RMCA Denver Feb 2009 Cut3
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Transcript of RMCA Denver Feb 2009 Cut3
Denver – February 12, 2009
Peter C. Burley, CRE Vice President Research, Simpson Housing LLLP
Hopeful Prospects
Navigating the US and Regional Economies in 2009
The opinions expressed are those of the Speaker
And do not necessarily reflect the views of
Simpson Housing LLLP, its Related Entities, Properties, Partners, Senior
Management, Maintenance Personnel, Parking Attendants, or
Human Resources Staff, None of whom are likely to Agree with me anyway…
An Important Disclaimer
Another Important Disclaimer
Data and Analyses are Compiled from
Sources Deemed Reliable
But Not Guaranteed
No Offer or Solicitation Implied …
Subject to Change Without
Notice…
In Nominal Terms, A $14 Trillion Economy
1947Q1 1959Q3 1972Q1 1984Q3 1997Q1 2009Q30
2000
4000
6000
8000
10000
12000
14000
16000Total Gross Domestic Product (Nominal $Bil)
Source: Moody's Economy.com; Bureau of Economic Analysis
$237 Bil1947
$14.4 Trillion2008
Personal Consumptio
n
Fixed Investm
ent
Change in Private In
ventories
Net Exports
Government -10
0
10
20
30
40
50
60
70Nominal Contribution to GDP (Pct, Q1:2009)
Source: BEA, Moody's Economy.com
Consumers & Government Make up the Lion’s Share
Consumers & Government Make up the Lion’s Share
1947Q1 1959Q3 1972Q1 1984Q3 1997Q160
62
64
66
68
70
72Nominal Contribution to GDP (Pct, Q1:2009)
Source: BEA, Moody's Economy.com
Personal Consumption
In Inflation Adjusted Terms, an $11 Trillion Economy
1990Q1 1992Q3 1995Q1 1997Q3 2000Q1 2002Q3 2005Q1 2007Q3 2010Q17000
7500
8000
8500
9000
9500
10000
10500
11000
11500
12000Total Gross Domestic Product (Bil 2000 $, SAAR)
Tech Slumpand 9/11
Source: Moody's Economy.com; Bureau of Economic Analysis
1990-91 Recession
TheCurrent
Unpleasantness
1990Q1
1991Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1-4
-2
0
2
4
6
8Gross Domestic Product (Annualized %)
Source: Moody's Economy.com; BEA
1990-91Recession Tech Slump
Post 9/11CurrentRecession
60-YearAverage
Trends in the US Economy Over Time
1990Q1
1991Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1100
105
110
115
120
125
130
135
140Total Nonfarm Employment (Mil., SA)
Source: Moody's Economy.com; BLS
1990-91Recession
90sExpansion
Tech SlumpJobless Recovery
The CurrentRecession
A 140 Million Job Economy
1991Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1-1.5
-1
-0.5
0
0.5
1
1.5 Change in Employment (Mil, Qtr)
Source: Moody's Economy.com; BLS
Job Growth & Decline over the Past 20 Years
1990-91Recession
90s Expansion
Tech SlumpJobless Recovery
The CurrentRecession
1990Q1
1992Q3
1995Q1
1997Q3
2000Q1
2002Q3
2005Q1
2007Q3
2010Q13
4
5
6
7
8
9
10Unemployment Rate (%)
Source: Moody's Economy.com; BLS, CPS
1990-91Recession
Tech SlumpJobless Recovery
The CurrentRecession
90sExpansion
Unemployment Trends
1990Q1
1992Q3
1995Q1
1997Q3
2000Q1
2002Q3
2005Q1
2007Q3
2010Q13
4
5
6
7
8
9
10Unemployment Rate (%)
Source: Moody's Economy.com; BLS, CPS
7.6%
9%-plus
Unemployment Trends
1948Q1
1960Q3
1973Q1
1985Q3
1998Q12
3
4
5
6
7
8
9
10
11Unemployment Rate (%)
Source: Moody's Economy.com; BLS, CPS
7.6%
9%-plus
7.6%
10.7%
8.8%
Unemployment Trends
Some Important Unemployment Definitions
• “Officially” Unemployed – In the Labor Force and working or actively looking for work
• Discouraged Workers – Have a Job-market Related reason for not currently looking
