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“…to raise new ideas and improve policy debates through quality
information and analysis on issues shaping New Hampshire’s future.”
Economic Outlook
When Will It End?
2009 Tri-State ASBO Conference
May 14, 2009
Dennis Delay
NHCPPS
Board of Directors
Donna Sytek, Chair
John B. Andrews
John D. Crosier
New Hampshire Center
for Public Policy Studies
Shelia T. Francoeur
Chuck Morse
Todd Selig
Stuart Smith
James Tibbetts
Brian Walsh
Kimon S. Zachos
All of our reports
are available on the web:
www.nhpolicy.org
Martin Gross
Staff
Steve Norton
Dennis Delay
Ryan Tappin
“…to raise new ideas and improve policy debates through quality
information and analysis on issues shaping New Hampshire’s future.”
Edward Hopper – The Lee Shore:
It’s a Great Time to be an
Economist:
Has Bear turned to Bull?
The Bursting Housing
Bubble…
Fiserv Case Shiller National House Price Index (-31.6%)
Index: 2000q1 = 100
-20.2%
…Means Homes No
Longer Equal to ATMs..
…Households Buckle Under the
Stress…
Household debt in delinquency or default, $ bil, annualized
1,000
Default
90-120 days
60-90 days
30-60 days
30 days
900
800
700
600
Sources: Equifax, Moody’s Economy.com
500
400
300
200
100
0
00
01
02
03
04
05
06
07
08
…Large and Growing Capital Shortfall
Projected losses on assets as of 2008Q3, $ bil
1,200
1,000
800
600
Corporate
Commercial
mortgages
Consumer
loans
At risk mortgages
Foreclosure rate
Foreclosed mortgages
Loss rate
Mortgage loss
20,000,000
50%
10,000,000
50%
$1 trillion
400
200
Residential
mortgages
0
Banks
Other financial
Government
…Shattering the Collective
Psyche
Net % of businesses responding positively to Dismal survey
40
30
20
10
0
-10
-20
Source: Moody’s Economy.com
-30
03
04
05
06
07
08
09
Looking For Stability in the Financial
System…
Difference between 3 month Libor and Treasury bill yields
"TED" Rate
Difference Between 3 month LIBOR and 3 month T-Bill
6
10/10/08
5
4
Lehman Failure
3
SubPrime Shock
2
LTCM Y2K
Tech Bust
1
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
0
The Worst Downturn Since
the Great Depression
Recessions since World War II
Duration in Months
Recession
Expansion
Peak to Trough Trough to Peak
Peak
Trough
Dec 2007
Mar 2001
Jul 1990
Jul 1981
Jan 1980
Nov 1973
Dec 1969
Apr 1960
Aug 1957
Jul 1953
Nov 1948
Nov 2009
Nov 2001
Mar 1991
Nov 1982
Jul 1980
Mar 1975
Nov 1970
Feb 1961
Apr 1958
May 1954
Oct 1949
23
8
8
16
6
16
11
10
8
10
11
Average for past recessions
10
Sources: NBER, BEA, FRB, BLS, Moody's Economy.com
-120
92
12
58
36
106
24
39
45
37
Peak-to-Trough
% Change
Real
Nonfarm
GDP Employment
Jobless Rate
Low
High Change
-3.1
-0.4
-1.3
-2.9
-2.2
-3.1
-1.0
-1.3
-3.8
-2.7
-1.7
-4.3
-2.0
-1.5
-3.1
-1.3
-2.7
-1.4
-2.3
-4.4
-3.3
-5.1
4.4
3.8
5.0
7.2
5.6
4.6
3.4
4.8
3.7
2.5
3.4
9.3
6.3
7.8
10.8
7.8
9.0
6.1
7.1
7.5
6.1
7.9
4.9
2.5
2.8
3.6
2.2
4.4
2.7
2.3
3.8
3.6
4.5
-2.0
-2.7
4.4
7.6
3.2
Anecdotal evidence from the Fed
Bank of Boston, April 15, 2009
 Business activity continues to slow in the First District,
 Non-auto retail sector sales are better than expected.
 Manufacturers report ongoing year-over-year declines in
sales or orders, with the pace worsening in the first quarter.
 Consulting and advertising firms cite marked declines.
 Commercial and residential real estate markets remain in
the doldrums, although residential contacts see early signs
of improvement.
 Costs are generally declining.
 Real estate prices continue to fall, but most responding
manufacturers and advertising and consulting firms are
holding prices steady.
Comparing Recessions – So Far:
Percent Change in Employment
0.0%
-1.0%
-2.0%
-1.6%
-1.8%
-3.0%
-2.9%
-3.0%
-4.0%
-3.7%
-4.6%-4.6%
-5.0%
-6.0%
-5.8%
-6.4%
-7.0%
United States
-6.6%
New England
Maine
1990 Recession
New Hampshire
Dec07 to Mar09
Vermont
Home prices rose much faster
than income.
Maine, Annual Percent Change
20.0%
15.0%
10.0%
5.0%
0.0%
Income
Home Price
Source: FHFA and Bureau of Economic Analysis
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Sep-01
Mar-01
Sep-00
Mar-00
Sep-99
-5.0%
Home prices rose much faster
than income.
New Hampshire, Annual Percent Change
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
Se
p00
Se
p01
Se
p02
Se
p03
Se
p04
Se
p05
Se
p06
Se
p07
Se
p08
Se
p-
99
-10.0%
Income
Housing Price
Source: FHFA and Bureau of Economic Analysis
Home prices rose much faster
than income.
