Cortright:  Oregon Economic Outlook
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Cortright: Oregon Economic Outlook

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Joe Cortright's October 2009 presentation on the outlook for the Oregon economy.

Joe Cortright's October 2009 presentation on the outlook for the Oregon economy.

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  • 2009CSHomePrice_History_033114.xls; data updated through Jan 2009, April 14, 2009.
  • rockefeller_state_tax_collections_2008.xls
  • https://www.wachovia.com/common_files/MonthlyEconomicOutlook_Oct2009.pdf
  • Source: March 2009 forecast
  • This summer likely marked the end of the recession and the economy should expand in the second half of this year.
  • Still 30 percent below the peak!
  • Source: calculated risk: http://4.bp.blogspot.com/_pMscxxELHEg/SrfgAatRn0I/AAAAAAAAGYU/lt9A4b8T4No/s1600-h/CREpricesJuly2009.jpg
  • https://www.wachovia.com/common_files/Is_the_Recovery_Sustainable.pdf
  • https://www.wachovia.com/common_files/Is_the_Recovery_Sustainable.pdf

Cortright:  Oregon Economic Outlook Cortright: Oregon Economic Outlook Presentation Transcript

  • Outlook for the Northwest Economy Joe Cortright – October 2009
  • Synopsis
    • The national economic outlook
    • Implications for the Northwest
    • From recession to recovery
    • A foundation for the future
  • National Economic Situation
    • Housing collapse
    • Financial meltdown – credit freeze
    • Recession started in December 2007 –already longer than the average post WWII recession
  • Job growth slowing since 2006 National data
  • We’re in a recession again
    • Brad DeLong Arrows chart
  • A Different Kind of Recession
    • An Asset Bubble
      • Housing Collapse
    • Speculative Finance
      • Deregulation, “too big to fail”
      • Multiplied the shock
      • Accommodative Fed
    • Punctured by Energy Prices
      • Running up against real limits
  • Last September . . .
    • Financial Market’s Wiley Coyote Moment
    Dow Industrials
  • An abrupt fall This recession
  • Oregon caught in the downdraft
  • Oregon & US unemployment spiked
  • Analyzing Oregon’s Performance
    • Since the Peak (November 2007)
      • Wage and salary employment
      • US: -7.9 million jobs: -5.7%
      • Oregon -131,000 jobs: -7.5%
    • Why is Oregon worse off?
  • Breaking it down
    • 92,000 jobs lost, in 3 categories:
    • Housing and Finance Bubble -30,000
    • Durable Goods Mfg. -20,000
    • Contagious Pessimism -42,000
    12 month change in Oregon Wage & Salary Employment
  • Housing and Finance Bubble
    • Sector Jobs Lost % Change
    • Construction (18,000) -19%
    • Real Estate (5,000) -12%
    • Finance (6,500) -6%
    • Total (29,500)
    12 month change in Oregon Wage & Salary Employment March 2008 to March 2009 Oregon Building permits down 44% in 2008; US housing starts at lowest level since 1946 <600k
  • Late to the housing collapse
  • Construction decline later, but steeper
  • Durable Goods Collapsed
  • #1 in Durable Goods Dependence
  • Durable Goods Manufacturing
    • Sector Jobs Lost % Change
    • Transp. Equipment (5,400) -33%
    • Wood Products (5,200) -19%
    • High Tech (4,600) -12%
    • Metals/Machinery (4,700) -14%
    • Total (19,900)
    12 month change in Oregon Wage & Salary Employment March 2008 to March 2009
  • Exports declined dramatically
  • Vulnerable to export shock Ranking among 50 States
  • Contagious Pessimism
    • Sector Jobs Lost % Change
    • Retail (14,100) -7%
    • Temps (10,900) -30%
    • Wholesale (6,200) -8%
    • Transportation (5,500) -9%
    • Restaurants (5,500) -4%
    • Total (42,200)