• Marginally Attached – Have Worked Recently, Aren’t Looking, But are Available
• Underemployed - P.T. for Economic Reasons; Have Settled for Part Time Work, Prefer Full-Time
Unemployment Trends
Unemployment Rate (%)
Source: Bureau of Labor Statistics
Officially Unemployed +Discouraged Workers +
P.T. for Economic Reasons
Officially Unemployed +Discouraged Workers
Officially Unemployed
'JUL 08 'AUG 08 'SEP 08 'OCT 08 'NOV '08 'DEC 08 'JAN 094
5
6
7
8
9
10
11
12
13
14
15
Official Unemployment Rate
Official Unemployment Rate + Discouraged Workers
Official Unemployment Rate + Discouraged Workers +Marginally Attached + Underemployed
Critical Dynamics in the Economy
The US Housing Market – Boom to Bust
The Subprime Crisis & Mortgage Market Meltdown
The Business Environment
Workers & Households
A Consumer Crisis
Critical Dynamics in the Economy
The US Housing Market
BOOM
Things Were Simply Wonderful: Sales Kept Rising
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q14
4.5
5
5.5
6
6.5
7
7.5
8
8.5
9
Existing New
Units Sold (Mil, SAAR)
Source: Moody's Economy.com; NAR; Census
2000Q1 2001Q2 2002Q3 2003Q4 2005Q11.5
1.6
1.7
1.8
1.9
2
2.1
2.2Total Housing Starts (Mil Units, SAAR)
Source: Moody's Economy.com; Census
Things Were Simply Wonderful: Builders Kept Building
2000Q1 2001Q2 2002Q3 2003Q4 2005Q11400
1600
1800
2000
2200
2400
2600
2800Real Estate Loans ($Bil., SA)
Source: Moody's Economy.com; Federal Reserve
Things Were Simply Wonderful: Lenders Kept Lending
2000Q1 2001Q2 2002Q3 2003Q4 2005Q167
67.5
68
68.5
69
69.5Homeownership Rate (%,SA)
Source: Moody's Economy.com; Census
Things Were Simply Wonderful: Ownership Kept Rising
1971Q2 1976Q2 1981Q2 1986Q2 1991Q2 1996Q2 2001Q2 2006Q24
6
8
10
12
14
16
18Mortgage Interest Rates (%,, NSA)
Source: Moody's Economy.com; Freddie Mac
30-Year Fixed
35-year average = 9.1%
Things Were Simply Wonderful: Rates Kept Falling
2000Q1 2001Q2 2002Q3 2003Q4 2005Q13.5
4
4.5
5
5.5
6
6.5
7
7.5
8
8.5
Source: Moody's Economy.com; Freddie Mac
30-Year Fixed
Adjustable
Mortgage Interest Rates (%,SA)
Things Were Simply Wonderful: Rates Kept Falling
2000Q1 2001Q2 2002Q3 2003Q4 2005Q110
15
20
25
30
35
40Percent Adjustable Rate Mortgages (%,NSA)
Source: Moody's Economy.com; FHFB
Things Were Simply Wonderful: Buying Was Cheap
1990Q1
1992Q3
1995Q1
1997Q3
2000Q1
2002Q3
2005Q180
100
120
140
160
180
200
220
240Median Existing Home Price ($Ths, SAAR)
Source: NAR; Moody's Economy.com
135%1990-2005
Things Were Simply Wonderful: Prices Kept Rising
1990Q1
1992Q3
1995Q1
1997Q3
2000Q1
2002Q3
2005Q180
100
120
140
160
180
200
220
240Median Existing Home Price ($Ths, SAAR)
Source: NAR; Moody's Economy.com
60%1999-2005
Things Were Simply Wonderful: Prices Kept Rising
Critical Dynamics in the Economy
The US Housing Market
BUST
It Couldn’t Last: Prices Outstrip Incomes
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1-5
0
5
10
15
20
25Annualized Growth Income vs Home Prices
Source: Moody's Economy.com;NAR;Census
Median Home Price
Median Household Income
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2100
105
110
115
120
125
130
135
140Housing Affordability Index
Source: Moody's Economy.com; NAR
It Couldn’t Last: Affordability Began to Slide
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
4
4.5
5
5.5
6
6.5
7
7.5
8
8.5
9
Existing New
