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Recent U.S. Economic Growth - in Charts
 

Recent U.S. Economic Growth - in Charts

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    Recent U.S. Economic Growth - in Charts Recent U.S. Economic Growth - in Charts Presentation Transcript

    • Recent U.S. Economic Growth In Charts MAY 2012
    • 1 GROWTH SINCE 2009 The Growth Story Since 2009 Despite the worst financial crisis since the Great Depression and a series of shocks in itsaftermath, the economy has gradually strengthened since mid-2009, though more work remains.Real quarterly GDP growth 2009 Q4 2010 Q1 2010 Q2 3.8% 3.9% 3.8% 2011 Q4 2010 Q3 3.0% 2010 Q4 2012 Q1 2.5% 2.3% 2009 Q3 2011 Q3 2.2% 2011 Q1 2011 Q2 1.8% 1.7% 0.4% 1.3% Japanese 2009 Q2 -0.7% earthquake/tsunami Debt limit Apr. 15, 2011 Aug. 2, 2011 Government shutdown Debt limit deal reached narrowly averted High oil prices High oil prices Aug. 2011 Oct. 2011 Feb. 2011 Oil prices fall Oil prices pass $90/barrel 2009 Q1 Egyptian President steps down below $90/barrel -6.7% Libyan conflict begins President Obama ratchets up sanctions on Libya Oil prices pass $90/barrel 2008 Q4 European debt crisis -8.9% Oct. 2010 Jul. 2011 Oct. 28, 2011 Early May 2010 Greece, Ireland Portugal Greek, Irish, and Portuguese Italian 10y bond yields Cost of borrowing spikes across Europe bond spreads widen spreads spike close above 6 percent, Euro falls to four-year low against the dollar remain near or above that level through late Jan. 2012 2008/09 financial crisisSource: Bureau of Economic Analysis, Wall Street Journal. U.S. DEPARTMENT OF THE TREASURY
    • 2 GROWTH SINCE 2009 The Components of Growth Since 2009  U.S. economic growth has been led by consumption, private sector investment, and exports. Percentage point contribution to real quarterly GDP growth, by component+10 +5 0 -5 Cumulative contributions to growth since 2009 Q2, Personal consumption expenditures by component +8 Gross private domestic investment +6 +4.3 Total +3.8 Exports +4 +2.9 +6.8 +2-10 -0.7 Imports 0 -2 Government consumption and gross -4 investment -3.5 Total GDP growth -6-15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2009 2010 2011 2012 Source: Bureau of Economic Analysis. U.S. DEPARTMENT OF THE TREASURY
    • 3 GROWTH SINCE 2009 International Growth  Growth in the U.S. has outpaced that of other advanced economies affected by the global financial crisis. Real GDP, 2008 Q1 = 100104102 U.S. Germany100 98 Euro area Japan 96 U.K. 94 92 90 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2009 2010 2011 2012 Source: Regional sources (see Notes section). U.S. DEPARTMENT OF THE TREASURY
    • 4 UNWINDING THE CRISIS Wealth, Savings, and Private Demand  Despite challenges, growth in private demand has outpaced GDP growth since late 2010. Household net worth, inflation-adjusted (constant 2011 dollars) Year-on-year percent change in real GDP and final sales to private domestic 80 purchasers$80 trillion recession 4% 70 Growth in real 60 GDP 50 2% -$19.3 trillion 40 2007 Q2 - 2009 Q1 30 1 Household wealth has begun to 0% 20 Household come back from a sharp decline wealth in 2007-08, but has not fully 10 returned... Growth in final 0 -2% sales to private 00 01 02 03 04 05 06 07 08 09 10 11 3 domestic Household debt and savings as a percent of disposable income Despite these drags purchasers on spending, private 150% 8% demand has begun recession -4% 140% Household 7% to show stronger debt-to-income growth as the 6% overhang of the 130% (left axis) 5% financial crisis fades. 120% -6% 4% 110% 2 …and families are 3% 100% saving more than recession Household 2% before the crisis. 90% savings rate 1% -8% (right axis) 2006 07 08 09 10 11 12 80% 0% Q1 00 01 02 03 04 05 06 07 08 09 10 11 Source: Federal Reserve Flow of Funds, Bureau of Economic Analysis. U.S. DEPARTMENT OF THE TREASURY
