Dr. Daraius Irani - Maryland's Economic Outlook Presentation

Two Steps Forward One Step Back Daraius Irani, PhD November 9, 2011

National Economy

Two Steps Forward? Real Gross Domestic Product, Seasonally Adjusted 1981Q1 through 2011Q3 15% 10%Annual Rate of Expansion 2.5 % 5% 0% -5% -10%© Towson University, Division of Economic and Community Outreach Bureau of Economic Analysis

Two Steps Forward? Personal Consumption, Seasonally Adjusted, Jan 2005 through Sept 2011 $9,600 0.6% 0.5 % $9,400 0.4%Personal Consumption Expenditures Billions of Chained 2005 Dollars $9,200 Annual Percent Change 0.2% $9,000 0.0% $8,800 -0.2% $8,600 $8,400 -0.4% $8,200 -0.6% Consumption Exp. Percent change © Towson University, Division of Economic and Community Outreach Bureau of Economic Analysis

Consumers are Spending but….. Percent Change from Previous Month US May June July August September Personal 0.3% 0.2% 0.1% -0.1% 0.1% Income Disposable 0.2% 0.1% 0.0% -0.4% -0.1% Personal Income Personal 0.0% -0.1% 0.5% 0.0% 0.5% Consumption© Towson University, Division of Economic and Community Outreach Bureau of Economic Analysis

The Employment Situation

Post – Recession Employment Picture Maryland Total Nonfarm Employees, in Thousands 133,000 2,510 US Total Nonfarm Employees, in Thousands 132,500 2,500 132,000 131,500 2,490 131,000 2001 Recession 2,480 130,500 130,000 2,470 129,500 2,460 129,000 2,450 128,500 128,000 2,440 US Maryland Maryland Total Nonfarm Employees, in Thousands 140,000 2,650 US Total Nonfarm Employees, in Thousands 138,000 2,600 136,000 134,000 2,550 2007 Recession 132,000 130,000 2,500 128,000 2,450 126,000 124,000 2,400© Towson University, Division of Economic and Community Outreach Bureau of Labor Statistics US Maryland

U.S. Stalled Job Creation and Wages ? Hours, Production and Nonsupervisory Employees, Jan 2006 through Aug 2011 6.0 4.5 4.0 4.0 3.5 Year-Over-Year Percent Change Year-Over-Year Percent Change 2.0 Average Hourly Wages Aggregate Weekly Hours 3.0 0.0 2.5 -2.0 2.0 -4.0 1.5 -6.0 1.0 -8.0 0.5 -10.0 0.0 Aggregate Weekly Hours Average Hourly Earnings© Towson University, Division of Economic and Community Outreach Federal Reserve Bank

Manpower Hiring Survey Hiring Plans, All Industries, Not Seasonally Adjusted, 2007Q1 through 2011Q4 35.0 30.0 25.0 20.0Index 15.0 10.0 5.0 0.0 -5.0 Expect increase Expect decrease Net Change © Towson University, Division of Economic and Community Outreach Moody’s Analytics

Job Hires vs. Job Separations Job hires vs. Job Separations, Seasonally Adjusted Jan 2008 through Aug 2011 4.3% 4.1% 3.9% 3.7% 3.5% Rate 3.3% 3.1% 2.9% 2.7% 2.5% Hires Separations© Towson University, Division of Economic and Community Outreach Bureau of Labor Statistics

Return to Peak Employment?© Towson University, Division of Economic and Community Outreach IHS Global Insight

Checking Consumer and Business Temperature

Consumer Sentiment Index Consumer Sentiment Monthly Index, Jan 2007 through Oct 2011 120.0 110.0 100.0First Quarter 1966=100 90.0 80.0 Index 70.0 60.0 50.0 40.0 © Towson University, Division of Economic and Community Outreach University of Michigan

Pulse of Commerce PCI Monthly Index, GDP, Seasonally Adjusted Jan 2002 through Sept 2011 105.00 100.00 95.00 90.00Index 85.00 80.00 75.00 70.00 PCI CERIDIAN INDEX GDP© Towson University, Division of Economic and Community Outreach Ceridian-UCLA Pulse of Commerce Index