New & Existing Home Sales (Mil Units, SAAR)
Source: Moody's Economy.com; NAR; Census
8.5 Mil UnitsQ3:2005
5.3 Mil UnitsQ1:2009
It Couldn’t Last: Demand Began to Ebb
2005 2007 Nov Jan Mar May Jul Sept Nov p0.6
0.8
1
1.2
1.4
1.6
1.8
2
2.2
2.4
2.6
2.8
West
Northeast
South
Midwest
Existing Home Sales (Mil. Units, SAAR)
Source: Nat'l Assoc Realtors
It Couldn’t Last: Sales Slowed Across the Country
And Mortgage Activity is Has Slowed
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q40
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Re-Fi
Purchase
Mortgage Originations ($Trillion, SAAR)
Source: Moody's Economy.com; FRB
2004Q1
2005Q2
2006Q3
2007Q4
2009Q1160
170
180
190
200
210
220
230Median Existing Home Price ($Ths, SAAR)
Source: NAR; Moody's Economy.com
-22.5%2005-2009
-7.8%2009-2010
The US Housing Market: The Drop in Prices
The US Housing Market: Prices Around the USA
-40 -35 -30 -25 -20 -15 -10 -5 0
Boston
Chicago
Denver
Las Vegas
Los Angeles
Miami
New York
San Diego
San Francisco
Washington
% change year ago% change from peak
Change in Home Prices (Pct, Year Ago, Peak)
Source: Moody's Economy.com; S&P/Case Shiller
The US Housing Market: Prices Around the USA
-40 -35 -30 -25 -20 -15 -10 -5 0
Boston
Chicago
Denver
Las Vegas
Los Angeles
Miami
New York
San Diego
San Francisco
Washington
% change year ago% change from peak
Change in Home Prices (Pct, Year Ago, Peak)
Source: Moody's Economy.com; S&P/Case Shiller
Inventories of Unsold Homes Have Risen Sharply
20052006
2007Nov
Dec Jan
Feb Mar
Apr May
Jun Jul
Aug Sept
Oct rNov p
0
2
4
6
8
10
12Months of Supply Existing Home Inventory
Soure: Nat'l Assoc Realtors
Builders Have Pulled Back … Way Back
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q40.6
0.8
1
1.2
1.4
1.6
1.8
2
2.2
2.4Starts & Permits (Mil. Units, SAAR)
StartsPermits
Soure: Moody's Economy.com; Census
Builders Have Pulled Back … Way Back
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q16
6.2
6.4
6.6
6.8
7
7.2
7.4
7.6
7.8Construction Employment (Mil, SA)
Source: Moody's Economy.com; BLS
Critical Dynamics in the Economy
The Subprime Crisis
Subprime Lending Made Home Buying Easy
•Credit to borrowers who do not meet prime underwriting guidelines.
•Heightened perceived risk of default due to:
history of loan delinquency or default bankruptcylimited debt experience
•Almost All Made as ARMs, Subject to Reset
•Most Packaged and Traded as High-Yield Asset-Backed Securities
1994 1995 1996 1997 1998 1999 2000 2001 2002 20030
50
100
150
200
250
300
350Subprime Mortgage Originations ($Bil)
Source: Fed. Res. Bank NY
Subprime Lending Made Home Buying Easy
2003Q1 2004Q2 2005Q3 2006Q4 2008Q13.5
4
4.5
5
5.5
6
6.5
7Mortgage Interest Rates (%,, NSA)
Source: Moody's Economy.com; Freddie Mac
30-Year Fixed
Adjustable
Until Adjustable Rate Mortgages Started to Reset
And Some Borrowers Were Not Prepared
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q44
6
8
10
12
14
16
18
20
22Total Loans Overdue (%,SA)
Source: Moody's Economy.com; MBA
Subprime
All Loans
1998Q1 1999Q2 2000Q3 2001Q4 2003Q1 2004Q2 2005Q3 2006Q4 2008Q11
1.5
2
2.5
3
3.5
4
4.5
5Subprime Loans in Foreclosure (%,SA)
Source: Moody's Economy.com; MBA
And Homes Were Being Lost
Subprime Lending And Convoluted Debt Swaps
"With this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else-or even of one's own position. Not surprisingly, the credit markets froze."
