Alison Felix, PhD and Senior Economist at the Federal Reserve Bank of Kansas City shares trends and projections for recession and recovery in Missouri and the U.S.

1. RECESSION AND
RECOVERY IN
MISSOURI AND THE
U.S.
Alison Felix
Senior Economist
Federal Reserve Bank of Kansas
City
The views expressed are those of the presenter and do not necessarily reflect the
positions of the
Federal Reserve Bank of Kansas City or the Federal Reserve System.

2. After slowing in the first half of 2011, growth is
picking up.
Real Gross Domestic Product
Percent change from previous period, annualized
5 5
4 4
3 3
2 2
1 1
0 0
-1 -1
-2 FOMC Forecast -2
Central Tendency
-3 -3
(Nov. 2011)
-4 -4
Source: Bureau of Economic Analysis; FOMC

3. Business investment increased sharply in
the second and third quarters of last year.
Growth in Components of Real GDP
Percent change from previous period, annualized Percent
16 16
14 2010:Q4 14
2011:Q1
12 12
2011:Q2
10 10
2011:Q3
8 8
6 6
4 4
2 2
0 0
-2 -2
-4 -4
-6 -6
Total GDP Consumer Residential Business Exports Government
Spending Investment Investment Spending
Source: Bureau of Economic Analysis

4. Unemployment rates have fallen over the
past year but remain stubbornly high.
Unemployment Rate
Percent Percent
12 12
FOMC Forecast
11 11
Central Tendency
10 (Nov. 2011) 10
9 9
8 8
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
Source: Bureau of Labor Statistics; FOMC

5. After increasing in the first half of 2011, inflation
has moderated and is expected to be below 2%
in 2012.
PCE Inflation
Percent change from previous period, annualized
5 5
4 4
3 3
2 2
1 1
0 0
-1 -1
-2 FOMC Forecast -2
-3 Central Tendency -3
(Nov. 2011)
-4 -4
-5 -5
Source: Bureau of Economic Analysis; FOMC

6. FOMC December Statement: “The Committee… currently anticipates that
economic conditions – including low rates of resource utilization and a
subdued outlook for inflation over the medium run – are likely to warrant
exceptionally low levels for the federal funds rate at least through mid-
2013.”
Fed Funds Rate
Percent Percent
6 6
5 Fed Funds Rate 5
4 4
3 3
2 2
1 1
0 0
Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11
Source: FOMC

7. FOMC December Statement: “… the Committee decided today to continue
its program to extend the average maturity of its holdings of securities as
announced in September. The Committee is maintaining its existing policies
of reinvesting principal payments from its holdings of agency debt and
agency mortgage-backed securities in agency mortgage-backed securities
and of rolling over maturing Treasury securities at auction.”
Federal Reserve Balance Sheet
Millions of Dollars Millions of Dollars
3000000 3000000
Fed Agency Debt Mortgage-Backed Securities Purch
2750000 2750000
Liquidity to Key Credit Markets
2500000 2500000
Lending to Financial Institutions
2250000 2250000
Long Term Treasury Purchases
2000000 2000000
Traditional Security Holdings
1750000 1750000
1500000 1500000
1250000 1250000
1000000 1000000
750000 750000
500000 500000
250000 250000
0 0
Jan-07 Sep-07 Jun-08 Feb-09 Nov-09 Jul-10 Apr-11 Dec-11
Source: FOMC

8. The Tenth District of the Federal Reserve

9. Despite some gains, employment is still well
below pre-recession levels.
Total Nonfarm Employment
Seasonally adjusted
Index Index
106 106
US
104 MO 104
102 102
100 100
98 98
96 96
Nov-01 Nov-03 Nov-05 Nov-07 Nov-09 Nov-11
Source: Bureau of Labor Statistics

