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Chris Chmura's presentation

  1. 1. LEAD Virginia: Where We Are in Virginia— Economic Drivers April 17, 2010 Economic Drivers of Virginia National growth Is the recession o er? over? What determines how fast we can grow? Industry Base Occupation Base Take-Awaysy Averages are misleading Not all industries/jobs are equal Past  Future Skills and education are important 2 1
  2. 2. Real GDP Grew an Annualized 5.6% in 4th Qtr 2009 Real Gross Domestic Product Quarterly Annualized Percent Change 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 2.0 -4.0 -6.0 -8.0 1992 1994 1996 1998 2000 2002 2004 2006 2008 NBER Defines Recession • Business Cycle Dating Committee • A recession i a significant d li i economic i is i ifi t decline in i activity spread across the economy, lasting more than a few months, normally visible in – real GDP, – real income, – employment, employment – industrial production, and – wholesale-retail sales. 2
  3. 3. Business Cycle Dating Committee Met April 8, 2010 • The committee reviewed the most recent data for all indicators relevant to the determination of a possible date of the trough in economic activity marking the end of the recession that began in December 2007. • The trough date would identify the end of contraction and the beginning of expansion. Although most indicators have turned up, the committee decided that the determination of the trough date on the basis of current data would be premature. Many indicators are quite preliminary at this time and will be revised in coming months. The committee acts only on the basis of actual indicators and does not rely on forecasts in making its determination of the dates of peaks and troughs in economic activity. The committee did review data relating to the date of the peak, previously determined to have occurred in December 2007, marking the onset of the recent recession. Recession Ended in 3rd Quarter 2009 Initial Unemployment Claims Thousands, 4-Week Moving Average 680 630 580 530 480 430 380 330 280 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Source: U.S. Department of Labor. Data through March 2010. 3
  4. 4. Industrial Production is Growing Industrial Production Index 115 110 105 100 95 90 Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Source: Federal Reserve Bank. Data through February 2010. Employment Starting to Grow (Still Down 8.4 Million Since 12/07) Employment Growth Employment Growth Monthly Change in Thousands Monthly Change in Thousands 600 600 400 400 200 200 0 0 -200 -200 -400 -400 -600 -600 -800 -800 -1,000 -1,000 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Source: U.S. Department of Labor. Data through March 2010. 4
  5. 5. How Long Before Back to Employment Level at Start of Recession? Jobs Created 11 M Jobs Lost with Per Month in Marginally Attached or Recovery 8.4 M Jobs Lost Prefer Full Time 200,000 42 months or 3.5 yrs 55 months or 4.6 yrs 250,000 34 months or 2.8 yrs 44 months or 3.7 yrs 300,000 28 months or 2.3 yrs 37 months or 3.1 yrs 400,000 21 months or 1.8 yrs 28 months or 2.3 yrs Unemployment Rate Also Lags Unemployment Rate 10.7 9.7 8.7 7.7 6.7 5.7 4.7 3.7 Mar-98 Mar-01 Mar-04 Mar-07 Mar-10 Source: U.S. Department of Labor. Data through March 2010. 5
  6. 6. Consumers Don’t Feel Good About Economy Consumer Confidence Index 1985 = 100 190 170 150 Present Situation Index 130 110 90 70 50 30 10 Feb-98 Feb-01 Feb-04 Feb-07 Feb-10 Source: Conference Board Data through March 2010. Consumers Don’t Feel Good About Economy Consumer Confidence Index 1985 = 100 190 170 150 Total Index Present Situation Index 130 110 90 70 50 30 Expectations Index 10 Feb-98 Feb-01 Feb-04 Feb-07 Feb-10 Source: Conference Board Data through March 2010. 6