Joseph Stiglitz
Critical Dynamics in the Financial & Economic Crisis
Excess Inventory Price Declines Refinancing Issues
Mtg ForeclosuresBank LossesBank Capital Depleted
Liquidity CrunchBank Failures
Fed Actions
TARPHope NowOther H.O. Programs
Econ Stim '08
More Fed Action
Critical Dynamics in the Economy
The Investor Response
19961997
19981999
20002001
20022003
20042005
20062007
2008*0
500
1000
1500
2000
2500
3000
3500
AgencyNonAgency
Mortgage Securities Issuance ($Bil)
Source: Securities Industry and Financial Markets Assoc
Some Mortgage Backed Securities Issuance Stopped
Issuers and Holders of Mortgage Backed Debt Weakened
6/30/2005
11/21/2005
4/18/2006
9/8/2006
2/2/2007
6/27/2007
11/16/2007
0
20
40
60
80
100
120
140
160
180Bear Stearns (daily closing price, $/Share)
NYSE
$171.50
JP Morgan Offer$2.00 (later $10)
4/1/2005
8/23/2005
1/17/2006
6/9/2006
10/31/2006
3/28/2007
8/20/2007
1/11/20080
5
10
15
20
25
30
35
40
45
50Countrywide Financial Corp (daily close, $/shr)
NYSE
Issuers and Holders of Mortgage Backed Debt Weakened
Critical Dynamics in the Economy
The Lender Response
Banks Have Clamped Down
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4-10
0
10
20
30
40
50
60
70
80Net % of Banks Tightening Standards for Mortgage Loans
Source: Moody's Economy.com; FRB
2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4-1
0
1
2
3
4
5
6
7
8C&I, RE Loans (% Chg)
Source: Moody's Economy.com;FRB
C&I
RE
Banks Have Clamped Down
2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3-1.5
-1
-0.5
0
0.5
1
1.5
2Consumer Credit Outstanding (% Chg)
Source: Moody's Economy.com;FRB
Banks Have Clamped Down
Critical Dynamics in the Economy
The Business Environment
2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q31650
1700
1750
1800
1850
1900
1950Corporate Profits Before Taxes ($Bil., SAAR)
Source: Moody's Economy.com;BEA
Profits Have Slumped
And, Financial Markets Remain Wary….and Weary
1/3/2005 10/18/2005 8/4/2006 5/23/2007 3/10/2008 12/22/20087000
8000
9000
10000
11000
12000
13000
14000
15000Dow Jones Industrial Average
Source: NYSE
Businesses have grown pessimistic….
12-Sep-08
26-Sep-08
10-Oct-
08
24-Oct-
08
19-Dec-
08
2-Jan-09
16-Jan-09
30-Jan-09-35
-30
-25
-20
-15
-10
-5
0
5
10
15Moody's Economy.com Survey of Business Confidence (Index)
Source: Moody's Economy.com
Cutting Back, Preserving Workforce, Reducing Costs
Pay CutsSalary Freezes
Reduced RaisesReduced Hours, Overtime
Unpaid Furloughs
Pension Contribution Freezes/Cuts401(k) Contribution Freezes/Cuts
Cutting Back, Preserving Workforce, Reducing Costs
Pay Cuts
FedExCaterpillarGymboree
YRC Worldwide Trucking
Salary Freezes
Dow Jones & Co. Publishing
Cutting Back, Preserving Workforce, Reducing Costs
Reduced Raises
Half of 620 Companies surveyedBy Hewitt Associates
Report that average raises willDrop below 3%
Source: L.A. Times, 1/15/2009
Cutting Back, Preserving Workforce, Reducing Costs
Unpaid Furloughs
State of California
Gannett Co. Publishing
Cutting Back, Preserving Workforce, Reducing Costs
Layoffs Remain the Favored Strategy
Mass Layoff Events – All Industries (#,SA)
Source: Moody’s Economy.com; BLS
'2006JUNJUN
'2007JUN
'2008JUN
DECDEC
800
1000
1200
1400
1600
1800
2000
2200
2400Major Layoff Annoucements (#)
Source: Bureau of Labor Statistics
Who is Laying Off This Month ?
