The Economy 2012

CA Urban/Community Forest Conference: The Economy 2012 P alo Alto, CA September 16, 2011 Robert Eyler, Ph.D. Professor, Economics Frank Howard Allen Economics Research Fellow Director, Executive MBA Program Sonoma State University [email_address]

Major Economic Issues
A year of mixed signals and international issues
International concerns worldwide
Domestic economy in US continues to struggle
International issues transmission to US
US issues transmission to world building: is the debt a big deal?
State: Budget passed, mix of cuts and new taxes
Where will the new unemployed public workers find jobs?
Is there a commitment to anything in Sacramento?
Commercialized science the key long-term: pulls all behind
Where is the investment?

What we have tried
Monetary Policy: about $1.2 trillion
Generate investment from lower interest rates and increasing money supply
Good: stimulated exports
Bad: inflation potential and lack of focus
Fiscal Policy: over $800 billion
Advertised as “New Deal 2”, some of that happened
Lack of investment in science, no focus here either
New jobs packages more rhetoric than real for now
If innovation and entrepreneurship the way out of recession, not much direct investment

Source: Federal Reserve Board

S&P 500 Index, 1990 - Present Sources: Reuters and CREA at SSU

S&P 500 Index, 2007 - Present Sources: Reuters and CREA at SSU

Philadelphia FED Business Survey, 1968 – Aug 2011 Source: Federal Reserve, Philadelphia

What we want (or should want)
Investment in solutions to scientific problems
We know these problem are coming or are here
To remain the technological and scientific leader worldwide
We know competition is coming from all points on the globe
Who in here likes math?
To create jobs and businesses
Science has a large multiplier effect on our economy

Source: BEA (www.bea.gov)

Unemployment Rates, US and CA, Seasonally Adjusted, 1976-2011 Source: BLS (www.bls.gov)

California
2011-12 likely to be slightly better than 2010-11
If recovery is truly in place, CA will feel effects of recovery
Labor market still the big deal
Private and public issues: job creation vs. destruction
Need to stimulate jobs and business and retain both
CA slowly bifurcating in terms of housing markets
Interior valleys likely to have a Japanese-like recovery
Coastal recovery dependent on general economic recovery and conversion of emerging wealth to housing demand

TechPulse Index, Jan 2007 = 100 Source: BEA (www.bea.gov)

Source: BEA (www.bea.gov)

Investment in Environmental Change
Three biggies:
Peak oil, petroleum use and culture
Generalizing the use of renewables: wind, solar
Rising oceans and climate change effects
Three issues
Lack of ROI short-term: need to commoditize solutions
Political will around this, especially in CA
Bad advertising to Wall Street: housing markets a good example of how Wall Street works

Housing and Environmental Issues
People make consumption choices, households make savings choices
Forestry use: are we still using new wood to build?
Need households to generate demand for many environmental solutions
Do teenagers consume micro-wind turbines?
Do teenagers consume solar paneling, low-flow toilets, instant hot water heaters?
Do people see oceans rising?
Are teenagers buying high MPG cars en masse?

Environ Employment, 1990-2011, Index (1990 = 100) Source: BLS (www.bls.gov)

Peak Wood? Index (1979 = 100), 1979-2011 Sources: BEA (Residential) and BLS (Softwood Prices)

Where are we headed?
Recession-like activity through 2011: labor markets
Hiring not concentrated in private firms or with sustainable funding
Unlikely to see a national surge in 2012, as elections and continued uncertainty will drag
CA economy now starting to pull and push
Tech firms and activity doing well
2012 as an election year may also slow things down
Recognize slower growth and better choices
Economic development choices have economic and environmental effects on communities
Investment in solutions to scientific problems a good long-term, slow growth bet

The Economy 2012

by California ReLeaf on Sep 19, 2011

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