State of the US
      Economy
    an Aaron Polk production
8


               7


               6


               5

Percentage of
              4
 Labor Force

               3

...
Percent




                                                                                                  0
          ...
5.0


          4.0


          3.0


          2.0
Percent
          1.0


          0.0


          -1.0


          -2....
Percent
                                                                                                                  ...
Dollars
                                                                                                               Bil...
Aaron Polk
EC 410: Economic Forecasting
Project #1
01/12/2008
                                         State of the US Eco...
2. Productivity in the Manufacturing Sector

             12
             10
              8
              6
   Percent   ...
During economic expansions, industries become more profitable and entrepreneurs begin
to flood the markets hoping to captu...
5. Total Personal Savings


                     600.0
                     500.0
                     400.0
             ...
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State+Of+The+Us+Economy+(Presentation+&+Report)

  1. 1. State of the US Economy an Aaron Polk production
  2. 2. 8 7 6 5 Percentage of 4 Labor Force 3 2 1 0 Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Unemployment 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 National Unemployment Rate Source: Bureau of Labor Statistics (BLS)
  3. 3. Percent 0 2 4 6 8 -4 -2 10 12 Qtr1 Qtr2 Qtr3 1998 Qtr4 Qtr1 Qtr2 Qtr3 1999 Qtr4 Qtr1 Qtr2 Qtr3 2000 Qtr4 Qtr1 Qtr2 Qtr3 2001 Qtr4 Qtr1 Qtr2 Qtr3 2002 Qtr4 Qtr1 Qtr2 Qtr3 2003 Qtr4 % change from last qtr Qtr1 Qtr2 Qtr3 2004 Qtr4 Qtr1 Qtr2 Source: BLS Qtr3 2005 Qtr4 Qtr1 Qtr2 Qtr3 2006 Qtr4 Qtr1 Qtr2 Qtr3 2007 Qtr4 Output per Hour of all Persons Qtr1 Manufacuring Productivity: Total Qtr2 2008 Qtr3
  4. 4. 5.0 4.0 3.0 2.0 Percent 1.0 0.0 -1.0 -2.0 Jan-98 Dec-98 Nov-99 Oct-00 Sep-01 Aug-02 Jul-03 Jun-04 May-05 Apr-06 Mar-07 Feb-08 %change from a month ago Commercial and Industrial Loans at all Commercial Banks Source: St. Louis Federal Reserve (SLFED)
  5. 5. Percent 0 -40 -30 -20 -10 10 20 30 40 -50 Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 %chng from a yr ago Sep-03 Jan-04 May-04 Sep-04 Activity Index Jan-05 May-05 Source: SLFED Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 ISM Nonmanufacturing: Business May-08
  6. 6. Dollars Billions of -300.0 -200.0 -100.0 300.0 400.0 500.0 600.0 100.0 200.0 0.0 Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Total Personal Savings Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Source: SLFED Jan-06 May-06 Sep-06 Jan-07 Total Personal Savings May-07 Sep-07 Jan-08 May-08 Sep-08
  7. 7. Aaron Polk EC 410: Economic Forecasting Project #1 01/12/2008 State of the US Economy With all of this talk in the media regarding a recession, people begin to wonder, “are we really in a recession?” Yes, the nation is in fact in a recession. People begin to panic, hoping their job is not on thin ice and hoping that they will have enough money to support themselves and their families. So we begin to answer those who are in doubt of a recession by looking at the following economic indicators to determine whether or not the state of the US economy is in peril. The indicators are as follows: 1. The national unemployment rate 2. Productivity in the manufacturing sector 3. Business loans from commercial banks 4. Business activity of non-manufacturing firms 5. Total personal savings We will go through each individual indicator and explain why we chose it, and it’s relatationship to the state of the nation’s economy. 1. The National Unemployment Rate 8 7 6 5 Percentage of 4 Labor Force 3 Unemployment 2 1 0 Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 The unemployment rate is commonly used by most economist and leading journalist to determine the well-being of an economy. People are in need of jobs in order to sustain their living because of the income it provides. Now, if we take a look at the beginning of the year 2007, we can see that there is a trough in the unemployment rate. Since then, unemployment has continued to rise, even past the levels the nation faced during the 2001-2002 recession.
  8. 8. 2. Productivity in the Manufacturing Sector 12 10 8 6 Percent 4 2 0 -2 -4 Qtr1 Qtr1 Qtr3 Qtr1 Qtr3 Qtr1 Qtr3 Qtr1 Qtr3 Qtr3 Qtr1 Qtr3 Qtr1 Qtr3 Qtr1 Qtr3 Qtr1 Qtr3 Qtr1 Qtr3 Qtr1 Qtr3 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 % change from last qtr Manufacturing is just one side of production, the other being the service. Manufacturing output depends on consumer demand, scarcity of resources, cost of capital, etc. Here we use the productivity of all workers in the manufacturing sector on a per hour basis. The graph illustrates the change of productivity in billions of dollars from last quarter. During the 3rd quarter, the productivity of manufacturing workers has seen slower growth until 2008, in which it begins to decline. This could be due to the massive layoffs in the sector, causing workers to perform more tasks leading to less specialization (as seen with the experience curve) and less productivity. The rising transportation costs may also be a factor, as firms use less inputs due to the rise in costs. 3. Business Loans from Commercial Banks 5.0 4.0 3.0 2.0 Percent 1.0 0.0 -1.0 -2.0 Jan-98 Mar-99 May-00 Jul-01 Sep-02 Nov-03 Jan-05 Mar-06 May-07 Jul-08 %change from a month ago
  9. 9. During economic expansions, industries become more profitable and entrepreneurs begin to flood the markets hoping to capture some of those profits. This is done through increasing capacity, investing into more capital, etc. Commercial banks give firms the financial ability to expand. With the graph above, we see that there is a continuous decline in the total amount of money banks are loaning starting in the summer of 2008, which is measured in the billions. As markets become less profitable, the fewer amounts of entrepreneurs and firms will venture into them. Along with the troubled credit markets to add to the decrease. 4. Business Activity of Non-Manufacturing Firms 40 30 20 10 0 Percent -10 -20 -30 -40 -50 Jan-05 Jan-98 Mar-99 Oct-99 Jun-04 Mar-06 Oct-06 Aug-98 May-00 Aug-05 May-07 Apr-03 Jul-01 Feb-02 Sep-02 Nov-03 Dec-00 Dec-07 %chng from a yr ago Non-manufacturing firms makes a bigger portion of the nation’s output than manufacturing itself, due to the number of manufacturing jobs that large companies have outsourced to lower-wage nations. So the business activity depends on almost the same factors as manufacturing does (demand, scarcity, and costs), at varying levels of dependency. As job losses lead to more leisure time, laid-off consumers are able to do more things during that leisure time (i.e. taxes), as opposed to when they were working full-time when they had no time to do anything besides work (and that is why they hire service professionals for example, to save them time). Looking above, we see a continuous decline in the business activity index of non-manufacturing beginning late in 2006, around the same time manufacturing productivity begins to increase.
  10. 10. 5. Total Personal Savings 600.0 500.0 400.0 300.0 Billions of 200.0 Dollars 100.0 0.0 -100.0 -200.0 Total Personal Savings -300.0 Jan-99 Jan-98 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Consumers begin to be more cautious with their money in which they spend less and save more in the case of job loss or losses from investments, knowing that a recession is existent. During the beginning of the financial market crisis over the summer, there is a spike in the amount of personal savings by citizens, illustrating the result of a crisis.

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