Source: CNN/Reuters
Circuit City – 30,000Caterpillar – 20,000Nissan – 20,000Pfizer – 19,500Alcoa – 13,500Boeing – 10,000 GM – 10,000TDK – 8,000Sprint Nextel – 8,000Home Depot – 7,000ING – 7,000Macy’s – 7,000Philips Electronics – 6,000Motorola – 4,000Hertz – 4,000Honda – 3,100EMC – 2,400Barclay’s – 2,100Cessna – 2,000MeadWestvaco Corp – 2,000Cigna – 1,100
Selected Layoff Announcements in January/February 2009
Saks – 1,100Walgreens – 1,000Schlumberger – 1,000Cummins - 800Autodesk - 750Logitech - 500Neiman Marcus - 375Ethan Allen - 350New York & Co - 350Barnes & Noble - 100Google - 100World Wrestling Ent - 60
The Result of Mounting Layoffs is Mounting UE Claims
7-Jan-01
23-Dec-
01
8-Dec-
02
23-Nov-03
7-Nov-04
23-Oct-
05
8-Oct-
06
23-Sep-07
7-Sep-08250000
300000
350000
400000
450000
500000
550000
600000Initial Claims for Unemployment Benefits (#/Wk,
Source: Moody's Economy.com; Employment Training Admin.
Employers are Cutting Back
2006M5
2006M9
2007M1
2007M5
2007M9
2008M1
2008M5
2008M9
2009M1-600
-500
-400
-300
-200
-100
0
100
200
300 Thousands of Jobs
Source: Moody's Economy.com
Critical Dynamics in the Economy
The Household Environment
Wages, Salaries Have Swooned
2004Q1 2005Q2 2006Q3 2007Q4 2009Q12.2
2.4
2.6
2.8
3
3.2
3.4
Wages & Salaries (Year-Over-Year Pct)
Source: Moody's Economy.com; BLS
Household Assets Have Crashed
2004Q1 2005Q2 2006Q3 2007Q4 2009Q142000
44000
46000
48000
50000
52000
54000
56000Household Net Worth ($Bil2000, SA)
Source: Moody's Economy.com; FRB
Household Liabilities Remain at All-Time Highs
2004Q1 2005Q2 2006Q3 2007Q4 2009Q110000
10500
11000
11500
12000
12500
13000
13500
14000
14500
15000Household Liabilities ($Bil SA)
Source: Moody's Economy.com; FRB
Household Debt Burdens Remain High
2004Q1 2005Q2 2006Q3 2007Q4 2009Q113.4
13.5
13.6
13.7
13.8
13.9
14
14.1
14.2
14.3
14.4
14.5Household Debt Service Burden (% of Disposable Income, SA)
Source: Moody's Economy.com; FRB
Household Cash Flow Has Shrunk
2004Q1 2005Q2 2006Q3 2007Q4 2009Q19000
9100
9200
9300
9400
9500
9600
9700
9800
9900Household Cash Flow ($Bil 2000 SA)
Source: Moody's Economy.com; FRB; IRS
Consumers Are Running Behind
2004Q1 2005Q2 2006Q3 2007Q4 2009Q11
1.2
1.4
1.6
1.8
2
2.2
2.4Pct of Accounts Delinquent 30 Days ($ Volume)
Source: Moody's Economy.com; ABA
Consumer Confidence has Collapsed
2004Q1 2005Q2 2006Q3 2007Q4 2009Q140
50
60
70
80
90
100
110Consumer Confidence (Index)
Source: Moody's Economy.com; Conference Board
Retail Sales Have Hit The Skids
2004Q1 2005Q2 2006Q3 2007Q4 2009Q1-6
-5
-4
-3
-2
-1
0
1
2
3
4Total Retail Sales (% Chg)
Source: Moody's Economy.com; BOC
Retailers Are Discounting Like Crazy
2004Q1 2005Q2 2006Q3 2007Q4 2009Q11.5
2
2.5
3
3.5
4
4.5
5
5.5Consumer Price Index (YOY%)
Source: Moody's Economy.com; BLS
But, Discounting Isn’t Helping A Whole Lot
2004Q1 2005Q2 2006Q3 2007Q4 2009Q110
11
12
13
14
15
16
17
18Vehicle Sales (Mil Units, SAAR)
Source: Moody's Economy.com; BEA
Monetary Policy Actions: A Near Zero Funds Rate
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q40
1
2
3
4
5
6
7Federal Funds Rate (%)
Source: Moody's Economy.com; FRB
The Troubled Asset Relief Program (TARP)
Designed to Provide Relief to Financial Institutionsby Acquiring Troubled Mortgage-Backed Assets,
Guaranteeing Assets,And Recapitalizing Banks Through Preferred Stock
(or Not…..)