Regional PCI Growth© Towson University, Division of Economic and Community Outreach Ceridian-UCLA Pulse of Commerce Index

ISM: Purchasing Managers Index ISM Monthly Index, Jan 2005 through Oct 2011 65% 60% 55% Oct: 50.8 50%Diffusion Index 45% 40% 35% 30% 25% 20%© Towson University, Division of Economic and Community Outreach Institute for Supply Management

Checking the Housing Picture

Shadow Inventory Concerns Shadow Inventory Detail, Monthly, Jan 2006 through Jul 2011 2.5 2Millions of Units 1.5 1 0.5 0 Pending Serious Delinquency Inventory Pending FC Inventory Pending REO Inventory © Towson University, Division of Economic and Community Outreach CoreLogic

Months’ Supply Shadow Inventory Months’ Supply Detail, Monthly, Jan 2006 through Jul 2011 9 8 7 6Number of Months 5 4 3 2 1 0 Pending Serious Delinquency Inventory Pending FC Inventory Pending REO Inventory © Towson University, Division of Economic and Community Outreach CoreLogic

Foreclosure Heat Map September 2011© Towson University, Division of Economic and Community Outreach RealtyTrac

New Houses For Sale in the United States Months Since Completion Not Seasonally Adjusted, Monthly, Jan 2006 through Jul 2011 16 14 12Number of Months 10 8 6 4 2 0 © Towson University, Division of Economic and Community Outreach Census Bureau

New Houses For Sale in the United States Number of Months to Clear Out Inventories Seasonally Adjusted, Months at Current Sales Rate, Jan 2006 through Jul 2011 14 12 10Number of Months 8 6 4 2 0 © Towson University, Division of Economic and Community Outreach Census Bureau

Distressed Sales as A Percentage of Total Sales Monthly, Jan 2006 through July 2011 45% 40% 35%Percent of Total Sales 30% 25% 20% 15% 10% 5% 0% Short Sales REO Sales © Towson University, Division of Economic and Community Outreach CoreLogic

Story Behind the Numbers • Incomes have remained stagnant for prime home buyers • Negative housing price trends have a negative wealth effect© Towson University, Division of Economic and Community Outreach

Maryland Outlook

Slow Down in Maryland’s Economy? Annual Rate of Change, Index, Monthly Jan 1997 through Sept 2011 8.0% 6.0% 4.0%Coincident Index 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% MD US © Towson University, Division of Economic and Community Outreach Federal Reserve Bank

Maryland Performance • Maryland added 10,000 private sector jobs in September • Employment growth is at 0.5 percent – a faster clip than the 0.1 percent for the nation o Federal Government added 2,100 jobs o State Government added 100 jobs o Local Government shed 5,400 jobs • Since January, 95 percent of new jobs have been created by the private sector© Towson University, Division of Economic and Community Outreach Department of Labor, Licensing and Regulation

Personal Income Percent Change© Towson University, Division of Economic and Community Outreach Bureau of Economic Activity

Mid-Atlantic Region Unemployment Rankings September Unemployment Rates Seasonally Adjusted State 2009 2010 2011 Maryland 7.4 7.4 7.4 Pennsylvania 8.5 8.5 8.3 Virginia 7.1 6.7 6.5 Delaware 8.3 8.3 8.1 DC 10.2 9.7 11.1 U.S. Unemployment Rate: 9.1 in September 9.0 in October© Towson University, Division of Economic and Community Outreach Bureau of Labor Statistics

Measures of Labor Underutilization Labor Underutilization, Averages, 2010Q3 through 2011Q2 18 16.2 16 15.4 14 12.7 12 12 10.7 10.2 10 9.2Percent 8.8 8 7.3 6 4 2 0 Maryland District of Columbia United States U-3 U-5 U-6 © Towson University, Division of Economic and Community Outreach Bureau of Labor Statistics

Maryland Mass Layoffs Total Initial Unemployment Claimants and Layoff Events, Monthly, Jan 2010 through Sep 2011 3,000 35 30 2,500 Layoff Events, Total all Industries 25Total Initial Claimants, 2,000 Total all Industries 20 1,500 15 1,000 10 500 5 0 0 Total Initial Claimants Layoff Events© Towson University, Division of Economic and Community Outreach Bureau of Labor Statistics