    • 5 UNWINDING THE CRISIS Fiscal Drag  State and local governments have been forced to cut deeply and shed jobs in response to fiscal challenges… Change in quarterly state and local employment, end-of-period (line, left axis) State and local government contribution to real GDP growth, percentage points (bars, right axis)+100 thousand +0.30% Change in state State and local 0.25 and local government +50 employment contribution to +0.15% 0.16 0.16 (left axis) 0.12 real GDP growth 0.02 0.01 0.05 (right axis) 0 0% -0.08 -0.01 -0.08 -0.06 -0.14 -50 -0.19 -0.19 -0.15% -0.26-100 -0.34 -0.33 -0.34 -0.30% -0.37 -0.41 …while private sector growth has continued.-150 -0.49 -0.45% Quarterly private sector changes in employment and contributions to real GDP growth-200 +1,000 +5% -0.60% 0 0% -1,000 Private sector Private contribution to -5% job growth real GDP growth1-250 -2,000 (right axis) -10% -0.75% (Thousands, left axis) -3,000 -15% 07 08 09 10 11 12-300 -0.90% 2007 08 09 10 11 12 Q1 Source: BLS, BEA. U.S. DEPARTMENT OF THE TREASURY
    • 6 MISCONCEPTIONS Three Misconceptions About Recent Economic Growth Some analysts have asserted that the following factors have been impediments to growth: 1. Regulations. Have increased regulations or regulatory uncertainty been a major factor in holding back growth? 2. Taxes. Is a high tax burden – or fears of future tax burdens – impeding growth? 3. Government. Is government so large that it is getting in the way of private sector-led growth? But the facts do not support these assertions. U.S. DEPARTMENT OF THE TREASURY
    • 7 MISCONCEPTIONS Are Regulations Holding Back Growth?  Regulations are not impeding business lending or investment. Commercial and industrial loans outstanding, constant 2011 dollars (log scale) Percent change in real investment in equipment and software 11 quarters after NBER trough 1,700$1,700 billion 1981-82 Cycle 38% Commercial and industrial loans 2007-09 Cycle +34% Jul. 15, 2010 Wall Street reform enacted 1990-91 Cycle 28% 1,500 1973-75 Cycle 28% 1960-61 Cycle 26% Average 21% 1,300 (excl. 2007-09) 1969-70 Cycle 21% +12% 2001 Cycle 19% ($144b) Since Oct. 2010 1957-58 Cycle 8% 1,100 Jan 09 10 11 12 1980 Cycle 2% 2008 Source: Federal Reserve, BEA. U.S. DEPARTMENT OF THE TREASURY
    • 8 MISCONCEPTIONS Are Regulations Holding Back Growth?  Regulations have not dampened corporate profits, even in the industries undergoing significant regulatory change, such as energy, health care, and finance. Corporate profits after tax, constant 2011 dollars (log scale) S&P 500 Economic Sectors Index, trailing 12-month earnings per share 70 Consumer Discretionary 1,600$1,600 billion recession Industrials recession Utilities Materials 60 Telecommunications Services 1,400 Information Technology Consumer Staples After-tax 50 Energy corporate profits 1,200 40 30 Health 1,000 Care +57% 20 ($570b) Since 2009 Q1 10 800 0 -10 Financial 600 -20 2007 08 09 10 11 05 06 07 08 09 10 11 12 Q1 Source: BEA, Barclay’s. U.S. DEPARTMENT OF THE TREASURY
    • 9 MISCONCEPTIONS Is a High Tax Burden Damaging Growth? From 2009 to the present, federal revenues relative to the economy have been at their lowestlevels in 60 years.Total federal revenues as a percentage of GDP (line, left axis)22 percent of GDP recession2120191817 Federal16 revenues1514 14.4% 15.4%13 of GDP of GDP 1950 201112 1946 51 56 61 66 71 76 81 86 91 96 01 06 11Source: OMB, BEA, NBER. U.S. DEPARTMENT OF THE TREASURY
    • 10 MISCONCEPTIONS How Large are Proposed Tax Changes? The President’s Budget proposes new revenues that amount to less than 1 percent of GDP.Projected revenue raised in the President’s FY2013 Budget and projected cumulative GDP, Fiscal Years 2013 – 2022. Total new revenue proposed in President’s FY2013 Budget, 2013 - 2022 <1% of GDP CUMULATIVE GDP 2013 - 2022Source: Office of Management and Budget. U.S. DEPARTMENT OF THE TREASURY
