Triple A Baseball-Hunt - UTEP · This recovery (2009 Q3-2012 Q3) Average contribution to real GDP...
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1/17/13 1 2013 Economic Outlook: Still feeling the pain Roberto Coronado Assistant Vice President in Charge and Sr. Economist January 16, 2013 The views expressed in this presentation are strictly those of the author and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or of the Federal Reserve System. Any secondary distribution of this material is strictly prohibited. May be quoted with appropriate attribution to the author. Today’s agenda U.S. economic update Recovery continues to be modest Is manufacturing slowing down? El Paso’s economy Recession was milder Recovery has been stronger Concluding remarks
Transcript of Triple A Baseball-Hunt - UTEP · This recovery (2009 Q3-2012 Q3) Average contribution to real GDP...
1/17/13
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2013 Economic Outlook: Still feeling the pain
Roberto Coronado Assistant Vice President in Charge and Sr. Economist January 16, 2013 The views expressed in this presentation are strictly those of the author and do not necessarily reflect the positions
of the Federal Reserve Bank of Dallas or of the Federal Reserve System. Any secondary distribution of this material is strictly prohibited. May be quoted with appropriate attribution to the author.
Today’s agenda
§ U.S. economic update § Recovery continues to be modest
§ Is manufacturing slowing down?
§ El Paso’s economy § Recession was milder
§ Recovery has been stronger
§ Concluding remarks
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U.S. recovery continues to be modest
Economic dashboard
5 4 . 4
-1
-0.5
0
0.5
11.5 2 2.5
3
3.5
4
4.5
5
1.42
HeadlinePCE
-2.5
-2
-1.5
-1
-0.5
0
0.51
1.5 22.5
3
3.5
4
4.5
5
5.5
6
2.60Year-over-year
Real GDP growth
4
4.5
5
5.5
66.5 7 7.5
8
8.5
9
9.5
10
7.8
Unemployment rate
Percent of jobs recovered
3
3.5
4
4.5
55.5
6 6.5 77.5
8
8.5
9
9.5
10
5.22
Junk-bond spread
Warning
Unemp.jump
Yieldcurve
Oilshock
Enginestall
Source: Harvey Rosenblum, Director of Research, Federal Reserve Bank of Dallas
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2.3
-1.0
0.0
1.0
2.0
3.0
4.0
Real GDP PCE Non-Residential ResidentialInvestment
Government Net Exports
This recovery (2009 Q3-2012 Q3)
Average contribution to real GDP growth over 13 quarters
Source: HAVER Analytics
What do we mean by a sluggish recovery?
2.3
1.5
1.1
0.1 -0.2 -0.2
-1.0
0.0
1.0
2.0
3.0
4.0
Real GDP PCE Non-Residential ResidentialInvestment
Government Net Exports
This recovery (2009 Q3-2012 Q3)
Average contribution to real GDP growth over 13 quarters
Source: HAVER Analytics
What do we mean by a sluggish recovery?
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What do we mean by a sluggish recovery?
3.9
2.6
0.9
0.5 0.5
-0.6
2.3
1.5
1.1
0.1 -0.2 -0.2
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Real GDP PCE Non-Residential ResidentialInvestment
Government Net Exports
Three prior recoveries This recovery (2009 Q3-2012 Q3)
-1.6
-1.2
0.3
-0.4 -0.7
0.4
Average contribution to real GDP growth over 13 quarters
Source: HAVER Analytics
PMIs show modest growth
30
35
40
45
50
55
60
65
70
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
ISM Nonmanufacturing ISM Manufacturing
Diffusion Index, 50+=Increasing
Expanding
Declining Danger Zone!!
50.7
56.1 Dec x
Source: Institute for Supply Management, Haver Analytics
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What about the labor market?
127,000
129,000
131,000
133,000
135,000
137,000
139,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
December 2012
134,021
Non-farm payroll employment
6.4%
2.9%
Thousands, S.A.
