Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
The U.S. Economic Outlook: Turbulent Times Presented by: Sara L. Johnson Managing Director Global Macroeconomics Group DRI-WEFA August 7, 2001 1 1 1991-2000 Was a Great Decade The unemployment rate fell from 7% to 4%. Core inflation subsided from 5.5% to 2.5%. Productivity and real wage growth accelerated. Household net worth doubled. The federal budget shifted from deficit to surplus. Potential real GDP growth surged to 4%, its fastest pace since the mid-1960s. 2 2 The U.S. Economy’s Potential Growth Rate Doubled in the 1990s 8 (Percent change) 6 4 2 0 -2 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 3 Actual Real GDP Potential Real GDP 3 Business Investment’s Share of GDP 15 (Nominal investment as a percent of GDP) 12 9 6 3 0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 4 Structures Equipment & Software 4 Productivity Growth Reached Unsustainable Rates (Year-over-year percent change) 5 4 3 2 1 0 1965 1970 1975 1980 1985 Total Factor Productivity 1990 1995 2000 2005 2010 Full-Employment Labor Productivity 5 5 The Good Times Are Over--for Awhile The stock market is down. Energy prices are up. Household debt is at a record high, while saving is at a record low. Internet companies are crashing. Business investment is falling. The U.S. has a huge trade deficit. 6 6 A U. S. Rebound Will Take Time Monetary and fiscal stimulus is in place. But lower interest rates won’t eliminate the excess capacity that is depressing business investment. A strong dollar and weakening global economy are reducing exports. Yet, consumers refuse to become discouraged. An end to inventory decumulation will help to revive economic growth. 7 7 The U.S. Economy’s Growth Has Stalled and Unemployment Is Rising 8 7 6 5 4 3 2 1 0 (Percent change, 1996$) 1997 8 1998 1999 (Percent ) 2000 2001 Real GDP Growth 2002 2003 8 7 6 5 4 3 2 1 0 2004 Unemployment Rate 8 Manufacturing Production Is in Recession 10 8 6 4 2 0 -2 -4 -6 -8 (Percent change, annual rate) 1997 1998 1999 2000 2001 2002 2003 2004 9 9 U.S. Inflation Will Subside as Unemployment Rises 5 (Year-over-year percent change) 4 3 2 1 0 -1 -2 1997 1998 CPI 1999 2000 2001 Producer Price Index 2002 2003 2004 2005 Employment Cost Index 10 10 Crude Oil Prices Will Decline 70 (Refiners’ acquisition cost, dollars per barrel) 60 50 40 30 20 10 0 1974 1978 1982 1986 1990 1994 Current Dollars 1998 2002 2006 2010 2001 Dollars 11 11 The Federal Reserve Has Lowered Rates Quickly 9 (Percent ) 8 7 6 5 4 3 1997 1998 1999 Federal Funds Rate 2000 2001 2002 10-Year Treasury Yield 2003 2004 Mortgage Rate 12 12 The Technology Bubble Has Burst: Nasdaq and S&P 500 Indexes 5000 3000 4000 2400 3000 1800 2000 1200 1000 600 0 0 1995 1996 1997 1998 1999 2000 2001 Nasdaq S&P 500 13 13 From Bull Market to Bear Market: Returns on S&P 500 Stocks and Treasury Bonds (Percent) 36 30 24 18 12 6 0 -6 -12 1990 1992 1994 1996 Stock Market Return 1998 2000 2002 2004 10-Year Treasury Bond Yield 14 14 The Personal Saving Rate Plummeted as Household Net Worth Soared 12 (Percent of disposable income) 6.5 10 6.0 8 5.5 6 5.0 4 4.5 2 4.0 0 3.5 1980 15 (Ratio) 1983 1986 1989 Saving Rate 1992 1995 1998 2001 2004 Net Worth/Disposable Income 15 The Rising Household Debt Service Burden 700 (Thousands of persons) (Percent of disposable income) 15 600 14 500 13 400 12 300 11 200 10 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Weekly Initial Unemployment Claims Debt Service Burden 16 16 Consumer Spending Outpaced Disposable Income Growth in 1999-2000 6 (Percent change, chained 1996 dollars) 5 4 3 2 1 0 -1 1986 1988 1990 1992 1994 1996 Consumer Spending 1998 2000 2002 2004 Disposable Income 17 17 A Mild Downturn in Sales of Light Vehicles 20 (Millions of units) 16 12 8 4 0 1972 1976 1980 1984 1988 1992 1996 2000 2004 18 Light Trucks Cars 18 Falling Interest Rates Support Home-Building 2.0 (Housing starts, millions of units) 1.6 1.2 0.8 0.4 0.0 1980 1984 1988 1992 Single-Family 1996 2000 2004 Multi-Family 19 19 Computers and Electronics Lead the Decline in Capital Goods Orders 1000 (Billions of dollars, annual rates) 800 600 400 200 0 1994 20 1995 1996 Total Nondefense 1997 1998 1999 2000 Computers & Electronics 2001 Other 20 A Retrenchment in Business Fixed Investment (Percent change, current dollars) 25 20 15 10 5 0 -5 -10 -15 Structures Computers 2000 2001 Software 2002 Communic. Equipment 2003 21 21 Venture Capital Investments Have Retreated (Billions of dollars) 120 100 80 60 40 20 0 1994 22 1995 1996 1997 1998 1999 2000 2001* * First half, annual rate 22 Most U.S. Venture Capital Still Goes to Information and Communications Industries (Percent of total, first half of 2001) Biomedical & Health 11% Computers & Electronics 14% Other 8% InternetSpecific 32% Communications 15% Computer Software 20% 23 Source: National Venture Capital Association and Venture Economics 23 Which States Are at Risk as Communications and Information Technologies Consolidate? (Percent of employment in communications and IT, 2000) 4.9 to 6.6 3.0 to 4.4 2.1 to 2.9 1.2 to 1.9 24 24 Global Uncertainties in 2001 U.S. - A pause in growth or a recession? Latin America - What if Argentina devalues? Europe - Part of the problem or part of the solution? Japan - Another decade of stagnation? Asia - After initial progress, is Asia relapsing? 25 25 The World Economy’s Growth Is Weakening (Percent change in real GDP) 7 6 5 4 3 2 1 0 -1 Canada Mexico South America 2000 Europe 2001 Japan Other Asia 2002 26 26 Real U.S. Exports and Imports Are Cyclical (Year-over-year percent change) 16 12 8 4 0 -4 1996 1997 1998 1999 2000 Real Exports 2001 2002 2003 2004 Real Imports 27 27 Western and Southern States Will Achieve the Fastest Employment Growth (Annual percent change, 2000 to 2005) 1.58 to 4.03 1.07 to 1.58 0.91 to 1.07 0.54 to 0.91 28 28