Rudney Associates Presents
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Transcript of Rudney Associates Presents
1
Looking Better... but Still Not Great
Steven A. WoodLecturer
University of California, BerkeleyMarch 26, 2014
Rudney Associates Presents
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The Economy is Growing … Real Gross Domestic Product
Quarter-to-Quarter Percent Change
Real Gross Domestic ProductBillions of Chained 2009 Dollars
141312111009080706Sources: Bureau of Economic Analysis /Haver Analytics
9
6
3
0
-3
-6
-9
16000
15600
15200
14800
14400
14000
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and Jobs are Being CreatedNonfarm Payroll Employment
Monthly Change, Thousands
Nonfarm Payroll EmploymentMillions
141312111009080706Source: Haver Analytics
800
400
0
-400
-800
-1200
140
138
136
134
132
130
128
4
Unemployment is Retreating …Civilian Unemployment Rate
Percent
141312111009080706Source: Bureau of Labor Statistics /Haver Analytics
10
9
8
7
6
5
4
10
9
8
7
6
5
4
5
and Wages are Picking UpAverage Hourly Earnings
Year-to-Year Percent Change
141312111009080706Source: Bureau of Labor Statistics /Haver Analytics
5
4
3
2
1
5
4
3
2
1
6
The Fed is Highly AccommodativeFederal Reserve Credit Outstanding
Billions of Dollars
141312111009080706Source: Haver Analytics
4500
3750
3000
2250
1500
750
4500
3750
3000
2250
1500
750
7
Keeping Interest Rates LowFederal Funds Rate, Percent
10-Year Treasury Note Yield, PercentMoody's Seasoned Baa Corporate Bond Yield, Percent
1005009590858075706560Sources: Federal Reserve Board /Haver Analytics
20
16
12
8
4
0
20
16
12
8
4
0
8
Banks are Lending AgainCommercial Bank Loans
Billions of Dollars
141312111009080706Source: Federal Reserve Board/Haver Analytics
8400
8000
7600
7200
6800
6400
8400
8000
7600
7200
6800
6400
9
Housing Starts are ClimbingNew Single Family Home Sales
12-Month Average, Thousands of Units
Existing Single Family Home Sales12-Month Average, Thousands of Units
1005009590Sources: Census Bureau, National Association of Realtors /Haver Analytics
1400
1200
1000
800
600
400
200
6750
6000
5250
4500
3750
3000
2250
10
and Car Sales have ReboundedTotal Motor Vehicle Sales
12-Month Average, Millions of Units
1005009590Source: Autodata /Haver Analytics
18
16
14
12
10
18
16
14
12
10
11
Exports are GrowingExports of Goods & Services
Billions of Chained 2009 Dollars
141312111009080706Source: Bureau of Economic Analysis /Haver Analytics
2200
2000
1800
1600
1400
2200
2000
1800
1600
1400
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But …
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But Growth is Still Sluggish …
-4 -3 -2 -1 PEAK
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 3090
100
110
120
130
140
Real GDPBusiness Cycle Peak = 100
1948 Q4
1953 Q2
1957 Q3
1960 Q2
1969 Q4
1973 Q4
1981 Q3
1990 Q3
2001 Q1
Average 10 Prior Re-cessions
2007 Q4
Cumulative Quarterly Change Relative to Business Cycle Peak
Inde
x
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and Job Creation is Still SoftPayroll Employment
Business Cycle Peak = 100
90
95
100
105
110
115
120
-12 Peak 12 24 36 48 60 72
Cumulative Monthly Change Relative to Business Cycle Peak
Inde
x
October 1949May 1954April 1958February 1961November 1970March 1975July 1981March 1991November 2001Average of 10 Prior RecessionsJune 2009
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The Output Gap Remains WideReal Gross Domestic Product
Billions of Chained 2009 Dollars
Real Potential Gross Domestic ProductBillions of Chained 2009 Dollars
141312111009080706050403020100Sources: BEA, CBO /Haver
17000
16000
15000
14000
13000
12000
11000
17000
16000
15000
14000
13000
12000
11000
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Leaving Employment DepressedEmployment-to-Population Raio
Ratio
1005009590858075706560Source: Bureau of Labor Statistics /Haver Analytics
65
63
61
59
57
55
65
63
61
59
57
55
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with Lots of Part-Time WorkersWorking Part-Time for Economic Reasons
Percent of Total Employment, 12-Month Average
1005009590858075706560Source: Haver Analytics
7
6
5
4
3
2
7
6
5
4
3
2
18
Unemployment is Still HighCivilian Unemployment Rate
Percent
1005009590858075706560Source: Bureau of Labor Statistics /Haver Analytics