    12 month change in Oregon Wage & Salary Employment March 2008 to March 2009
  • Unemployment: Special Factors
  • Net migration is strong 11 th 6 th 17 th 24 th 10 th 8 th 10 th 9 th Oregon Rank Oregon net domestic migration, percent of current population Source: Census Bureau estimates 2008: Oregon ranked 8th highest in net in-bound percent of United Van Lines Moves
  • Oregon’s Labor Force Keeps Growing Source: Office of Economic Analysis; Employment Dept. data
  • What’s the outlook?
    • Insights from the Economic Forecasts
    • --Wells Fargo
    • --Oregon Economic Forecast
  • GDP expected to recover Wells Fargo Securities, Monthly Outlook, October 7, 2009
  • Unemployment persists Wells Fargo Securities, Monthly Outlook, October 7, 2009
  • State forecast has bottomed
  • Alternative Scenarios September 2009 Revenue Forecast Oregon Non-Farm Employment
  • News Flash: Recession Over
    • Mid-September Good News . . .
    • Sept. 14th: Governor Yellen
    • Sept. 15th: Chair Bernanke
    • “ Recession may have ended in summer”
  • What’s the evidence?
    • “Over” = GDP growth not declining
    • Evidence:
    • - Retail sales up
    • - House prices up (slightly)
    • - Job losses easing
    • - More normal financial markets
  • Risks
    • Retail sales: temporary spurt
      • “ Cash for Clunkers”
    • Housing
      • Huge backlog of foreclosures
      • Millions underwater on mortgages
      • Shadow inventory
    • Financial Markets
      • CRE: the other shoe
  • Retail sales “rebound”
  • Retail sales are up!
    • Retail Sales, Seasonally Adjusted, Millions (monthly)
    • Category July August Change
    • Total Retail Sales 342,280 351,418 2.7%
    • Auto Sales 58,089 64,221 10.6%
    • Gas Station Sales 29,727 31,239 5.1%
    • Retail, ex. Gas & auto 254,464 255,958 0.6%
  • But very little after adjusting
    • Retail Sales, Seasonally Adjusted, Millions (monthly)
    • Category July August Change
    • Total Retail Sales 342,280 351,418 2.7%
    • Auto Sales 58,089 64,221 10.6%
    • Gas Station Sales 29,727 31,239 5.1%
    • Retail, ex. Gas & auto 254,464 255,958 0.6%
  • Home prices may have “bottomed”
  • The Other Shoe: CRE Two Year Lag between residential and commercial peaks
  • First Time Buyers Giveway
    • 2009:
      • 350,000 additional sales
      • Cost: $15 billion
      • = $43,000 per additional sale
    • 2010
      • 500,000 additional sales
      • Cost: $30 billion
      • = $60,000 per additional sale
    • These are the National Association of Realtors estimates, and may be low.
  • A very different recession
    • Financial collapse
    • Liquidity trap (monetary policy impotent)
    • Massive wealth effect
    • Global scope
    • = “Out of sample” forecasting
  • Here we go again
    • As in 2002, we are in a recession – Let’s remember the lessons from last time:
      • Recessions end
      • “Recovery” is a misnomer: we don’t recover the same jobs and businesses we lost
      • Recession is time to lay the foundation for building during the next expansion
  • A very different “recovery”
    • Letters:
      • Not “V”
      • Maybe “U” or “W”
      • Possibly “L”
    • Adjectives
      • “Tepid”
      • “Protracted”
  • Key drivers for the future
    • Cluster performance
    • New business formation
    • Innovation
    • Sustainability
    • Institutions
  • Parallel to the 1930s
    • New Institutions for a changed world
    • Then: Industrial Economy
    • Now: Knowledge Economy/Sustainability
  • Four Key Changes
    • Energy
    • Housing
    • Transportation
    • Health Care
  • “ May you live in interesting times.”
  • www.ImpresaConsulting.com Joe Cortright – June 2009
  •  
  • Debt: Still over leveraged
  • Equity: We lost $14 trillion
  •