$700 Billion($350 Billion X 2)
The Troubled Asset Relief Program (TARP)
Outlays Through January 30, 2009
Citigroup - $50 B in Preferred Stock; $306 B GuaranteesB of A - $45 B in Preferred Stock; $118B in Guarantees
AIG - $40B in Preferred StockJP Morgan Chase - $25B In Preferred Stock
Wells Fargo - $25B in Preferred StockGoldman Sachs - $10B in Preferred StockMorgan Stanley - $10B in Preferred StockPNC Fin Svcs - $7.5B in Preferred StockUS Bancorp - $6.6B in Preferred Stock
GMAC - $5 B in Preferred StockCapital One - $3.5B in Preferred Stock
American Express - $3.4B in Preferred Stock
Bank of New York Mellon - $3B in Asset Guarantees
The Troubled Asset Relief Program (TARP)
Oh, Yeah…..
General Motors - $13.4 B in Preferred Stock Chrysler - $4 B in Preferred Stock
Term Asset-Backed Securities Loan Facility (TALF)
Designed to Stimulate Credit MarketsBy Issuing Loans on Asset-Backed Securities
Loans May be Auto Loans, Student Loans,Credit Card Loans or Small Business Loans
$200 Billion (beginning February 2009)
American Recovery and Reinvestment Act of 2009
Combined Direct Stimulus and Tax Cuts To:
Generate Renewed DemandCreate Employment
Invest in Economic Growth
$800 - $900 Billion
American Recovery and Reinvestment Act of 2009
Proposed Elements of the Stimulus Plan
• Infrastructure Improvements• (Education Facilities Modernization)• Renewable Energy Investment• (Health Care Records Modernization)• Science, Research Technology• Medicaid Assistance to States• Unemployment Benefits Extensions• COBRA Credits• Food Stamps• Household Tax Cuts/Credits• Business Tax Credits and Offsets
The Likely Effects of the Stimulus Plan
•Create Jobs, Boost Incomes
•Hiring Incentives w/ Business Tax Cuts, Credits, etc.
•Boost Spending
The Likely Effects of the Stimulus Plan: Employment Growth
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4-1.5
-1
-0.5
0
0.5
1Employment Change (Mil.,SA)
Source: Moody's Economy.com
2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q34.5
5
5.5
6
6.5
7
7.5
8
8.5
9
9.5Unemployment Rate (%)
Source: Moody's Economy.com
The Likely Effects of the Stimulus Plan: Unemployment
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q14
4.5
5
5.5
6
6.5
7
7.5Total Home Sales (Mil Units, SAAR)
Source: Moody's Economy.com; NAR; BOC
The Likely Effects of the Stimulus Plan: Housing Markets
2007Q1 2008Q2 2009Q3 2010Q4 2012Q14000
4100
4200
4300
4400
4500
4600
4700
4800
4900Total Retail Sales ($Bil., SAAR)
Source: Moody's Economy.com; Census
The Likely Effects of the Stimulus Plan: Spending
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1-6
-4
-2
0
2
4
6
8GDP (Annualized %)
Source: Moody's Economy.com
The Likely Effects of the Stimulus Plan: GDP Growth
The Likely Effects of NO Stimulus Plan: Employment Growth
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4-2
-1.5
-1
-0.5
0
0.5
1Employment Change (Mil.,SA)
Source: Moody's Economy.com
w/Stimulus
w/o Stimulus
The Likely Effects of NO Stimulus Plan: Unemployment
2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q34
5
6
7
8
9
10
11
12Unemployment Rate (%)
Source: Moody's Economy.com
w/Stimulus
w/o Stimulus
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q14
4.5
5
5.5
6
6.5
7
7.5
With StimulusWithout Stimulus
Total Home Sales (Mil Units, SAAR)
Source: Moody's Economy.com; NAR; BOC
The Likely Effects of the Stimulus Plan: Housing Markets
The Likely Effects of the Stimulus Plan: Spending
2007Q1 2008Q2 2009Q3 2010Q4 2012Q14000
4100
4200
4300
4400
4500
4600
4700
4800
4900
5000Total Retail Sales ($Bil., SAAR)
Source: Moody's Economy.com; Census
w/o Stimulus
w/Stimulus
The Likely Effects of the Stimulus Plan: GDP
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1-6
-4
-2
0
2
4
6
8GDP (Annualized %)
Source: Moody's Economy.com
w/Stimulus
w/o Stimulus
The View from Denver: Employment Trends Similar to US
