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The U.S. Economy: “Still Healing From The Great
Recession”
Eugenio J. Aleman, Director and Senior Economist
May 17, 2013
Let’s Look at the Federal Government
Federal Government Outlay Growth
Year-over-Year Percent Change, 12-Month Moving Average
Government outlays have come
down considerably
40%
40%
35%
35%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
-5%
-5%
-10%
-10%
Federal Government Outlay Growth: Mar @ -2.8%
-15%
-15%
60
65
70
75
80
85
90
Source: U.S. Department of the Treasury and Wells Fargo Securities, LLC
Economics
2
95
00
05
10
Let’s Look at the Federal Government
Total Outlays as Percent of Nominal GDP
12-Month Moving Average
26%
26%
Total Outlays as a Percent of GDP: Mar @ 22.0%
Strong fiscal reaction to avoid a
depression
25%
25%
24%
24%
23%
23%
22%
22%
21%
21%
20%
20%
19%
19%
18%
18%
17%
17%
69
72
75
78
81
84
87
90
93
96
Source: U.S. Department of the Treasury and Wells Fargo Securities, LLC
Economics
3
99
02
05
08
11
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
Fiscal Conservatism? Where?
When?
$0
-$200
-$200
-$400
-$400
-$600
-$600
-$800
-$800
-$1,000
-$1,000
-$1,200
-$1,200
-$1,400
-$1,400
Surplus or Deficit: Mar @ -$911 Billion
-$1,600
-$1,600
67
71
75
79
83
87
91
95
Source: U.S. Department of the Treasury and Wells Fargo Securities, LLC
Economics
4
99
03
07
11
Real GDP Growth
U.S. Real GDP
Bars = Compound Annual Rate
Line = Yr/Yr % Change
10%
U.S. real GDP growth recovered
somewhat, but remains weak
10%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-6%
-8%
Real GDP: Q1 @ 2.5%
Real GDP: Q1 @ 1.8%
-10%
-10%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
-8%
5
U.S. Nonfarm Employment
Nonfarm Employment Change
Change in Employment, In Thousands
Employment turned the corner
in October of 2010, but it is still
weak
600
600
400
400
200
200
0
0
-200
-200
-400
-400
-600
-600
-800
-800
Monthly Change: Apr @ 165.0 Thousand
-1,000
-1,000
00
01
02
03
04
05
06
07
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
6
08
09
10
11
12
13
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
been fairly broad based, the
government sector has
continued to struggle
Prof. & Bus. Svcs.
Leisure & Hospitality
More
Number of
Employees
Manufacturing
Financial Activities
Less
Construction
Other Services
April 2013
Information
-2%
-1%
0%
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
7
1%
2%
3%
4%
U.S. Employment By Industry
U.S. Employment Composition
Professional and
Business
services, 12%
Education and
Health Services,
14%
Lesiure and
Hospitality, 10%
As a percentage of total nonfarm payrolls
Financial
Activities, 5%
Other Services,
4%
Government,
15%
Information, 2%
Natural
Resources and
Mining, 1%
Manufacturing,
8%
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
8
Trade,
Transportation
and Utilities,
29%
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
9
Unemployment Rate
Unemployment Rate
Seasonally Adjusted
Not as high as during the 1980s
recession, but more damaging
12%
12%
10%
10%
8%
8%
6%
6%
4%
4%
Unemployment Rate: Apr @ 7.5%
2%
2%
60
65
70
75
80
85
90
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
10
95
00
05
10
The Employment Situation
Labor Force Participation Rate
16 Years and Over, Seasonally Adjusted
One of the reasons for the
decline in the unemployment
rate is tied to the drop-off in the
labor force participation rate
68%
68%
67%
67%
66%
66%
65%
65%
64%
64%
Labor Force Participation Rate: Apr @ 63.3%
63%
63%
90
92
94
96
98
00
02
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
11
04
06
08
10
12
Mean Duration of Unemployment
Mean Duration Unemployment
Average Weeks Unemployed
44
44
Average Duration of Unemployment: Apr @ 36.5
Duration of unemployment
shows a struggling labor market
40
40
36
36
32
32
28
28
24
24
20
20
16
16
12
12
8
8
80
82
84
86
88
90
92
94
96
98
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
12
00
02
04
06
08
10
12
Unemployment by Education Level
Unemployment Rate by Education Level
April 2013
14%
College graduates have the edge
even in the worst recession since
the depression
14%
12%
12%
10%
10%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
No High School
Diploma
High School
Diploma
Some College
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
13
College Degree
Consumer Price Index
U.S. Consumer Price Index
Both Series are 3-Month Moving Averages
Consumer prices are slowing
once again
9%
9%
6%
6%
3%
3%
0%
0%
-3%
-3%
-6%
-6%
-9%
-9%
CPI 3-Month Annual Rate: Mar @ 1.4%
CPI Year-over-Year: Mar @ 1.7%
-12%
-12%
92
94
96
98
00
02
04
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
14
06
08
10
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
15
Helicopter Ben to the Rescue
The Helicopter Effect!