Vermont, Annual Percent Change
20.0%
15.0%
10.0%
5.0%
0.0%
Income
Home Price
Source: FHFA and Bureau of Economic Analysis
Sep-08
Mar-08
Sep-07
Mar-07
Sep-06
Mar-06
Sep-05
Mar-05
Sep-04
Mar-04
Sep-03
Mar-03
Sep-02
Mar-02
Sep-01
Mar-01
Sep-00
Mar-00
Sep-99
-5.0%
Homebuilding at a stand still.
Total Housing Permits
800
700
600
500
400
300
200
100
0
2001
Average
2002
Average
2003
Average
2004
Average
ME
Source: US Dept of Commerce
2005
Average
NH
VT
2006
Average
2007
Average
2008
Average
If and When?
Market is continuing to deteriorate in terms of
backlog of unsold homes and price declines
• Price decline is approaching that experienced in the early 1990s
Major problem now is buyers sitting on the
sidelines
• New construction is not adding much inventory (that’s good)
• Inventory in absolute terms is stable/modestly improving (that’s good)
To get buyers back in the game:
•
•
•
•
They need confidence they will have a job
They need confidence prices will not drop further
They need reasonable access to mortgage credit
They need low interest rates
Major national economic and buyer incentives
could take hold in second half of 2009 to
provide some stability, if not recovery.
50-50 chance we will see price and inventory
stability by the end of the year, but at low
levels
Look for a very gradual recovery, when it
comes
Variation in State Tax Structure
State and Local Government Revenue by Source 2005
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
From Federal
Government
Property Taxes
Sales Taxes
Individual Income
Taxes
Corporate Income
Taxes
From Non-Tax
Charges and Misc.
Source: The Tax Foundation
U.S. Average
Maine
New Hampshire
Vermont
35.0%
AMERICAN RECOVERY AND
REINVESTMENT ACT OF 2009
Recovery.gov
Save or create
• 15,000 jobs in ME
• 16,000 jobs in NH
• 8,000 in VT
Formula block grant awards 2/19/09
Fed agencies report use of funds
3/3/09
More reporting from Feds in May
States start reporting in July
Northeast Scores Big in Stimulus
Package – Source: Economy.com
Stimulus funding, $ per capita
> $1,850
$1,650 to $1,750
$1,750 to $1,850
< $1,650
ARRA 2009 funds for Education
Quoted amount ($)
Maine
New Hampshire
Vermont
Per Capita Amount
United States
Maine
New Hampshire
Vermont
Title I Grants
$13,000,000,000
$51,443,951
$37,644,428
$32,381,262
$43
$39
$29
$52
EDUCATION FOR THE 21st CENTURY
Child Care
IDEA, Part B State Development Block
Grants
Grant
Head Start
$12,200,000,000
$2,000,000,000 $2,100,000,000
$59,132,572
$6,757,950
$2,813,426
$51,284,643
$4,736,238
$1,359,668
$28,698,693
$2,823,372
$1,214,941
$40
$45
$39
$46
Source: Economy.com and Recovery.gov
$7
$5
$4
$5
$7
$2
$1
$2
Pell Grants
$15,636,000,000
$57,819,239
$37,433,673
$25,166,252
State Fiscal
Stabilization Fund
$53,600,000,000
$198,199,761
$205,981,865
$93,865,373
$51
$44
$28
$41
$176
$150
$156
$151
ARRA of 2009 targeted to
Education and Healthcare
Source: PolEcon Research, April 2009
ARRA of 2009 will see most of
the impact next year
Source: PolEcon Research, April 2009
A significant recession with
difficult challenges over the full
forecast period
 Global credit crisis and its after effects have pushed New England
economy into recession.
 Declining employment in the New England region (since first half
of 2008). Forecast to lose over 250,000 jobs in the region by end of
decline in 2010, or 3.6% of employment.
 Unemployment rate is expected to rise to highest rate since 1992,
to 9.2% in US, over 8% in the region by mid-2010.
 Housing price decline expected till 2010.
 Slow recovery expected ….in housing, employment and overall
regional economy.
Declining oil prices have
softened the blow.
When Will it End? (Economy.com)
Major Financial
Failures Abate
Employment
Bottoms
Foreclosures
Peak
House Prices
Resume Rising
Stock Market Housing Starts
Bottoms
Bottom
’08q1
’08q2
’08q3
Oil Prices
Peak
’08q4
’09q1
’09q2
’09q3
Home Sales
Bottom
House Prices
Bottoms
$ Rises
Fed Tightens
’09q4
’10q1
’10q2
’10q3
’10q4
Jobless Rate
Peaks
Extraordinary Writedowns
End
Right Place, Right Time.
Recasts- The Next Lee
Shore?
Northern New England Scores Well
Northern New England Economic Scoreboard for 2008
Ranking among the 50 states
(Rank of '1' is best; for example 1 is lowest tax rate, highest income, etc.)
Categories
Favorable Tax Climate (by burden on income, 2005)
Standard of Living (by poverty rate 2005-2007)
Most Livable State (CQ Press, 2008)
Safest State (CQ Press, 2008)
Child and Family Well Being (Annie E. Casey Foundation, 2007)
Education – High School Degree or better (2006)
Healthiest State (CQ Press, 2008)
Per Capita Income (2008)
Education – College Degree or better (2006)
ME
NH
VT
Rank Rank Rank
45
1
41
26
1
4
20
1
8
2
1
4
16
1
10
18
3
10
4
2
3
33
9
22
25
10
7
A full proof economic indicator!
New Hampshire Boat Registrations and Payroll Employment (000's)
105000
700
100000
650
95000
90000
600
85000
550
80000
75000
500
70000
450
65000
400
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
60000
NH Boat Registrations
NH Payroll Employment