The document discusses the state of the U.S. economy and small business credit environment. It provides data and charts on topics such as the federal budget deficit, GDP growth, employment, inflation, housing market, and small business sentiment. The economy is showing some signs of recovery but growth remains weak, unemployment is high, and small businesses continue to struggle with access to credit.
1. The U.S. Economy & Small Business Credit
Eugenio J. Aleman, Director and Senior Economist
March 14, 2013
2. Let’s Look at the Federal Government
Federal Budget Surplus or Deficit
12-Month Moving Sum in Billions of Dollars
$400 $400
$200 $200
$0 $0
-$200 -$200
Fiscal Conservatism? Where? -$400 -$400
When? -$600 -$600
-$800 -$800
-$1,000 -$1,000
-$1,200 -$1,200
-$1,400 -$1,400
Surplus or Deficit: Jan @ -$1,030 Billion
-$1,600 -$1,600
67 71 75 79 83 87 91 95 99 03 07 11
Source: U.S. Department of the Treasury and Wells Fargo Securities, LLC
Economics 2
3. Real GDP Growth
U.S. Real GDP
Bars = Compound Annual Rate Line = Yr/Yr % Change
10% 10%
8% 8%
6% 6%
4% 4%
2% 2%
U.S. real GDP growth recovered 0% 0%
somewhat, but remains weak
-2% -2%
-4% -4%
-6% -6%
Real GDP: Q4 @ 0.1%
-8% -8%
Real GDP: Q4 @ 1.6%
-10% -10%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics 3
4. U.S. Nonfarm Employment
Nonfarm Employment Change
Change in Employment, In Thousands
600 600
400 400
200 200
0 0
Employment turned the corner
in October of 2010, but it is still -200 -200
weak
-400 -400
-600 -600
-800 -800
Monthly Change: Feb @ 236.0 Thousand
-1,000 -1,000
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics 4
5. U.S. Employment By Industry
U.S. Employment by Industry
Year-over-Year Percent Change of 3-M Moving Average
Total Nonfarm
Trade, Trans. & Utilities
Government
Educ. & Health Svcs.
While employment growth has Prof. & Bus. Svcs.
More
been broad based, the Number of
Leisure & Hospitality
government sector has Employees
continued to struggle Manufacturing
Financial Activities Less
Construction
Other Services
February 2013
Information
-2% -1% 0% 1% 2% 3% 4%
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics 5
6. Government Employment
U.S. Government Employment Composition
State
Government,
23%
It is not the Federal
Government!
Local
Government,
64%
Federal
Government,
13%
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics 6
7. Unemployment Rate
Unemployment Rate
Seasonally Adjusted
12% 12%
10% 10%
8% 8%
Not as high as during the 1980s
recession, but more damaging
6% 6%
4% 4%
Unemployment Rate: Feb @ 7.7%
2% 2%
60 65 70 75 80 85 90 95 00 05 10
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics 7
8. The Employment Situation
Labor Force Participation Rate
16 Years and Over, Seasonally Adjusted
68% 68%
67% 67%
66% 66%
One of the reasons for the
decline in the unemployment
rate is tied to the drop-off in the 65% 65%
labor force participation rate
64% 64%
Labor Force Participation Rate: Feb @ 63.5%
63% 63%
90 92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics 8
9. Mean Duration of Unemployment
Mean Duration Unemployment
Average Weeks Unemployed
44 44
Average Duration of Unemployment: Feb @ 36.9
40 40
36 36
32 32
Duration of unemployment 28 28
shows a struggling labor market 24 24
20 20
16 16
12 12
8 8
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics 9
10. Unemployment by Education Level
Unemployment Rate by Education Level
February 2013
14% 14%
12% 12%
10% 10%
8% 8%
College graduates have the edge
even in the worst recession since 6% 6%
the depression
4% 4%
2% 2%
0% 0%
No High School High School Some College College Degree
Diploma Diploma
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics 10
11. Consumer Price Index
U.S. Consumer Price Index
Both Series are 3-Month Moving Averages
9% 9%
6% 6%
3% 3%
0% 0%
Consumer prices are slowing
once again -3% -3%
-6% -6%
-9% -9%
CPI 3-Month Annual Rate: Jan @ 0.3%
CPI Year-over-Year: Jan @ 1.7%
-12% -12%
92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics 11
12. The U.S. Economy
On this side of the wall:
Inflation & stagnation =
stagflation
On this side of the wall:
1930’s depression/
Japan-like depression
The Humpty-Dumpty Economy
The U.S. Economy sat on a wall,
The U.S. Economy had a great fall.
All the king's Treasury-men,
And all the king's Federal Reserve-men,
Couldn't put The U.S. Economy together again.
