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					Wyoming Business Report

  National Economic Conditions
       Cheyenne Luncheon
       January 11th, 2011
           Rob Godby
Recovery is Technically Underway
                                           Quarter-Quarter Growth in Real GDP
                 8


                 6

                                                                                                                                                            Estimated
                 4
                                                                                                                                                            3% growth
                                                                                                                                                            in 2010-Q4
                 2
Percent Change




                 0


                 -2


                 -4


                 -6


                 -8
                      I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV
                       2000         2001        2002        2003        2004        2005        2006        2007        2008        2009        2010

                                 GDP percent change based on chained 2005 dollars (seasonally adjusted annual rates)




                                                                                                Source: US Bureau of Economic Analysis
         Not out of the Woods yet…
              Employment and Output Loss from Peak
0.50%

0.00%

-0.50%

-1.00%

-1.50%

-2.00%

-2.50%

-3.00%

-3.50%

-4.00%

-4.50%

-5.00%

-5.50%

-6.00%

-6.50%
     Dec-07    Jun-08      Dec-08        Jun-09       Dec-09        Jun-10       Dec-10        Jun-11

              % change Employment Level from Peak (seasonally adjusted)
              % change Real GDP (Output) from peak
              % change Employment Level from Peak net of Census hiring (seasonally adjusted)
              Projected 2010-Q4 Growth

                                                          Source: US Bureau of Economic Analysis
                                                   How Bad is Employment?
                                                         % Total Job Loss in Recent Recessions
                                                   0            12             24                  36                 48           60
                                          1.00%


                                          0.00%
% Change in Employment Relative to Peak




                                          -1.00%


                                          -2.00%


                                          -3.00%


                                          -4.00%


                                          -5.00%


                                          -6.00%


                                          -7.00%
                                                                                 Months from Peak

                                                       Dec-07        Feb-01   Jun-90      Jul-81        Mar-80         Jul-74



                                                                                           Source: US Bureau of Labor Statistics
                                                                                  % Unemployed or Underemployed




                                                                                                    10.0
                                                                                                           12.0
                                                                                                                  14.0
                                                                                                                         16.0
                                                                                                                                18.0
                                                                                                                                       20.0




                                                                      0.0
                                                                            2.0
                                                                                  4.0
                                                                                        6.0
                                                                                              8.0
                                                            Jan-00
                                                            Jun-00
                                                            Nov-00
                                                            Apr-01
                                                            Sep-01
                                                            Feb-02
                                                             Jul-02
                                                            Dec-02
                                                            May-03
                                                            Oct-03
                                                            Mar-04
                                                            Aug-04
                                                            Jan-05
                                                            Jun-05


                                        Unemployment Rate
                                                            Nov-05
                                                            Apr-06
                                                            Sep-06
                                        U-6


                                                            Feb-07
                                                             Jul-07
                                                            Dec-07
                                                                                                                                              Unemployment Rate and U-6 Rate




                                                            May-08
                                                            Oct-08
                                                            Mar-09
                                                            Aug-09
Source: US Bureau of Labor Statistics




                                                            Jan-10
                                                            Jun-10
                                                            Nov-10
                                                                                                                                                                               Employment Growth Stalled in 2010
 How Long will Employment Recovery Take?

                                          Time Required to Restore 6% Unemployment
                                     16

                                     14

                                     12
                  Millions of jobs




                                     10
To restore 6%                                                                Every month an additional 125,000
                                      8
employment                                                                   people enter the workforce,
                                      6
today would                                                                  increasing the number of jobs needed
require an                            4                                      to restore full employment.
additional 5.2                        2
million jobs in                       0
the economy


                                                            Jobs Shortfall
How Long will Employment Recovery Take?

                             Time Required to Restore 6% Unemployment
                        16

                        14

                        12
     Millions of jobs




                        10
                                                                   At a very robust job growth rate of 300,000
                         8                                         per month (level consistent with 4-5%
                         6                                         growth in the economy), 30 months needed
                         4                                         to restore unemployment rate to 6%.
                         2

                         0




                                     Jobs Shortfall   300,000 jobs added per month
How Long will Employment Recovery Take?