  7. 7. Consumers have Begun to Spend Retail Sales $ Millions 400,000 400 000 370,000 340,000 310,000 280,000 250,000 220,000 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Source: U.S. Department of Commerce. Data through February 2010. Consumers have Begun to Spend Retail Sales $ Millions 400,000 400 000 370,000 340,000 310,000 280,000 250,000 220,000 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Source: U.S. Department of Commerce. Data through February 2010. 7
  8. 8. Consumers have Begun to Spend Retail Sales $ Millions 400,000 400 000 370,000 340,000 310,000 280,000 250,000 220,000 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Source: U.S. Department of Commerce. Data through February 2010. Cash-for-Clunker Program Helped Jump Start Economy Total Auto Sales, Thousand Units, SAAR 22,000 22 000 20,000 18,000 16,000 14,000 12,000 12 000 10,000 8,000 Aug-97 Aug-99 Aug-01 Aug-03 Aug-05 Aug-07 Aug-09 8
  9. 9. Will the Recovery Stall? Total Auto Sales, Thousand Units, SAAR 22,000 22 000 20,000 18,000 16,000 14,000 12,000 12 000 10,000 8,000 Sep-97 Sep-99 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Will the Recovery Stall? Total Light Vehicle Sales, Thousand Units, SAAR 22,000 20,000 18,000 16,000 14,000 12,000 , 10,000 8,000 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 9
  10. 10. What Does this Means for the Economy? • Not depression • 1930’s unemployment rate >20% for 4 years (today, it’s 9.7%) • Real GDP declined for 4 years – 1929 -8.6% – 1930 -6.4% 6 4% – 1931 -13.0% – 1932 -1.3% – 2009 -2.4% Change in Home Prices From Year Ago, 2009 Qtr 4 Source: Federal Housing Finance Agency. 10
  11. 11. Federal Credit Supported New Home Sales New Home Sales Thousands 1,500 1,300 1,100 900 700 500 300 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 First-Time Home Buyers Reach Record Market Share (survey started in 1981) • First-time homebuyers 47% of all home sales in 2009 41% in 2008 Previous high: 44% in 1991 • First-time homebuyers profile Median age 30 Median income $61,600 Cost of home $156,000 (165,000 in 2008) Source: National Association of Realtors Survey, 2009. 11
  12. 12. Anticipating Federal Credit Caused Lower Trough in New Home Sales New Home Sales Thousands, SAAR 1,500 1,300 1,100 900 700 500 Lowest since 1963: Jan ‘09: 329,000 300 Nov-96 Nov-98 Nov-00 Nov-02 Nov-04 Nov-06 Nov-08 Federal Credit Supported New Home Sales New Home Sales Thousands, SAAR 1,500 1,300 1,100 900 July ‘09: 419,000 700 500 Lowest since 1963: Jan ‘09: 329,000 300 Nov-96 Nov-98 Nov-00 Nov-02 Nov-04 Nov-06 Nov-08 12
  13. 13. Federal Home Credit • Passed in February 2009 • O i i ll set t end i N Originally t to d in November 2009 b Federal Home Credit • Passed in February 2009 • O i i ll set t end i N Originally t to d in November 2009 b • Tax credit extended and broadened – 1st time buyer must sign purchase agreement 4/30/10 – Close 6/30/10 13
  14. 14. The Fed’s Goal: 3% - 3.5% Real GDP Growth? 3.0% - 3.5% Noninflationary Economic Growth Unemployment Falls Capacity Utilization Rises Slower Deliveries CHMURAECONOMICS&ANALYTICS How Fast Can the Economy Grow? Annual Growth Rate Forecast 4.5 Labor Force 4.0 3.5 3.0 2.5 2.0 1.5 15 2.5 1.6 1.0 1.7 1.2 1.2 0.5 0.7 0.0 1951-1973 1974-1981 1982-1990 1991-1995 1995-2005 2006-2016 Source: CBO, January 2006. 28 14
  15. 15. How Fast Can the Economy Grow? Annual Growth Rate Forecast Productivity + 4.0 3.8 Labor Force = Potential GDP 3.3 33 3.5 3.2 3.0 3.0 2.7 2.8 0.8 2.1 2.5 1.4 2.1 2.0 1.5 2.1 1.5 2.5 1.0 1.7 1.6 1.2 1.2 0.5 0.7 0.0 1951-1973 1974-1981 1982-1990 1991-1995 1995-2005 2006-2016 Source: CBO, January 2006. 29 National Forecast 2009 Actual 2010 Forecast Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Quarterly Annualized Rates (%) Real GDP ‐6.4 ‐0.7 2.2 5.6 1.8 2.2 2.2 2.5 Consumer Spending 0.6 ‐0.9 2.8 1.6 1.9 1.7 1.8 1.9 Residential Investment ‐38.2 ‐23.3 19.0 3.8 6.2 4.6 11.3 12.2 Nonresidential Invest. ‐39.2 ‐9.6 ‐5.9 5.3 4.6 2.9 4.5 8.1 Equipment &Software ‐36.4 ‐4.8 1.5 19.0 9.4 7.2 8.2 11.7 Government Expend. ‐2.6 6.7 2.7 ‐1.3 4.8 3.9 3.0 1.9 Net Exports, Goods &  Services ($Billion) ‐385.8 ‐329.8 ‐356.8 ‐348.0 ‐344.5 ‐345.3 ‐358.3 ‐375.9 Percentage Change From a Year Ago (%) Consumer Price Index ‐0.2 ‐0.9 ‐1.6 1.5 2.2 2.1 1.6 1.0 Yields (%) Federal Funds Rate 0.2 0.2 0.2 0.1 0.1 0.2 0.5 0.9 Prime Rate 3.3 3.3 3.3 3.3 3.3 3.3 3.6 4.0 10‐Year Treasury 2.7 3.3 3.5 3.5 3.4 3.3 3.3 3.5 30‐Year Mortgage 5.1 5.0 5.2 4.9 5.1 5.1 5.2 5.3 Source: Chmura Economics & Analytics Note: Yields reported for the average of the quarter GDP based on preliminary figures 15