Economics 12
21. Your House As Seen By:
And…
Your County’s Tax Assessor…
Economics
22. New Home Sales
New Home Sales
Seasonally Adjusted Annual Rate, In Thousands
1,500 1,500
1,300 1,300
1,100 1,100
900 900
New home sales are still low but
improving
700 700
500 500
300 300
New Home Sales: Jan @ 437,000
3-Month Moving Average: Jan @ 402,667
100 100
89 91 93 95 97 99 01 03 05 07 09 11 13
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics 22
23. Housing Starts
Housing Starts
Seasonally Adjusted Annual Rate, In Millions
2.4 2.4
2.0 2.0
1.6 1.6
As well as housing starts 1.2 1.2
0.8 0.8
0.4 0.4
Housing Starts: Jan @ 890K
0.0 0.0
87 89 91 93 95 97 99 01 03 05 07 09 11 13
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics 23
24. Existing Home Sales
Existing Single-Family Home Resales
Seasonally Adjusted Annual Rate - In Millions
7.0 7.0
6.0 6.0
5.0 5.0
Existing home sales are
relatively strong
4.0 4.0
3.0 3.0
Existing Home Sales: Jan @ 4.3 Million
2.0 2.0
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics 24
25. Home Prices
Home Prices
Year-over-Year Percentage Change
24% 24%
20% 20%
16% 16%
12% 12%
8% 8%
4% 4%
Home prices are finally showing 0% 0%
signs of recovery
-4% -4%
-8% -8%
-12% -12%
Median Sale Price: Jan @ $174,100
-16% Median Sale Price, 3-M Mov Avg: Jan @ 10.9% -16%
FHFA Purchase Only Index: Dec @ 5.8%
-20% -20%
S&P Case-Shiller Composite-10: Dec @ 5.9%
-24% -24%
97 99 01 03 05 07 09 11 13
Source: National Association of Realtors, FHFA, S&P Case-Shiller and Wells Fargo Securities, LLC
Economics 25
26. Home Mortgages
Real Estate Lending
By Commerical Banks, Year-over-Year Percent Change
25% 25%
20% 20%
15% 15%
Home mortgages have been
10% 10%
declining for the past four years
and are just recently showing
5% 5%
some improvement
0% 0%
-5% -5%
Real Estate Loans: Jan @ 1.3%
-10% -10%
1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013
Source: Federal Reserve Board and Wells Fargo Securities, LLC
Economics 26
27. Negative Equity
Negative Equity Mortgages - By State
Percent of Mortgages Outstanding
Utah 18.5
As of Q3 2012
Washington 18.6
Oregon 18.6
New Jersey 19.9
Virginia 20.0
New Hampshire 20.3
Rhode Island 22.1
Idaho 22.3
Maryland 22.9
O…M…G…? Ohio 23.8
Illinois 25.4
California 28.3
Michigan 32.0
Georgia 35.6
Arizona 38.6
Florida 42.1
Nevada 56.9
US 22.0
0% 10% 20% 30% 40% 50% 60% 70%
Source: FHFA and Wells Fargo Securities, LLC
Economics 27
29. Small Business Sentiment
Regulation, taxes and poor
sales as lead concerns
Source: NFIB and Wells Fargo Securities, LLC
Economics 29
30. Small Business Sentiment
Small Businesses are still
feeling as if in recession
Source: NFIB and Wells Fargo Securities, LLC
Economics 30
31. Small Business Sentiment
Expectations of the future
are very weak, but the same
thing happened in the
1990s
Source: NFIB and Wells Fargo Securities, LLC
Economics 31
32. Small Business Sentiment
Small Business surveys
remain weak
Source: NFIB and Wells Fargo Securities, LLC
Economics 32
33. Small Business Sentiment
Small Business following
consumer confidence very
closely
Source: NFIB and Wells Fargo Securities, LLC
Economics 33
34. Small Business Sentiment
According to Small
Businesses, the economy
remains in recession
Source: NFIB and Wells Fargo Securities, LLC
Economics 34
35. Small Business Sentiment
It is clear that weak sales
are behind the weakness
felt by Small Businesses
Source: NFIB and Wells Fargo Securities, LLC
Economics 35
36. Small Business Credit
Small Businesses are not
borrowing
Source: Federal Reserve Bank and Wells Fargo Securities, LLC
Economics 36
37. Small Business Credit
Credit access has improved