                              Time Required to Restore 6% Unemployment
                        16

                        14

                        12
     Millions of jobs




                        10
                                                                             At job growth rate of 250,000 per month
                         8
                                                                             (level consistent with rates in mid-1990s
                         6
                                                                             boom), 42 months needed to restore
                         4                                                   unemployment rate to 6%.
                         2

                         0




                             Jobs Shortfall   300,000 jobs added per month    250,000 jobs added per month
How Long will Employment Recovery Take?

                             Time Required to Restore 6% Unemployment                           At job growth
                        16                                                                      rate of 200,000
                        14
                                                                                                per month
                                                                                                (double the rate
                        12
                                                                                                in Dec. 2010),
     Millions of jobs




                        10
                                                                                                almost 6 years
                         8
                                                                                                needed to
                         6                                                                      restore
                         4                                                                      unemployment
                         2                                                                      rate to 6%.
                         0




                                  Jobs Shortfall                 300,000 jobs added per month
                                  250,000 jobs added per month   200,000 jobs added per month
                                             What Happened in 2010?
                                                       Employment Change Over 2010
                    1500

                                                                              Estimated Labor Force Growth
                                                                Total Job Growth

                    1000
Thousands of Jobs




                     500




                       0




                    -500
                                                                 Apr-10



                                                                          May-10




                                                                                                           Aug-10




                                                                                                                                             Nov-10
                                              Feb-10




                                                                                                Jul-10




                                                                                                                      Sep-10
                           Dec-09



                                    Jan-10




                                                       Mar-10




                                                                                   Jun-10




                                                                                                                                                      Dec-10
                                                                                                                                    Oct-10
                                                                                            Source: US Bureau of Labor Statistics
                                             What Happened in 2010?
                                                       Employment Change Over 2010
                    1500

                                                                              Estimated Labor Force Growth
                                                                Total Job Growth
                                                                                                                                         Private Jobs
                    1000
Thousands of Jobs




                     500




                       0




                    -500
                                                                Apr-10



                                                                         May-10




                                                                                                           Aug-10




                                                                                                                                                Nov-10
                                              Feb-10




                                                                                                Jul-10




                                                                                                                      Sep-10
                           Dec-09



                                    Jan-10




                                                       Mar-10




                                                                                   Jun-10




                                                                                                                                                         Dec-10
                                                                                                                                    Oct-10
                                                                                            Source: US Bureau of Labor Statistics
                                             What Happened in 2010?
                                                       Employment Change Over 2010
                    1500
                                                                                  Estimated Labor Force Growth

                                                                Total Job Growth
                                                                                                                                                 Private Jobs
                    1000
Thousands of Jobs




                     500



                                                                                                                                   Census Jobs


                       0




                    -500
                                                                Apr-10



                                                                         May-10




                                                                                                               Aug-10




                                                                                                                                                      Nov-10
                                              Feb-10




                                                                                                    Jul-10




                                                                                                                          Sep-10
                           Dec-09



                                    Jan-10




                                                       Mar-10




                                                                                       Jun-10




                                                                                                                                                                Dec-10
                                                                                                                                        Oct-10
                                                                                                Source: US Bureau of Labor Statistics
                                             What Happened in 2010?
                                                       Employment Change Over 2010
                    1500
                                                                                  Estimated Labor Force Growth

                                                                Total Job Growth
                                                                                                                                                 Private Jobs
                    1000
Thousands of Jobs




                     500



                                                                                                                                   Census Jobs


                       0




                                                                                                All other Government Jobs

                    -500
                                                                Apr-10



                                                                         May-10




                                                                                                               Aug-10




                                                                                                                                                      Nov-10
                                              Feb-10




                                                                                                    Jul-10




                                                                                                                          Sep-10
                           Dec-09



                                    Jan-10




                                                       Mar-10




                                                                                       Jun-10




                                                                                                                                                                Dec-10
                                                                                                                                        Oct-10
                                                                                                Source: US Bureau of Labor Statistics
               Who is Impacted Most?
                 National Unemployment Rate and Education
          18