Economics
16
Federal Reserve Target Rate
U.S. Federal Reserve Target Rate
7.00%
7.00%
U.S. Target Rate: Apr @ 0.25%
Monetary policy remains
extremely expansive
6.00%
6.00%
5.00%
5.00%
4.00%
4.00%
3.00%
3.00%
2.00%
2.00%
1.00%
1.00%
0.00%
2000
0.00%
2002
2004
2006
Source: Federal Reserve Board and Wells Fargo Securities, LLC
Economics
17
2008
2010
2012
Federal Reserve Balance Sheet
Federal Reserve Balance Sheet
Trillions
$3.5
$3.0
$2.5
A Monetary Tsunami?
$3.5
Other: Apr @ $242.1B
Foreign Swaps: Apr @ $8.8B
PDCF & TAF
Commercial Paper & Money Market
Repos & Dis. Window: Apr @ $0.0B
Agencies & MBS: Apr @ $1,143.4B
Treasuries: Apr @ $1,811.6B
$2.5
$2.0
$2.0
$1.5
$1.5
$1.0
$1.0
$0.5
$0.5
$0.0
2007
$0.0
2008
2009
2010
Source: Federal Reserve Board and Wells Fargo Securities, LLC
Economics
$3.0
18
2011
2012
2013
The Housing Market Today
Economics
Your House As Seen By:
You…
Economics
Your House As Seen By:
Your Buyer…
Economics
Your House As Seen By:
Your Lender…
Economics
Your House As Seen By:
Your Appraiser…
Economics
Your House As Seen By:
And…
Your County’s Tax Assessor…
Economics
New Home Sales
New Home Sales
Seasonally Adjusted Annual Rate, In Thousands
1,500
New home sales are still low but
improving
1,500
1,300
1,300
1,100
1,100
900
900
700
700
500
500
300
300
New Home Sales: Mar @ 417,000
3-Month Moving Average: Mar @ 424,333
100
100
89
91
93
95
97
99
01
03
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
25
05
07
09
11
13
Housing Starts
Housing Starts
Seasonally Adjusted Annual Rate, In Millions
As well as housing starts
2.4
2.4
2.0
2.0
1.6
1.6
1.2
1.2
0.8
0.8
0.4
0.4
Housing Starts: Mar @ 1036K
0.0
0.0
87
89
91
93
95
97
99
01
03
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
26
05
07
09
11
13
Existing Home Sales
Existing Single-Family Home Resales
Seasonally Adjusted Annual Rate - In Millions
Existing home sales are
relatively strong
7.0
7.0
6.0
6.0
5.0
5.0
4.0
4.0
3.0
3.0
Existing Home Sales: Mar @ 4.3 Million
2.0
2.0
86
88
90
92
94
96
98
00
02
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
27
04
06
08
10
12
Home Prices
Home Prices
Year-over-Year Percentage Change
Home prices are finally showing
signs of recovery. But, are they
too strong for our own good?
