% over the past year adding 7,300 jobs

metro area has 3,400 more leisure & hospitality jobs today than 5 years ago

Bust: Mostly low paying, part-time jobs

Leisure & Hospitality: boom or bust?Leisure & Hospitality jobs, Cincinnati MSARecession 2007 through 2009 Level change -3,900 Percent change -3.7%

Recovery 2009 through 2011 Level change 2,700 Percent change 2.6%

Past 12 months (Feb 2012) Level change 7,300 Percent change 7.7%

Feb 2012 versus Feb 2007 Level change 3,400 Percent change 3.4%

Boom: employment is up 7.7% over the past year adding 7,300 jobs

metro area has 3,400 more leisure & hospitality jobs today than 5 years ago

Bust: Mostly low paying, part-time jobs

UNEMPLOYMENT TRENDSThe percentage of Cincinnati adults participating in the labor force is down along with the unemployment rate

Unemployment: boom or bust?Cincinnati MSA Unemployed Unemployment Rate

Recession 2007 through 2009 2007 55,901 5.0% 2009 105,224 9.3%

Recovery 2009 through 2011 2009 105,224 9.3% 2011 99,173 8.9%

Past 12 months (Feb 2012) Feb 2011 103,522 9.3% Feb 2012 85,505 7.8%

Feb 2012 versus Feb 2007 Feb 2007 55,208 5.0% Feb 2012 85,505 7.8%

Unemployment: boom or bust?• Boom:

• More people are working• Unemployment rate is down

• Bust:• The labor force participation has declined from 67.1% to 66.4% • If the labor force participation today were at 2007 levels, another

10,500 people would be looking for work• If they were still in the labor force the unemployment rate would be

9.7% instead of 8.9%• Unemployment rate does not differentiate between part-time and

full-time or low-wage and high-wage jobs

AVERAGE HOURS WORKED AND WEEKLY EARNINGS

Avg. hours worked per week have nearly regained pre-recession levels

2007

M01

2007

M05

2007

M09

2008

M01

2008

M05

2008

M09

2009

M01

2009

M05

2009

M09

2010

M01

2010

M05

2010

M09

2011

M01

2011

M05

2011

M09

2012

M0131.031.532.032.533.033.534.034.535.035.536.0

Avg Hours Worked per Week

2007: Avg. hours 34.62011: Avg. hours 34.3

Avg. weekly earnings mixed results

2007

M01

2007

M05

2007

M09

2008

M01

2008

M05

2008

M09

2009

M01

2009

M05

2009

M09

2010

M01

2010

M05

2010

M09

2011

M01

2011

M05

2011

M09

2012

M01$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

Current dollars surpass pre-recession levelsAdjusted for inflation still down 5.8%

Total earnings still down billions $

JobsAvg. weekly

earningsAnnual earnings

in billions2007 1,047,200 736.8 $40.1 2011 989,358 747.5 $38.5 Percent change -4.2%Level change ($1.7)

JobsAvg. Weekly

EarningsAnnual earnings

in billions2007 1,047,200 355.4 $19.4 2011 989,358 332.3 $17.1 Percent change -11.7%Level change ($2.3)

PRICES AND INFLATION TRENDS

Inflation rate below historical averages but rising

Avg. since 1970

Avg. since 1980

Avg. since 1990

Avg. since 2000

Avg. 2011

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

CPI-UAll items less food and energy

CPI-U versus Core Inflation

Long term

1970

M01

1973

M05

1976

M09

1980

M01

1983

M05

1986

M09

1990

M01

1993

M05

1996

M09

2000

M01

2003

M05

2006

M09

2010

M01

0

50

100

150

200

250

CPI-UAll items less food and enery

Short term

2011

M03

2011

M05

2011

M07

2011

M09

2011

M11

2012

M01

2012

M03

220

222

224

226

228

230

CPI-UAll items less food and enery

Gasoline prices rising rapidly

2002M01 2003M05 2004M09 2006M01 2007M05 2008M09 2010M01 2011M050

50

100

150

200

250

300

350

400

CPI for gasolineJan. 2007: $2.36Jan. 2012: $3.44April 2012: $3.99

Gas prices eat into disposable income

Price per gallon of gas $2/gallon $3/gallon $4/gallon Median household income $45,090 $45,090 $45,090 Expenditure on gasoline 2,200 3,300 4,400 Percent of household income 4.9% 7.3% 9.8%

Average American household purchases approximately 1,100 gallons of gasoline per year

Every $1 rise in gas costs the average family an additional $1,100 per year or 2.2% of household income

Food prices rising as well• In 2010 the average household spent $6,110 on food

• For the 12 months ending March 2012 food prices are up 4% or about $240 per year

Consumer spending sluggish• Nationally, consumers continued to increase their spending in

March (nominal dollars)• Up 0.8 percent from Feb. 2012• Up 6.5 percent from March 2011• Gasoline stations up: 7.6%• Restaurants up: 6.3%

• Special factors • Release of new iPad lifted sales at electronics stores • Outsize growth at building supply stores likely weather-related

• Modest growth for remainder of year

Outlook for 2012• Over the past 12 months:

• Cincinnati’s growth has kept pace with the rest of the country. 

• That trend is expected to continue next year with employment increasing 1.4 percent adding 13,900 jobs. 

• The unemployment rate is expected to remain relatively high, but below 2011 levels. 

Summary• Long slow recovery• Lots of risks on the horizon

• Oil price volatility• European debt crisis• Federal debt and deficit management• Potential changes in Federal tax policy• Changes in health care costs

Discussion Questions• Will Americans continue to retire at 65?

• The age workers expect to retire has increased from an average of 60 in 1995 to 66 in 2011, according to a Gallup poll.

• 42 percent of workers 55 and over have been jobless for at least a year

• 39 percent of 45 to 54-year-olds have been jobless for at least a year

Discussion Questions• Are Americans abandoning the dream of owning their own home?

• Nationally, prices have now dropped 34.4% from their peak in 2006. Prices are now the lowest they have been since the end of 2002, according to the Case/Shiller index. Robert Shiller, co-creator of the index and long-term researcher on housing prices, warns that risks remain and that we may be seeing a broad shift in consumers' beliefs with regard to the desirability and risks of owning a house. In fact, Shiller speculates that it may take decades for suburban single-family housing prices to recover.

Discussion Questions• Will Americans continue to save as the economy improves?

• Before the Great Recession, the American household sector, in the aggregate, had ceased to save at all. Now the American household sector is saving again. This is good news. In the long run, economies that don’t save either suffer slow long-term growth because their physical capital (machines) and human capital (our skills and training) grow slowly, or they borrow from other economies (China) that do save.