          16

          14

          12

          10
Percent




           8

           6

           4

           2

           0
                         Jul-00


                                           Jul-01


                                                             Jul-02


                                                                               Jul-03


                                                                                                 Jul-04


                                                                                                                   Jul-05


                                                                                                                                      Jul-06


                                                                                                                                                        Jul-07


                                                                                                                                                                          Jul-08


                                                                                                                                                                                            Jul-09


                                                                                                                                                                                                              Jul-10
               Jan-00


                                  Jan-01


                                                    Jan-02


                                                                      Jan-03


                                                                                        Jan-04


                                                                                                          Jan-05


                                                                                                                            Jan-06


                                                                                                                                               Jan-07


                                                                                                                                                                 Jan-08


                                                                                                                                                                                   Jan-09


                                                                                                                                                                                                     Jan-10
                        Unemployment rate - less than high school diploma (25 years of age and older)
                        Unemployment rate - no college (25 years of age and older)
                        Unemployment rate - some college or Associates degree (25 years of age and older)
                        Unemployment rate - Bachelor's and higher (25 years of age and older)

                                                                                                                                     Source: US Bureau of Labor Statistics
                          Who is Impacted Most?
                                                           Duration of Unemployment
                        60.0%


                        50.0%
Percent of Unemployed




                        40.0%


                        30.0%


                        20.0%


                        10.0%


                         0.0%
                                         Jul-00


                                                           Jul-01


                                                                             Jul-02


                                                                                               Jul-03


                                                                                                                 Jul-04


                                                                                                                                   Jul-05


                                                                                                                                                     Jul-06


                                                                                                                                                                       Jul-07


                                                                                                                                                                                         Jul-08


                                                                                                                                                                                                           Jul-09


                                                                                                                                                                                                                             Jul-10
                                Jan-00


                                                  Jan-01


                                                                    Jan-02


                                                                                      Jan-03


                                                                                                        Jan-04


                                                                                                                          Jan-05


                                                                                                                                            Jan-06


                                                                                                                                                              Jan-07


                                                                                                                                                                                Jan-08


                                                                                                                                                                                                  Jan-09


                                                                                                                                                                                                                    Jan-10
                           Percent Unemployed 27 weeks or more                                                                       Percent Unemployed less than 5 weeks




                                                                                                                                              Source: US Bureau of Labor Statistics
    Challenges to Employment Recovery
• Lack of consumer demand (initial recession impact)
    –   The severity of the housing crisis.
    –   The financial crisis smashed savings and nest-eggs.
    –   The very high unemployment created quickly (shock and
        fear).
•   Long-term effects now feeding off the recession impact
    –   Labor mobility is gone – cannot sell homes to move and no
        savings to finance “fresh-starts” which increases
        unemployment spells.
    –   Being unemployed for an extended period reduces human
        capital and employability.
    –   Skills mismatch between the sectors that contracted and
        those now expanding.
                      Glimmers of Hope
                       Initial Claims 8/4/2007-Present
            700,000                                                               A steady slowdown
            650,000
                                                                                  in layoffs now
                                                                                  appears to be
            600,000
                                                                                  occurring.
            550,000
Thousands




            500,000

            450,000

            400,000

            350,000

            300,000

            250,000




                           Seasonally Adjusted   4-wk Moving Avg




                                                 Source: US Department of Labor
                                                                                            10.0
                                                                                                   12.0
                                                                                                          14.0
                                                                                                                 16.0




                                                              0.0
                                                                    2.0
                                                                          4.0
                                                                                6.0
                                                                                      8.0
                                                 1970-01-01
                                                 1971-01-01
                                                 1972-01-01
                                                 1973-01-01
                                                 1974-01-01
                                                 1975-01-01
                                                 1976-01-01
                                                 1977-01-01
                                                 1978-01-01
                                                 1979-01-01
                                                 1980-01-01
                                                 1981-01-01
                                                 1982-01-01
                                                 1983-01-01
                                                 1984-01-01
                                                 1985-01-01
                                                 1986-01-01
                                                 1987-01-01
                                                 1988-01-01
                                                 1989-01-01
                                                 1990-01-01
                                                 1991-01-01
                                                 1992-01-01



                          Personal Saving Rate
                                                 1993-01-01
                                                 1994-01-01
                                                                                                                        Personal Saving Rate




                                                 1995-01-01
                                                 1996-01-01
                                                 1997-01-01
Source: Federal Reserve                          1998-01-01
                                                 1999-01-01
                                                 2000-01-01
                                                 2001-01-01
                                                 2002-01-01
                                                                                                                                               Savings Rates have Stabilized




