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How the New President Will Affect the Outlook for the Economy, Financial Markets, and Jobs

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Robert Genetski's presentation from the ERE Expo 2009 Spring.

Robert Genetski's presentation from the ERE Expo 2009 Spring.

Published in: Business, Economy & Finance
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  • 1. The Economy & Jobs: Where We’re Heading & What You Can Do About It •  Robert Genetski, Ph.D. •  Website: classicalprinciples.com •  Phone: 616-990-1354
  • 2. Modern Economic Principles Frugal Families Aggravate Nation’s Economic Woes WSJ January 6, 2009 As layoffs and store closures grip the U.S., families hope frugality will see them through. But thriftiness is a major reason the downturn may not soon end.
  • 3. Government Spending & Stock Prices Dow Jones Index Millions of dollars 400 9500 350 Federal Government Outlays 8500 (right axis) Dow Jones Industrial 300 Average (left axis) 7500 250 6500 200 5500 150 4500 100 3500 50 0 2500 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
  • 4. Government Spending & Stock Prices year over year percent change natural log natural log 10 15 14 Government Outlays 13 (right scale) 8 12 11 Dow Jones Average (left scale) 6 10 9 4 8 1920 1932 1944 1956 1968 1980 1992 2004
  • 5. Classical Principles •  Low tax rates •  Free Markets •  Protect Individual Property Rights •  Stable Prices
  • 6. Effective Marginal Tax Rates: Individuals (Data are based on Genetski estimates of MTR for indiv. In 70th-95th percentile) percent 40 38 36 34 32 30 28 26 24 22 20 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 source: classicalprinciples.com; Dr. Robert Genetski
  • 7. Marginal Tax Rates: Capital Gains (Maximum capital gains tax paid by indiviudals) percent 50 45 40 35 30 25 20 15 10 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 source: classicalprinciples.com; Dr. Robert Genetski
  • 8. Productivity Trends (annual rates of change; private nonfarm business; similar periods of capacity utilization) natural log of the index 5.2 2008-10: 1.5% 5.0 1997-08: 2.6% 2010-15: 1.0% 4.8 1981-86: 2.0% 4.6 1986-96: 1.5% 1965-75: 2.2% 4.4 1976-81: 0.7% 4.2 1950-65: 2.6% 4.0 3.8 3.6 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 classicalprinciples.com
  • 9. Adjusted Bank Reserves billions of dollars (monthly averages) 100 95 90 85 80 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 source: Federal Reserve Bank of St. Louis
  • 10. Adjusted Bank Reserves billions of dollars (monthly averages) 120 Feb. $758 billion 110 Total Adjusted Bank Reserves 100 90 Total Adjusted Bank Reserves less excess reserves held at the Fed (1 and 6-month average) 80 70 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 source: Federal Reserve Bank of St. Louis; classicalprinciples.com
  • 11. U.S. Dollar Index 120 110 4-year average 100 Avg. value 1967-2008=101 90 80 Trade-weighted G-10 Index 70 01 02 03 04 05 06 07 08 09
  • 12. Government “Stimulus” (billions of dollars) •  Beginning deficit $250 •  Early stimulus 170 •  Bailout Fannie & Freddie 200+ •  Fallout from Fannie & Freddie bailout 700 •  Citi, AIG bailouts 500+ •  Help auto companies retool 25 •  Bailout Detroit so it can retool 25 •  Obama “stimulus” 790 •  Total over $2,500
  • 13. Long-Term Interest Rates percent 10.0 Moody's 9.5 BAA Bonds 9.0 Fannie, Freddie 8.5 Bailout 8.0 7.5 $700 billion 7.0 Bailout 6.5 Moody's AAA Bonds 6.0 5.5 5.0 10-year 4.5 Treasury Notes 4.0 3.5 3.0 20-Oct 15-Dec 12-Jan 9-Feb 8-Mar 5-Apr 3-May 31-May 28-Jun 26-Jul 23-Aug 20-Sep 18-Oct 17-Nov 15-Nov
  • 14. Broadest Stock Index (over 8,000 stocks) $29.00 $28.00 $27.00 $26.00 $25.00 $24.00 50-day average $23.00 $22.00 10-day $21.00 $20.00 $19.00 $18.00 $17.00 $16.00 Daily Index $15.00 $14.00 15-Mar 12-Apr 10-May 7-Jun 5-Jul 2-Aug 11-Apr 30-Aug 27-Sep 25-Oct 20-Dec 17-Jan 14-Feb 14-Mar 22-Nov
  • 15. Housing Starts (millions per year) 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 01 02 03 04 05 06 07 08 09
  • 16. Home Sales & Inventory millions of units 8 5.0 Inventories All Homes 4.5 Total Existing Home Sales (saar) 7 4.0 6 3.5 3.0 5 2.5 4 2.0 2000 01 02 03 04 05 06 07 08
  • 17. Interest Rate Spreads 7 6 5 4 BAA bonds minus 10-year Treasury Notes 3 2 AAA bonds minus 1 10-year Treasury Notes 0 6-Mar 2-May 28-Jun 24-Aug 20-Oct 18-Dec 15-Feb 15-Apr 11-Jun 7-Aug 3-Oct 29-Nov 29-Jan 27-Mar 2008 2007
  • 18. Working Age Population Growth (annual growth rates) 2.5 India 2.0 Mexico 1.5 Brazil 1.0 United States 0.5 China Western Europe 0.0 Eastern Europe -0.5 Japan -1.0 -1.5 2000-05 2005-10 2010-15 2015-20
  • 19. Business Environment •  Cascading recession—international weakness •  Government borrowing—scarcity of credit •  Some relief due later this year—hiring 2010 •  Sharp increase in spending followed by rapid wage, price increases 2011 •  Rising costs—financing, environment, etc.
  • 20. Pressure on Your Clients •  Survival mode—focus on cash flow •  Conserve capital, allocate funds cautiously •  Budgets being monitored, adjusted monthly •  Credit sources scarce/expensive •  Need to adapt to major swings in spending
  • 21. Strategies for Recruiters •  Recognize economic pressures on clients •  Need to deliver greater value added –  Anticipate labor needs as economy recovers –  Upcoming shortage of qualified labor –  Creative ways to overcome cost constraints –  Provide input on wage adjustments to inflation
  • 22. Key Points •  Monetary stimulus-recovery this summer •  Labor markets improve in 2010 •  Recovery, growing labor demand 2011 •  Cost constraints affect your clients •  Need for creativity to provide solutions

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