24%
24%
20%
20%
16%
16%
12%
12%
8%
8%
4%
4%
0%
0%
-4%
-4%
-8%
-8%
-12%
-12%
Median Sale Price: Mar @ $185,100
-16%
-16%
Median Sale Price, 3-M Mov Avg: Mar @ 11.3%
FHFA Purchase Only Index: Feb @ 7.1%
-20%
-20%
S&P Case-Shiller Composite-10: Feb @ 8.6%
-24%
-24%
97
99
01
03
05
07
09
11
Source: National Association of Realtors, FHFA, S&P Case-Shiller and Wells Fargo Securities, LLC
Economics
28
13
Home Mortgages
Real Estate Lending
By Commerical Banks, Year-over-Year Percent Change
Home mortgages have been
declining for the past four years
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
-5%
-5%
Real Estate Loans: Mar @ 0.0%
-10%
1973
1977
1981
1985
1989
1993
Source: Federal Reserve Board and Wells Fargo Securities, LLC
Economics
29
1997
2001
2005
2009
-10%
2013
Negative Equity
Negative Equity Mortgages - By State
Percent of Mortgages Outstanding
Washington
17.8
Alabama
18.3
Oregon
18.9
Virginia
19.3
New Jersey
20.0
New Hampshire
20.1
Idaho
O…M…G…?
As of Q4 2012
21.0
Rhode Island
23.4
Maryland
23.5
Ohio
25.0
California
25.2
Illinois
28.4
Michigan
31.9
Georgia
33.8
Arizona
34.9
Florida
40.2
Nevada
52.4
US
21.5
0%
10%
Source: FHFA and Wells Fargo Securities, LLC
Economics
30
20%
30%
40%
50%
60%
ISM Manufacturing Index
ISM Manufacturing Composite Index
Diffusion Index
Manufacturing has weakened
but it is back to expansion
territory
65
65
60
60
55
55
50
50
45
45
40
40
35
35
ISM Manufacturing Index: Apr @ 50.7
12-Month Moving Average: Apr @ 51.4
30
30
87
89
91
93
95
97
99
01
03
Source: Institute for Supply Management and Wells Fargo Securities, LLC
Economics
31
05
07
09
11
13
U.S. Manufacturing
Manufacturing Output and Employment
Employment in Millions; Output 2007= 100
120
120
Manufacturing Employment: Mar @ 12.0 M (Left Axis)
Manufacturing Output: Mar @ 95.7 (Right Axis)
100
The Manufacturing Myth!
100
80
80
60
60
40
40
20
20
0
0
40
45
50
55
60
65
70
75
80
85
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
32
90
95
00
05
10
ISM Non-Manufacturing Index
ISM Non-Manufacturing Index
Business Activity Index
But the service economy
continues to move along
70
70
65
65
60
60
55
55
50
50
45
45
40
40
35
35
ISM Non-Mfg. Business Activity Index: Apr @ 55.0
30
30
98
99
00
01
02
03
04
05
06
07
Source: Institute for Supply Management and Wells Fargo Securities, LLC
Economics
33
08
09
10
11
12
13
Consumer Credit
Revolving & Nonrevolving Debt
Month-over-Month Change, 3-M Mov. Avg., Billions of Dollars
$60
$60
Revolving: Mar @ $0.1 Billion
Nonrevolving: Mar @ $13.0 Billion
Credit card lending is nonexistent
$48
$48
$36
$36
$24
$24
$12
$12
$0
-$12
2007
$0
-$12
2008
2009
2010
Source: Federal Reserve Board and Wells Fargo Securities, LLC
Economics
34
2011
2012
Household Debt
Household Debt - Consumer & Mortgage
As a Percent of Disposable Personal Income
Households are deleveraging
fast…but not fast enough!