                                                 2003-01-01
                                                 2004-01-01
                                                 2005-01-01
                                                 2006-01-01
                                                 2007-01-01
                                                 2008-01-01
                                                 2009-01-01
                                                 2010-01-01
                                                 2011-01-01
Consumer Credit Contraction has Ended
Confidence Weak but Sales Strong
Auto Sales, Luxury Goods Sales Up
                                                $0
                                                               $100,000
                                                                          $150,000
                                                                                     $200,000
                                                                                                $250,000
                                                                                                           $300,000




                                                     $50,000
                                    Jan 1990
                                    Nov 1990
                                    Sep 1991
                                     Jul 1992
                                    May 1993
                                    Mar 1994
                                    Jan 1995
                                    Nov 1995
                                    Sep 1996
                                     Jul 1997
                                    May 1998
                                    Mar 1999
                                    Jan 2000

                           Median
                                    Nov 2000
                                    Sep 2001
                                     Jul 2002
                                    May 2003
                                                                                                                      Median New Home Prices




                                    Mar 2004
                                    Jan 2005
                                    Nov 2005
                                    Sep 2006

Source: US Census Bureau
                                     Jul 2007
                                    May 2008
                                    Mar 2009
                                    Jan 2010
                                    Nov 2010
                                                                                                                                               Housing Market may be Stabilizing
                                                                                                                      Homes Sold, thousands




                                                                                                                                        1,000
                                                                                                                                                        1,400
                                                                                                                                                                1,600



                                                                                                                                                1,200




                                                                                                                200
                                                                                                                      400
                                                                                                                            600
                                                                                                                                  800




                                                                                                          0
                                                                                               Jan 1990
                                                                                               Oct 1990
                                                                                               Jul 1991
                                                                                               Apr 1992
                                                                                               Jan 1993
                                                                                               Oct 1993
                                                                                               Jul 1994
                                                                                               Apr 1995
                                                                                               Jan 1996
                                                                                               Oct 1996
                                                                                               Jul 1997
                                                                                               Apr 1998
                                                                                               Jan 1999
                                                                                               Oct 1999
                                                                                               Jul 2000
                                                                                               Apr 2001
                                                                                               Jan 2002
                           Houses Sold (National - monthly, seasonally adjusted annual rate)
                                                                                               Oct 2002
                                                                                               Jul 2003
                                                                                               Apr 2004
                                                                                               Jan 2005
                                                                                               Oct 2005
                                                                                                                                                                        New One-Family Homes for Sale




                                                                                               Jul 2006


Source: US Census Bureau
                                                                                               Apr 2007
                                                                                               Jan 2008
                                                                                               Oct 2008
                                                                                               Jul 2009
                                                                                               Apr 2010
                                                                                                          0.0
                                                                                                                2.0
                                                                                                                      4.0
                                                                                                                            6.0
                                                                                                                                  8.0




                           Seasonally Adjusted Months of Supply
                                                                                                                                        10.0
                                                                                                                                                12.0
                                                                                                                                                        14.0
                                                                                                                                                                16.0
                                                                                                                                                                                                        Housing Market may be Stabilizing




                                                                                                                            Months Supply
     Overview, and hope for 2011
• The recovery is well underway.
   – Summer slowdown has subsided.
• We had a long way to go to climb out of the hole we
  were in.
   – Output levels have recovered to pre-recession levels.
   – Unemployment will not recover for a LOOOOONG time.
• Consumers may be tentatively coming back, or at
  least beginning to come out of hiding.
• Firms are beginning to rehire and still reinvesting.
• Inflation shows no signs of emerging.
      Headwinds will slow recovery
• Expect economic growth to be slower than needed in 2011.
   • 3.0-3.5% growth in GDP at annual rates
• Employment challenges are going to transform our economy
  socially and economically
   • Jobs recovery will continue to be very slow.
   • Economic cost to those out of work/entering will be permanent
   • Income inequality will become much worse -a nation of “haves and
     have nots”.
• Consumption growth will begin to recover, but to a “new
  normal.”
   • Old consumption-focused economy will be challenged.
• Fiscal austerity concerns will limit government influence.
   • Balancing long-term debt concerns with recovery will be difficult.
          Thank you!


            Rob Godby
Department of Economics and Finance
        College of Business
       University of Wyoming

				
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