Source: Bureau of Labor Statistics/HAVER Analytics
Jobs? Heading in the right direction, but a long way to go
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-1000
-800
-600
-400
-200
0
200
400
600
03 04 05 06 07 08 09 10 11 12
December155K 151K
Thousands (SA)
3-month MA
∆ in Payrolls
Source: Bureau of Labor Statistics
Payroll employment continues to improve
0.90
0.91
0.92
0.93
0.94
0.95
0.96
0.97
0.98
0.99
1.00
1.01
1.02
1.03
1.04
2007 2008 2009 2010 2011 2012
Total Nonfarm Employment Real GDP
Index Dec 2007 = 1, S.A.
2.5%
2.9%
Source: Bureau of Labor Statistics/Bureau of Economic Analysis
Recovery complete in GDP, job growth slowly catching up
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GDP and Job Growth After 24 Months of Recovery: 11 Recessions Since 1948
R² = 0.77259
-10
-5
0
5
10
15
0 1 2 3 4 5 6 7 8 9
ßßThe Great Recession
% Increase In Employment
% Increase in GDP
0
2
4
6
8
10
12
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source:Bureau of Labor Statistics
Percent
December 2012: 7.8
Unemployment rate is coming down
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The recovery in the industrial sector is losing momentum
80
85
90
95
100
105
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Board of Governors, Federal Reserve System
Index: Jan 2007=100, S.A.
21%
7%
U.S. manufacturing recovery stalls
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20
30
40
50
60
70
80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
ISM Manufacturing Index
ISM Manufacturing: New Orders Index
SA, 50+ = Increasing
Source: Institute of Supply Management
Increasing
Decreasing
Is manufacturing contracting?
8
10
12
14
16
18
20
2006 2007 2008 2009 2010 2011 2012
Million Units, SAAR
Source: Bureau of Economic Analysis/HAVER Analytics
Cash for ClunkersTsunami disrupts auto output
in Japan and the US
December=15.32
Vehicle sales continue to improve
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GDP growth is expected to gain momentum
2.7
2.3
2.5
1.3
2.7
2.0
1.3
3.1
1.4
1.6
2.1
2.5
2.7 2.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2009: H2 2010: H1 2010: H2 2011: H1 2011: H2 2012: Q1 2012: Q2 2012: Q3 2012: Q4 2013: Q1 2013: Q2 2013: Q3 2013: Q4 2014: Q1Source: Bureau of Economic Analysis, Haver Analytics, Blue Chip Economic Indicators
% change, annualized
Forecast
4.1 4.6
1.0 0.6
-1.2
-5.9
-12.5
-15.9
-19.6
-11.4
5.0 5.6
7.98.6
6.6
2.2
4.4
1.2
5.6 5.15.9
2.4
0.3 0.3
2.5 3.0 3.4 3.6 3.4 3.4 3.7 3.8
-25
-20
-15
-10
-5
0
5
10
2007 2008 2009 2010 2011 2012 2013 2014
Source: Federal Reserve Board, Blue Chip Economic Indicators
% change from prior quarter, annualized
Industrial production expected to grow
Forecast
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0
2
4
6
8
10
12
2007 2008 2009 2010 2011 2012 2013 2014
Source: Bureau of Labor Statistics, Blue Chip Economic Indicators
Percent
Quarterly Forecast
Unemployment rate in the right direction
2014 Q4=7.0
What about the rest of the economy
§ Housing has bottomed down. Slow recovery.
§ Consumer spending has picked up. However, consumer sentiment still low.
§ Inflation in the comfort zone.
§ The big elephant in the room: Uncertainty
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El Paso leading the U.S. recovery
Dallas Fed ahead of the rest
90
92
94
96
98
100
102
104 Index, each District employment peak=100
Dallas
Chicago
Atlanta San Francisco
Minneapolis
Kansas City Richmond
Philadelphia
St. Louis Cleveland
New York
Boston U.S.