  16. 16. Risks to the Recovery • Higher taxes – Federal debt – Health care reform • International investors pull out of U.S. – Bond yields rise – Further issues in real estate • Inflation (Federal Reserve independence) State Rankings, Employment Year- over-Year % Change Feb 2010 0.5 -0.5 -1.5 Alaska +279 jobs DC +228 jobs -2.5 Virginia #29 -3.5 -100,700 jobs -2.7% -4.5 Wyoming -13,000 jobs Nevada -61,500 jobs -5.5 16
  17. 17. Virginia Employment Declining at Slower Rate than Nation Employment Growth Percent Change, Year-Over-Year 4.0 40 Virginia 3.0 2.0 1.0 0.0 -1.0 -2.0 United States -3.0 30 -4.0 -5.0 -6.0 Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Source: Virginia Employment Commission and Chmura. Nonfarm Employment: Northern Virginia vs. the Rest of the State Since 2000 (in thousands) Change From a Year Ago, In Thousands, 112 Net Gain in VA 163 Net Gain in NVA 150 -50 Net LOSS ROS 100 50 - (50) (100) (150) Jan-98 Sep-98 Jan-99 Sep-99 Jan-00 Sep-00 Jan-01 Sep-01 Jan-02 Sep-02 Jan-03 Sep-03 Jan-04 Sep-04 Jan-05 Sep-05 Jan-06 Sep-06 Jan-07 Sep-07 Jan-08 Sep-08 Jan-09 Sep-09 Jan-10 May-98 May-99 May-00 May-01 May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 Data through February 2010. 34 17
  18. 18. Nonfarm Employment: Northern Virginia vs. the Rest of the State Since 2000 (in thousands) Change From a Year Ago, In Thousands, 112 Net Gain in VA 163 Net Gain in NVA 150 -50 Net LOSS ROS 100 50 - (50) 2000 – December 2007 (in thousands) 302 Net Gain in VA (100) 100 Net Gain in NVA 102 Net Gain in ROS (150) Jan-98 Sep-98 Jan-99 Sep-99 Jan-00 Sep-00 Jan-01 Sep-01 Jan-02 Sep-02 Jan-03 Sep-03 Jan-04 Sep-04 Jan-05 Sep-05 Jan-06 Sep-06 Jan-07 Sep-07 Jan-08 Sep-08 Jan-09 Sep-09 Jan-10 May-98 May-99 May-00 May-01 May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 Data through February 2010. 35 Nonfarm Employment: Rural vs. Metropolitan Areas Since 2000 Change From a Year Ago, In Thousands 181 Net Gain in Metro VA 150 69 Net LOSS in Rural Areas 100 50 - (50) (100) (150) Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 May-98 Sep-98 May-99 Sep-99 May-00 Sep-00 May-01 Sep-01 May-02 Sep-02 May-03 Sep-03 May-04 Sep-04 May-05 Sep-05 May-06 Sep-06 May-07 Sep-07 May-08 Sep-08 May-09 Sep-09 Data through February 2010. 36 18
  19. 19. Unemployment Rate is High in Many Rural Areas 37 West Piedmont Workforce Area (Danville, Henry, Martinsville, Patrick, and Pittsylvania) Skewed Toward Mfg 38 19
  20. 20. Employment Still Dropping in Manufacturing Sector 39 10,000 Job Loss in Broadwoven Fabric Mills …Top 10 Occupations Lost Occupation Title Jobs Textile Winding, Twisting, and Drawing Out Machine Setters, g, g, g , Operators, and Tenders 1,297 Textile Knitting and Weaving Machine Setters, Operators, and Tenders 1,150 Textile Bleaching and Dyeing Machine Operators and Tenders 552 Sewing Machine Operators 457 Inspectors, Testers, Sorters, Samplers, and Weighers 439 First-Line Supervisors/Managers of Production and Operating Workers 370 Industrial Machinery Mechanics 280 Laborers and Freight, Stock, and Material Movers, Hand 269 Extruding and Forming Machine Setters, Operators, and Tenders, Synthetic and Glass Fibers 257 Maintenance and Repair Workers, General 240 TOTAL 5,311 40 20
  21. 21. Occupations • Are linked to transferable skills – Move between industries • Are linked to attributes/knowledge • Take Away: Paradigm shift needed: • People – not industries– are a region’s resources 41 Reasons for Longer-Term Shifts in Growth • Infrastructure – Highways – Internet – Quality of life • Education 42 21