2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4-7
-6
-5
-4
-3
-2
-1
0
1
2
3
Denver
US
Employment Growth (Ann %)
Source: Moody's Economy.com; BLS
The View from Denver: Mirroring, Bettering the US
1995Q1 1997Q3 2000Q1 2002Q3 2005Q1 2007Q3 2010Q190
95
100
105
110
115
120Relative Employment Trends (Index, 1997Q3=100)
Source: Moody's Economy.com; BLS
Forecast
The View from Denver: Unemployment Rises Rapidly
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q42
3
4
5
6
7
8
Denver
US
Unemployment Rate (%)
Source: Moody's Economy.com;BOC
The View from Denver: A Well-Diversified Economy
0 2 4 6 8 10 12 14 16 18
Constrn
Mfg
TCU
Wholesale
Retail
Information
Financial
Pro/Bus Svc
Edu/Hlth Svc
Leisure Svc
Other Svc
Govt
Denver
US
Percent of Total Employment
Source: Moody's Economy.com; BLS
The View from Colorado: Denver Is a Popular Destination
Survey says Denver is most popular place to liveSurvey says Denver is most popular place to live
Percentage of Americans who say they want to live in this city or metropolitan area:Percentage of Americans who say they want to live in this city or metropolitan area:
Most popularMost popular Least popular Least popular
Denver: 43%Denver: 43% Detroit: 8% Detroit: 8%
San Diego: 40% Cleveland: 10% San Diego: 40% Cleveland: 10%
Seattle: 38% Cincinnati: 13% Seattle: 38% Cincinnati: 13%
Orlando: 34% Kansas City: 15% Orlando: 34% Kansas City: 15% San Francisco: 34% Pittsburgh: 17%
Tampa: 34% Minneapolis: 16% Tampa: 34% Minneapolis: 16% Source: Pew Research CenterSource: Pew Research Center
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1-5
0
5
10
15
20
25
30
35 Net Migration (Ths., SAAR)
Source: OED/Policy Group, March 2008
Forecast
The View from Denver: A Popular Destination
The View from Denver: Wages Remain Barely Positive
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4-4
-2
0
2
4
6
8
10
12
14
16
Wages & Salaries
Disposable Income
Wages, Salaries, Disposable Income (YOY%)
Source: Moody's Economy.com; BEA; BOC
The View from Denver: Incomes Swing Cyclically
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4-4
-2
0
2
4
6
8
10
12
Denver
US
Median Household Income (YOY%)
Source: Moody's Economy.com;BOC
The View from Denver: Home Sales Track Nation
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4-30
-20
-10
0
10
20
30
Denver
US
Single Family Home Sales (YOY%)
Source: Moody's Economy.com; NAR;BOC
The View from Denver: Home Prices Did Not Boom
2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4-20
-15
-10
-5
0
5
10
15
20
Denver
US
Median Single Family Home Price (YOY%)
Source: Moody's Economy.com; NAR
The View from Denver: Foreclosures Briefly Spiked Here
19882000
20062007
0
1000
2000
3000
4000
5000
6000Foreclosure Filings
Source: OED/Policy Group, March 2008
A Denver Forecast
A Denver Forecast: Employment Growth
2005Q2
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1-20
-15
-10
-5
0
5
10
15Employment Change (Ths., SAAR)
Source: Moody's Economy.com
Forecast
A Denver Forecast: Employment Growth
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1-20
-15
-10
-5
0
5
10
Tourism Education & Health Services,Professional & Business ServicesInformationTransportation & UtilitiesManufacturing
Major Sector Employment Change (Ths., SA)
Source: Moody's Economy.com; BLS
2000Q1
2001Q2
2002Q3
2003Q4
2005Q1
2006Q2
2007Q3
2008Q4
2010Q1
2011Q22
3
4
5
6
7
8
9Unemployment (%)
Forecast
Source: Moody's Economy.com;BLS
A Denver Forecast: Unemployment
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q33
4
5
6
7
8
9
10Unemployment (%)
Forecast
Source: Moody's Economy.com;BLS
US
Denver
A Denver Forecast: Unemployment
A Denver Forecast: Wages & Salaries
2000Q1
2001Q2
2002Q3
2003Q4
2005Q1
2006Q2
2007Q3
2008Q4
2010Q1
2011Q2-4
-2
0
2
4
6
8
10
12
14
16Wages & Salaries (YOY%)
Source: Moody's Economy.com; BLS
Forecast