Source: Federal Reserve Bank of Dallas.
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90
95
100
105
110
115
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Federal Reserve Bank of Dallas
Index, Jan 2000 = 100
Note: El Paso Business Cycle is a composite index that includes employment, unemployment rate, retail sales and wages.
-2.5 %
3.4 %
Recession Recovery Expansion
El Paso is beyond recovery
El Paso is good at importing recessions
-1.00
-0.50
0.00
0.50
1.00
1.50
1978
19
79
1980
19
81
1982
19
83
1984
19
85
1986
19
87
1988
19
89
1990
19
91
1992
19
93
1994
19
95
1996
19
97
1998
19
99
2000
20
01
2002
20
03
2004
20
05
2006
20
07
2008
20
09
2010
20
11
2012
US/MX
MX MX US
US US/MX
El Paso Business Cycle Index, Percent, m-o-m, 3 month MA
Source: Federal Reserve Bank of Dallas
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El Paso employment growth
2.3
3.6
2.2
3.9
0.0
2.0
2.7
1.1
2.0
1.5
-2.3
2.5
-1.1
0.9
2.0 1.9
3.6
-0.3
-1.1
1.9
0.4
1.5
-3
-2
-1
0
1
2
3
4
5
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*
Average 1.4
*Data for 2012 is November 2012/November 2011 Government Employment excludes federal military employmentSource: Federal Reserve Bank of Dallas.
Percent, Dec/Dec, S.A.
El Paso non-farm employment
230
240
250
260
270
280
290
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Federal Reserve Bank of Dallas
November284KJobs
Thousands, S.A.
2.5%
1.3%
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Comparing the recovery in the El Paso and U.S. labor markets
92
94
96
98
100
102
104
2007 2008 2009 2010 2011 2012
-2.9%
2.6%
U.S.
El Paso
Index Dec 2007=100
Source: Bureau of Labor Statistics/HAVER Analytics
El Paso-U.S. unemployment
0
2
4
6
8
10
12
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
El Paso
U.S.
Source: The Federal Reserve Bank of Dallas and the Bureau of Labor Statistics
Percent
November = 8.5
December = 7.8
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El Paso’s recession milder than other border cities
Metro Area Peak Trough Decline (%)
Bo�om to Today (%)
Texas July 2008
November 2009 5.3% 9.9%
El Paso February 2008
September 2009 2.5% 6.1%
Brownsville February 2008
August 2009 4.9% 2.8%
Laredo August 2007
October 2009 18.9% 11.9%
McAllen February 2008
March 2010 15.7% 8.2%
El Paso’s economy in transition
§ Employment migrating from manufacturing to services
§ 1990: Mfg. +20%; Svcs. 75%
§ Today: Mfg. 5%; Svcs. 90%
§ Per capita income closing gap with national levels
§ 1990: 62%
§ 2000: 60%
§ 2010: 73%
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Concluding remarks U.S. recovery continues to be modest. Rebound in housing and pick up in household
spending are good signs for the economic outlook. Economic outlook for the U.S. remains “cautiously
optimistic.” El Paso now in expansion mode (already exceeded
pre-recession peak levels), leading the U.S. The local recession was milder than elsewhere.
Concluding remarks Going forward, there are several downside risks:
1. Fiscal-cliff 2.0, uncertainty 2. Euro-zone crisis and global financial turmoil 3. Slowdown in U.S. industrial sector, in particular autos 4. Violence in Northern Mexico 5. Volatile peso/dollar exchange rate will have
implications for El Paso
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2013 Economic Outlook: Still feeling the pain
The views expressed in this presentation are strictly those of the author and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or of the Federal Reserve System. Any secondary distribution of this
material is strictly prohibited. May be quoted with appropriate attribution to the author.
Roberto Coronado [email protected]
915.521.5235