  22. 22. Broad Relationships Between Education and Economic Well-Being Are Well Established Median Weekly  • More education is Unemployment  Rate in 2008  (%) Education Attained Earnings in  2008 ($) associated with higher 2.0 20 Doctoral degree D ld 1,561 1 561 1.7 Professional degree 1,531 wages 2.4 Master's degree 1,233 2.8 • More education is 3.7 Bachelor's degree Associate degree 1,012 757 associated with a lower 5.1 Some college, no degree 699 5.7 High‐school graduate 618 unemployment rate 9 Less than a high school diploma 453 43 Broad Relationships Between Education and Economic Well-Being Are Clear Mean Real Earnings of Workers 18 Years and Over by Education Attainment $45,000 The The image The image cannot be The image image cannot be display ed. Your computer cannot be cannot display ed. may not hav e enough display ed. Your be Your memory to open the image, computer may display ed computer or the image may hav e been not hav e enough . Your may not corrupted. Restart y our memory to open computer hav e computer, and then open the the image, or the may not enough file again. If the red x still image may hav e hav e memory to appears, y ou may hav e to been corrupted. enough open the delete the image and then Restart y our memory image, or insert it again. computer, and to open the image then open the file the may hav e again. If the red image, or been x still appears, the corrupted. y ou may hav e to Advanced Degree image Restart delete the image may hav e y our and then insert it been computer, again. corrupted and then $40,000 . Restart open the y our file again. computer If the red , and x still then appears, open the y ou may file again. hav e to If the red delete the x still image and appears, then insert y ou may it again. hav e to delete the image and then insert it again. $35,000 $30,000 Bachelor's Degree $25,000 $20,000 Some College/Associate's Degree $15,000 High School Graduate g $10,000 Less than High School $5,000 $0 1975 1980 1985 1990 1995 2000 Source: U.S. Census Bureau, Current Population Survey Recessions are shaded. 44 22
  23. 23. Broad Relationships Between Education and Economic Well-Being Are Clear Mean Real Earnings of Workers 18 Years and Over by Education Attainment $45,000 The image cannot be display ed. Your computer may not hav e The image cannot be display ed. Your computer may not hav e enough memory to open the image, or the image may hav e been corrupted. Restart y our computer, and then open the The image cannot be display ed. Your computer may not hav e enough memory to open the image, or the The image cannot be display ed . Your computer may not enough file again. If the red x still image may hav e hav e memory to appears, y ou may hav e to been corrupted. enough open the delete the image and then Restart y our memory image, or insert it again. computer, and to open the image then open the file the may hav e again. If the red image, or been x still appears, the Advanced Degree corrupted. y ou may hav e to image Restart delete the image may hav e y our and then insert it been computer, again. corrupted $40,000 and then . Restart open the y our file again. computer If the red , and x still then appears, open the y ou may file again. hav e to If the red delete the x still image and appears, then insert y ou may it again. hav e to delete the image and then insert it again. $35,000 $30,000 Bachelor's Degree $25,000 $20,000 Some College/Associate's Degree $15,000 High School Graduate g $10,000 Less than High School $5,000 $0 1975 1980 1985 1990 1995 2000 Source: U.S. Census Bureau, Current Population Survey Recessions are shaded. 45 Our International Competitive Advantage is Education Average Years of Schooling of Adults, Selected Countries 1990 14 2000 11.7 12.1 12 10 9.2 9.4 7.2 8 6.7 7.1 5.9 6.4 6.0 5.4 6.1 4.0 4.9 5.1 6 4.1 4 2 0 Brazil China Hong Kong, India Mexico Singapore South United China Africa States Source: World Bank Database. 46 23

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