130%
130%
120%
120%
110%
110%
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
Household Debt: Q4 @ 100.4%
40%
40%
60
65
70
75
80
85
Source: Federal Reserve Board and Wells Fargo Securities, LLC
Economics
35
90
95
00
05
10
Household Debt
Household Debt Service Ratio
Debt Payments as a Percent of Disposable Personal Income
14.5%
14.5%
DSR: Q4 @ 10.4%
Consumer confidence is still
very weak for a strong recovery
14.0%
14.0%
13.5%
13.5%
13.0%
13.0%
12.5%
12.5%
12.0%
12.0%
11.5%
11.5%
11.0%
11.0%
10.5%
10.5%
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
36
Consumer Confidence
Consumer Confidence Index
Conference Board
Consumer confidence is still
very weak for a strong recovery
160
160
140
140
120
120
100
100
80
80
60
60
Confidence Yr/Yr % Chg: Apr @ -0.8%
40
40
Confidence: Apr @ 68.1
12-Month Moving Average: Apr @ 65.8
20
20
87
89
91
93
95
97
99
01
Source: The Conference Board and Wells Fargo Securities, LLC
Economics
37
03
05
07
09
11
13
Personal Saving Rate
Personal Saving Rate
Disp. Personal Income Less Spending as a % of Disp. Income
15%
15%
12%
12%
9%
9%
6%
6%
3%
3%
The best news is that the saving
rate has improved
Personal Saving Rate: Mar @ 2.7%
Personal Saving Rate, 12-Month M.A.: Mar @ 3.7%
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
38
Mortgage and Treasury Rates
Conventional Mortgage Rate vs. 10-Year Treasury Yield
Percent
Mortgage interest rates have
plummeted…but who is buying?
7.0%
7.0%
6.0%
6.0%
5.0%
5.0%
4.0%
4.0%
3.0%
3.0%
2.0%
2.0%
Conventional 30-Year Fixed Mortg. Rate: Apr @ 3.43%
10-Year Yield: Apr @ 1.79%
1.0%
2004
1.0%
2005
2006
2007
2008
2009
2010
Source: Freddie Mac, Federal Reserve Board and Wells Fargo Securities, LLC
Economics
39
2011
2012
2013
Global Forecast
Wells Fargo International Economic Forecast
(Year-over-Year Percent C hange)
GDP
2013
2014
2012
2013
2014
3.2%
2.5%
3.0%
1.9%
3.9%
2.2%
3.9%
n/a
4.0%
n/a
4.4%
n/a
Advanced Economies 1
United States
Eurozone
United Kingdom
Japan
Korea
Canada
1.2%
2.2%
-0.6%
0.3%
1.9%
2.0%
1.8%
1.0%
1.8%
-0.6%
1.0%
0.8%
2.5%
1.6%
2.1%
2.1%
1.4%
1.8%
2.3%
3.9%
2.4%
2.0%
2.1%
2.5%
2.8%
0.0%
2.2%
1.5%
1.4%
1.6%
1.4%
2.8%
0.4%
1.5%
1.5%
1.7%
2.0%
1.5%
2.3%
1.0%
2.9%
2.0%
Developing Economies 1
China
India
Mexico
Brazil
Russia
5.1%
7.7%
4.8%
3.9%
0.9%
3.4%
5.0%
7.8%
5.5%
2.6%
2.1%
2.9%
5.6%
8.2%
6.4%
3.2%
2.7%
3.5%
5.9%
2.7%
9.7%
4.1%
5.4%
5.1%
6.7%
2.6%
10.1%
4.2%
6.6%
6.6%
6.8%
3.5%
9.3%
4.7%
5.8%
5.6%
Global (PPP weights)
Global (Market Exchange Rates)
Growth will remain positive but
weak
Forecast as of: May 8, 2013
1
Aggregated Using PPP Weights
Source: Wells Fargo Securities, LLC
Economics
CPI
2012
40
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Global Head of Research and Economics
Economists
Azhar Iqbal, Econometrician………………………………[email protected]
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………………… …[email protected]
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……
Tim Quinlan, Economist …………………………………[email protected]
Chief Economist
John E. Silvia …
Michael A. Brown, Economist ………………… [email protected]
...................... …
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[email protected]
.
…………………………… [email protected]
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Senior Economists
Kaylyn Swankoski, Economic Analyst
Mark Vitner, Senior Economist……………....………. .
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.
[email protected]
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…………………....………[email protected]
Sam Bullard, Senior Economist
Sara Silverman, Economic Analyst
[email protected]
Peg Gavin, Executive Assistant.
Eugenio Aleman, Senior Economist …………………[email protected]
Cyndi Flowe, Senior Administrative Assistant
.…
[email protected]
[email protected]
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Economics
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