but remains above pre-
recession levels
Source: Federal Reserve Bank and Wells Fargo Securities, LLC
Economics 37
38. Small Business Credit
Credit demand is weak but
improving
Source: Federal Reserve Bank and Wells Fargo Securities, LLC
Economics 38
39. Small Business Credit
Lending standards have
loosened considerably
Source: Federal Reserve Bank and Wells Fargo Securities, LLC
Economics 39
40. ISM Manufacturing Index
ISM Manufacturing Composite Index
Diffusion Index
65 65
60 60
55 55
Manufacturing has weakened 50 50
but it is back to expansion
territory 45 45
40 40
35 35
ISM Manufacturing Index: Feb @ 54.2
12-Month Moving Average: Feb @ 51.8
30 30
87 89 91 93 95 97 99 01 03 05 07 09 11 13
Source: Institute for Supply Management and Wells Fargo Securities, LLC
Economics 40
41. ISM Non-Manufacturing Index
ISM Non-Manufacturing
Composite Index
65 65
60 60
55 55
But the service economy
50 50
continues to move along
45 45
40 40
ISM Non-Manufacturing Index SA: Feb @ 56.0
35 35
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: Institute for Supply Management and Wells Fargo Securities, LLC
Economics 41
43. Household Debt
Household Debt Service Ratio
Debt Payments as a Percent of Disposable Personal Income
14.5% 14.5%
14.0% 14.0%
13.5% 13.5%
13.0% 13.0%
12.5% 12.5%
U.S. Households are ready to
start borrowing 12.0% 12.0%
11.5% 11.5%
11.0% 11.0%
10.5% 10.5%
DSR: Q3 @ 10.6%
10.0% 10.0%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: The Conference Board and Wells Fargo Securities, LLC
Economics 43
44. Consumer Confidence
Consumer Confidence Index
Conference Board
160 160
140 140
120 120
100 100
Consumer confidence is still
very weak for a strong recovery 80 80
60 60
40 Confidence Yr/Yr % Chg: Feb @ -2.8% 40
Confidence: Feb @ 69.6
12-Month Moving Average: Feb @ 66.6
20 20
87 89 91 93 95 97 99 01 03 05 07 09 11 13
Source: The Conference Board and Wells Fargo Securities, LLC
Economics 44
45. Personal Saving Rate
Personal Saving Rate
Disp. Personal Income Less Spending as a % of Disp. Income
15% 15%
12% 12%
9% 9%
The best news is that the saving
rate has improved
6% 6%
3% 3%
Personal Saving Rate: Jan @ 2.4%
Personal Saving Rate, 12-Month M.A.: Jan @ 3.8%
0% 0%
60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics 45
46. Mortgage and Treasury Rates
Conventional Mortgage Rate vs. 10-Year Treasury Yield
Percent
7.0% 7.0%
6.0% 6.0%
5.0% 5.0%
Mortgage interest rates are 4.0% 4.0%
starting to edge up again but
from a very low base
3.0% 3.0%
2.0% 2.0%
Conventional 30-Year Fixed Mortg. Rate: Feb @ 3.53%
10-Year Yield: Feb @ 2.02%
1.0% 1.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Freddie Mac, Federal Reserve Board and Wells Fargo Securities, LLC
Economics 46
47. Global Forecast
Wells Fargo International Economic Forecast
(Year-over-Year Percent C hange)
GDP CPI
2012 2013 2014 2012 2013 2014
Global (PPP weights) 2.7% 2.8% 3.7% 4.2% 3.9% 4.3%
Global (Market Exchange Rates) 1.5% 1.6% 2.4% n/a n/a n/a
1
Advanced Economies 1.2% 1.2% 2.3% 2.1% 1.3% 1.8%
United States 2.2% 2.0% 2.3% 2.1% 1.6% 2.1%
Eurozone -0.5% -0.1% 1.8% 2.5% 1.3% 1.7%
United Kingdom 0.2% 1.1% 2.0% 2.8% 2.5% 2.1%
Growth will remain positive but Japan 1.9% 0.4% 2.5% 0.0% -0.2% 0.1%
Korea 2.1% 2.8% 4.3% 2.2% 2.6% 3.1%
weak Canada 1.8% 1.5% 2.6% 1.5% 1.1% 2.0%
1
Developing Economies 4.4% 4.7% 5.4% 6.7% 7.0% 7.2%
China 7.7% 8.1% 8.4% 2.7% 3.0% 3.5%
India 5.0% 5.7% 6.5% 9.7% 9.0% 9.3%
Mexico 4.1% 3.3% 3.4% 4.1% 4.1% 4.8%
Brazil 0.8% 2.2% 4.2% 5.4% 6.3% 6.1%
Russia 3.4% 3.1% 3.7% 5.1% 6.0% 5.5%
Forecast as of: February 6, 2013
1
Aggregated Using PPP Weights
Source: Wells Fargo Securities, LLC
Economics 47