    • 11 MISCONCEPTIONS Would Proposed Tax Changes Hurt Small Business? Letting the top two income tax brackets return to pre-2001 levels has a minimal impact onsmall businesses with employees.Projected revenue effect of reinstating 36 and 39.6 individual income tax brackets as proposed in the President’s FY2013 Budget, Fiscal Year 2013 Total income of high-income filers in the top two brackets2 $1.2 trillion 13% of total income Total income1 of all filers $9 trillion Total income of high-income filers in the top two brackets who own small businesses with employees3 $400 billion 4% of total income Small business income of high- income filers in the top two brackets who own small businesses with employees $113 billion New revenue4 from small business income of 1% of total income high-income filers in the top two brackets who own small businesses with employees $2.9 billion <0.03% of total incomeSource: Treasury analysis. See Notes section for methodology. U.S. DEPARTMENT OF THE TREASURY
    • 12 MISCONCEPTIONS Has Government Grown? Federal employment is at historic lows relative to the overall workforce.Federal civilian employment as a percentage of the labor force*5% recession4%3% Federal civilian 1.8% February 2012 employment2%1%0% 48 52 56 60 64 68 72 76 80 84 88 92 96 00 04 08 12* Periods after 1980 exclude temporary Census workers.Source: OMB, BEA, BLS. U.S. DEPARTMENT OF THE TREASURY
    • 13 MISCONCEPTIONS Is There Concern About the Size of Government? Investors remain confident that the U.S. government will meet its real fiscal obligations, asdemonstrated by…5-year sovereign credit default swap prices One-, five-, and ten-year U.S. inflation expectations300 basis points 3 percent 2 …low inflation expectations. 10-yr inflation250 expectations France 2 1 …low cost of200 insurance against default and… 1150 5-yr inflation expectations Germany100 0 50 1-yr inflation expectations United States -1 Jan 10 11 12 0 2009 10 11 12Source: Bloomberg, Federal Reserve Bank of Cleveland, Treasury. U.S. DEPARTMENT OF THE TREASURY
    • NChart 1 NotesOil prices are West Texas intermediate crude oil spot prices. Chart 10 cont. 2 “High-income filers” are those who would be subject to the top two individual income tax brackets under the President’s FY2013 Budget proposal.Chart 3Regional sources 3 “Small business owners” defined as filers a) with business income and deductions of lessEuro Area: Statistical Office of the European Communities than $10 million, and b) who employ other individuals. See Knittel et al, “Methodology toJapan: Cabinet Office of Japan Identify Small Businesses and Their Owners”, Office of Tax Analysis Technical Paper 4, AugustU.K.: Office for National Statistics 2011.U.S.: Bureau of Economic Analysis 4 “New revenue” includes revenues raised in Fiscal Year 2013 by reversing the“Euro Area” consists of the following 17 European Union member countries who have adopted EGTRAA/JGTRAA rate cuts on the top two individual income tax brackets to small businessthe euro (European Monetary Union): the 11 original members - Austria, Belgium, Finland, income of high-income filers who own small businesses with employees.France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain - and Greece(from January 2001), Slovenia (from January 2007), Cyprus and Malta (from January 2008), U.S. Department of the Treasury, Office of Tax Analysis calculations. Revenue estimate excludesSlovakia (from January 2009) and Estonia (from January 2011). increased revenue that would come from the expiration of other upper-income EGTRAA/JGTRAA tax cut provisions such as those affecting itemized deductions, personal exemptions, qualifiedChart 5 dividends, and capital gains.“Private contribution to real GDP growth” defined as the sum of the contributions of realpersonal consumption expenditures, real gross private domestic investment, and real exports to The calculation of the additional revenue from small business employers takes into account theoverall annualized quarterly real GDP growth, in percentage points. variation among taxpayers in the importance of small business income. Since the highest income classes pay most of the added tax but are less dependent on small employer income,Chart 10 the small employer share of the total tax increase is lower than the small business share of total1 “Income” defined as adjusted gross income. income. U.S. DEPARTMENT OF THE TREASURY