Housing

MD Homes Sales vs. Inventories MD Home Sales vs. Inventories, Seasonally Adjusted Jan 2000 through Aug 2011 10,000 60,000 9,000 50,000 8,000 7,000 40,000 6,000Home Sales Inventory 5,000 30,000 4,000 20,000 3,000 2,000 10,000 1,000 0 0 Home Sales Inventories © Towson University, Division of Economic and Community Outreach Maryland Association of Realtors

MD Homes Prices vs. Inventories MD Home Sales vs. Inventories, Seasonally Adjusted Jan 2000 through Aug 2011 $400,000 60,000 $350,000 50,000 $300,000Average Home Price 40,000 $250,000 Inventory $200,000 30,000 $150,000 20,000 $100,000 10,000 $50,000 $0 0 Inventories Home Prices © Towson University, Division of Economic and Community Outreach Maryland Association of Realtors

MD Distressed Properties Aug-10 Aug-11 6% 8% 12% 9% 82% 83% Total Sales REO Sales Short Sales© Towson University, Division of Economic and Community Outreach CoreLogic

Baltimore – Towson Distressed Properties Aug-10 Aug-11 5% 6% 7% 12% 83% 87% Total Sales REO Sales Short Sales© Towson University, Division of Economic and Community Outreach CoreLogic

Housing and Foreclosures • Maryland - September 2011 o 10,662 Foreclosure Homes for Sale o $180,906 Average Foreclosure Sales Price • US – September 2011 o 1,485,418 Foreclosure Homes for Sale o $173,344 Average Foreclosure Sales Price© Towson University, Division of Economic and Community Outreach RealtyTrac

What’s Looming Ahead?

Maryland Federal Government and Private Sector Employment Seasonally Adjusted, Jan 2000 through Sept 2011 150 2,200Federal Government Employment, thousands Private Sector Employment, thousands 145 2,150 140 2,100 135 2,050 130 2,000 125 1,950 120 1,900 115 1,850 110 1,800 Federal Total Private © Towson University, Division of Economic and Community Outreach Bureau Of Labor Statistics

Challenges Ahead • Maryland fiscal leaders cut the State’s economic outlook • The State’s Board of Revenue Estimates expects growth of 2.8 percent – downgraded from 4.7 percent. • Increased Taxes (?) • Federal Budget Cuts© Towson University, Division of Economic and Community Outreach

Maryland’s Forecast

RESI Employment Outlook Maryland Historical & Projected TNA Employment Growth, 2007Q1 through 2013Q4 1.5% 2,600,000 1.0% 0.5% 2,550,000 0.0% TNA Employment LevelPercent change from same -0.5% 2,500,000 quarter one year ago -1.0% -1.5% 2,450,000 -2.0% -2.5% 2,400,000 -3.0% -3.5% 2,350,000 Growth TNA © Towson University, Division of Economic and Community Outreach RESI, Bureau of Labor Statistics

RESI Employment Outlook Maryland Projected Employment Growth, Percent, 2011 to 2012 Admin/Waste 2.8% Arts/Entertainment 2.6% Professional/Sci. 2.5% Healthcare Svcs. 1.8% Accomm/Food Svcs 1.6% Government 1.4%Transp./Warehousing 1.1% Trade 0.9% Educational Svcs. 0.7% Mgmt of Companies 0.5% Financial Svcs 0.2% Real Estate 0.1% Manufacturing -1.1% Utilities -1.8% Information -2.3% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% © Towson University, Division of Economic and Community Outreach RESI, Bureau of Labor Statistics

RESI Outlook - Summary Maryland Indicators - Historical & Projected Annual Figures 2009 2010 2011 2012 2013 Total Non- -3.0% -0.3% 0.7% 1.1% 1.4% Agricultural Employment (annual growth) Total Personal 0.3% 2.8% 4.5% 3.2% 3.7% Income (annual growth)© Towson University, Division of Economic and Community Outreach RESI, Bureau of Labor Statistics, Bureau of Economic Analysis

Dr. Daraius Irani - Maryland's Economic Outlook Presentation

by Towson--DECO on Nov 10, 2011

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