10. The unemployment rate in Missouri is
similar to the national rate.
Unemployment Rate
Seasonally adjusted
Percent Percent
12 12
U.S.
10 10
MO
8 8
6 6
4 4
2 2
Nov-01 Nov-03 Nov-05 Nov-07 Nov-09 Nov-11
Source: Bureau of Labor Statistics

11. The industry mix in Missouri is very similar to
the national average.
Employment Share by Industry
Seasonally adjusted
Percent Percent
18 18
16 US 16
MO
14 14
12 12
10 10
8 8
6 6
4 4
2 2
0 0
Trade Educ. State & Prof. Leis. Manuf. Fin. Svcs. Constr. Trans. Info
& Health Loc. & Busi. & Hosp. & Util.
Govt.
Source: Bureau of Labor Statistics

12. Manufacturing employment growth outpaced
every other industry in Missouri over the past
year.
Employment Growth by Industry
Nov-11 over Nov-10
Percent Percent
6 6
US
4 4
MO
2 2
0 0
-2 -2
-4 -4
-6 -6
-8 -8
-10 -10
Prof. Educ. Leis. Manuf. Trans. Trade Constr. Fin. Svcs. State & Info
& Busi. & Health & Hosp. & Util. Loc.
Govt.
Source: Bureau of Labor Statistics

13. Since the recession started, employment has
fallen in every industry except healthcare.
Employment Growth by Industry
Nov-11 over Dec-07
Percent Percent
15 15
10 US 10
5 MO 5
0 0
-5 -5
-10 -10
-15 -15
-20 -20
-25 -25
-30 -30
-35 -35
Educ. Leis. State & Prof. Trans. Trade Fin. Svcs. Info Manuf. Constr.
& Health & Hosp. Loc. & Busi. & Util.
Govt.
Source: Bureau of Labor Statistics

14. Nationally, the manufacturing sector has been
expanding for over two years.
Manufacturing Activity
Seasonally adjusted
Index Index
65 65
60 60
55 55
50 50
45 45
US
40 6-month ahead 40
MO
expectations
Rest of Tenth District
35 35
30 30
2001:Q4 2003:Q4 2005:Q4 2007:Q4 2009:Q4 2011:Q4
Sources: ISM, FRBKC Manufacturing Survey
Note: 50 = zero change

15. Manufacturers in Missouri expect increased
activity over the next six months.
Missouri Manufacturing Expectations
Seasonally adjusted; six months ahead
Index Index
30 30
2011 Q1
25 2011 Q2 25
2011 Q3
20 2011 Q4 20
15 15
10 10
5 5
0 0
-5 -5
Production Volume of new New orders Capital Employment
orders for exports expenditures
Source: FRBKC Manufacturing Survey

16. After sharp increases in 2010, Missouri
manufacturing exports fell in 2011.
Missouri Manufactured Exports
Year-over-year
Percent Percent
60 60
2009
50 50
2010
40 40
2011 YTD Oct
30 30
20 20
10 10
0 0
-10 -10
-20 -20
-30 -30
-40 -40
-50 -50
Total Transp Equip Chemicals Machinery Food Computers &
(27.8%) (22.2%) (11.9%) (11.2%) Electronics
(5.6%)
Source: Wiser Trade
Note: Number in parantheses represents the share of Missouri manufactured exports.

17. Crop prices have fallen somewhat from high
levels last summer.
Crop Prices
$/Bushel $/Bushel
18 18
Beans
16 16
Wheat
14 14
Corn
12 12
10 10
8 8
6 6
4 4
2 2
0 0
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Source: Commodity Research Bureau

18. Farmland prices have increased sharply in
Missouri.
Missouri Non-irrigated Farmland Values
Year-over-year
Percent Percent
30 30
25 25
20 20
15 15
10 10
5 5
0 0
-5 -5
2002 Q3 2005 Q3 2008 Q3 2011 Q3
Source: FRBKC Agricultural Credit Survey