12
10
8
6
4
2
12
10
8
6
4
2
19
Government Spending is FadingFederal Government Outlays
Billions of Dollars, 12-Month Average
141312111009080706050403020100Source: Haver Analytics
3200
2800
2400
2000
1600
1200
3200
2800
2400
2000
1600
1200
20
Government Spending is FadingReal Federal Government Purchases
Index: 2007 Q4 = 100
Real State & Local Government PurchasesIndex: 2007 Q4 = 100
141312111009080706Sources: Bureau of Economic Analysis /Haver Analytics
120
115
110
105
100
95
90
120
115
110
105
100
95
90
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Government Jobs DisappearTotal Government Employment
Business Cycle Peak = 100
90
95
100
105
110
115
120
-12 Peak 12 24 36 48 60 72
Cumulative Monthly Change Relative to Business Cycle Peak
Inde
x
October 1949May 1954April 1958February 1961November 1970March 1975July 1981March 1991November 2001Average 10 Prior RecessionsJune 2009
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Budget Deficit Rapidly ShrinksFederal Government Budget Balance
Billions of Dollars, 12-Month Total
1005009590858075706560Source: Haver Analytics
250
0
-250
-500
-750
-1000
-1250
250
0
-250
-500
-750
-1000
-1250
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Money Supply Grows SlowlyFederal Reserve Credit Outstanding
Index: 2007 Q4 = 100
Money SupplyIndex: 2007 Q4 = 100
141312111009080706Sources: Federal Reserve Board /Haver Analytics
500
400
300
200
100
0
500
400
300
200
100
0
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Banks Are Not Lending MuchTotal Reserve Balances
Billions of Dollars
Required Reserve BalancesBillions of Dollars
141312111009080706Source: Haver Analytics
2500
2000
1500
1000
500
0
2500
2000
1500
1000
500
0
25
Banks Continue to DeleverageFinancial Institutions Debt Outstanding
Percent of GDP
1005009590858075706560Source: Federal Reserve Board/Haver Analytics
120
100
80
60
40
20
0
120
100
80
60
40
20
0
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Consumers Also DeleverageHousehold Debt Outstanding
Percent of Disposable Income
1005009590858075706560Source: Federal Reserve Board/Haver Analytics
125
100
75
50
125
100
75
50
27
Inflation Stays LowPersonal Consumption Expenditure Price Index
Year-to-Year Percent Change
Core Personal Consumption Expenditure Price IndexYear-to-Year Percent Change
1005009590858075706560Sources: Bureau of Economic Analysis /Haver Analytics
12
10
8
6
4
2
0
-2
12
10
8
6
4
2
0
-2
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Below the Fed’s TargetPersonal Consumption Expenditure Price Index
Year-to-Year Percent Change
Core Personal Consumption Expenditure Price IndexYear-ot-Year Percent Change
141312111009080706Sources: Bureau of Economic Analysis /Haver Analytics
6
4
2
0
-2
6
4
2
0
-2
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What about financial markets?
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Interest Rates to Stay LowFederal Funds Rate, Percent
10-Year Treasury Note Yield, PercentMoody's Seasoned Baa Corporate Bond Yield, Percent
1005009590858075706560Sources: Federal Reserve Board /Haver Analytics
20
16
12
8
4
0
20
16
12
8
4
0
31
Corporate Profits at Record LevelsCorporate Profits
Percent of GDP
1005009590858075706560Source: Haver Analytics
14
12
10
8
6
14
12
10
8
6
32
Stock Market at Record LevelsS&P 500 Compsite Index
Index: 1941 - 43 = 100
1005009590858075706560Source: Standard & Poor's /Haver Analytics
2000
1600
1200
800
400
0
2000
1600
1200
800
400
0
33
Stocks Appear “Fairly” ValuedS&P 500 Composite Index
Price/Earnings Ratio
1005009590858075706560Source: Standard & Poor's/Haver Analytics
50
40
30
20
10
0
50
40
30
20
10
0
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But Profit Growth has SlowedCorporate Profits
Year-to-Year Percent Change
1005009590858075706560Source: Bureau of Economic Analysis /Haver Analytics
60
40
20
0
-20
-40
60
40
20
0
-20
-40
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The Major Known Risks
1. Confrontation with Russia/oil price shock
2. Weaker European growth/new recession
3. European sovereign debt problems
4. Political stalemate in Washington
5. The Chinese “bubble” economy
6. Slower emerging market growth
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Looking Better… but Still Not Great
Questions?