19. Home sales activity remains slow.
Existing Home Sales
Seasonally adjusted
140 Index: 2001:Q3=100 Index 140
US
130 130
MO
120 120
110 110
100 100
90 90
80 80
70 70
60 60
2001:Q3 2003:Q3 2005:Q3 2007:Q3 2009:Q3 2011:Q3
Source: NAR

20. Residential construction activity remains weak
but has increased over the past few months.
Value of Residential Construction Contracts
Seasonally adjusted
225 Index Nov-01=100 Index 225
200 US
200
175 MO 175
150 150
125 125
100 100
75 75
50 50
25 25
0 0
Nov-01 Nov-03 Nov-05 Nov-07 Nov-09 Nov-11
Source: FW Dodge

21. Home prices in Missouri increased in the
third quarter but remain well-below peak
levels.
Home Prices
Seasonally adjusted
160 Index: 2001:Q3=100 Index 160
US
150 150
MO
140 140
130 130
120 120
110 110
100 100
90 90
2001:Q3 2003:Q3 2005:Q3 2007:Q3 2009:Q3 2011:Q3
Source: FHFA - purchase only index

22. Foreclosure rates in Missouri are lower than
in other parts of the nation.
Foreclosure Rate
Percent Percent
6 6
U.S.
5 5
MO
4 4
3 3
2 2
1 1
0 0
2001:Q3 2003:Q3 2005:Q3 2007:Q3 2009:Q3 2011:Q3
Source: Mortgage Bankers Association

23. U.S. commercial construction activity is
weaker than pre-recession levels.
Value of Commercial Construction Contracts
Seasonally adjusted, 3-month moving average
325 Index Nov-01=100 Index 325
300 300
US
275 275
250 MO 250
225 225
200 200
175 175
150 150
125 125
100 100
75 75
50 50
25 25
0 0
Nov-01 Nov-03 Nov-05 Nov-07 Nov-09 Nov-11
Source: FW Dodge

24. Federal government debt levels have
increased significantly over the past few
years.
Federal Government Debt as a Percent of GDP
Percent Percent
200 200
180 Actual 180
160 Extended-Baseline Scenario 160
140 Alternative Fiscal Scenario 140
120 120
100 100
80 80
60 60
CBO Projection
40 40
June 2011
20 20
0 0
1945 1955 1965 1975 1985 1995 2005 2015 2025 2035
Source: Congressional Budget Office
Note: According to the CBO, "The extended-baseline scenario adheres closely to current
law, following CBO's 10-year baseline budget projections through 2021 and then
extending the baseline concept for the rest of the long-term projection period. The
alternative fiscal scenario incorporates several changes to current law that are widely
expected to occur or that would modify some provisions that might be difficult to sustain
for a long period."

25. State government tax revenues increased in
FY
2011 but remained below pre-recession
levels. State Tax Revenue
160 Index: 2002=100 Index 160
US
150 150
MO
140 140
130 130
120 120
110 110
100 100
90 90
FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
Source: US Census Bureau

26. Among the top 25 Missouri export countries,
EU countries combine for 14% of exports.
Missouri Exports by Destination
Canada
Mexico
China
20% Korea, South
Japan
31%
Belgium
Singapore
Germany
Brazil
United Kingdom
10% Australia
Netherlands
5% 8% Venezuela
4% 5%
Argentina
Other

27. The baby boom generation is nearing
retirement.
Missouri Population by Age
10 Percent Percent 10
1990
8 2010 8
6 6
4 4
2 2
0 0
Source: US Census Bureau

28. Conclusions
 The pace of the U.S. economic recovery slowed in
the first half of 2011, but growth picked up in the
second half of last year.
 The U.S. and Missouri economies are still expected
to recover at a moderate pace over the next few
years.
 However, economic growth may rely more heavily
on private demand in the U.S. as problems persist
in Europe and the U.S. federal government faces
high debt levels.

29. Presentations can be found online at:
http://www.kansascityfed.org/speeches/index.
cfm