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Network For Value Chain Excellence
Are We Out of the Woods Yet?Economic Update & Outlook
September 172014
• Is It Getting Better – or Worse?• It’s All Getting Better – Slowly!• Waiting for Drivers of Growth• Consumer is still The Key • 3% Increase in GDP in 2015?
Economic Update & Outlook
At Record High
S&P 500 IndexRecovered 2013 Q1(After 6 Years)
At Record High
Industrial ProductionRecovered 2013 Q3(After 6 years)
Recovered
Recovered
At Record High
Real GDPRecovered 2011 Q2(After 3 Years)
At Record High
Corporate ProfitsRecovered 2010 Q3(after 4 years)
Recovered
Recovered
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
1.3
3.9
1.7
3.9
2.7 2.5
-1.5
2.9
0.8
4.6
2.31.6
2.5
0.1
2.7
1.8
4.5
3.5
-2.1
4.2
GDP Surged in Q2 2014(Percent Change Real GDP)
2009 2010
U. S. Bureau of Economic Analysis, August 28, 2014
2011 2012 2013 2014
LatestAvg. for 20 Quarters = 2.2%
GDP 20 Quarter RecoveryAt Below Average Pace
U. S. Bureau of Economic Analysis, average growth 20 quarters post recession
10 Recessions 2009 Q3 - 2014 Q2
2.2%
4.2%
GDP Component 2012Growth
2013Growth
U. S. GDP (Output) 2.8% 2.2%Consumer Spending 2.2 2.4Gross Investment 9.5 4.9Residential Construction 12.9 11.9Non-Resid. Construction 12.7 -0.5Government Spending -1.0 -2.0
Growth Drivers Were “Worse” in 2013
U. S. Bureau of Economic Analysis, GDP Accounts, inflation adjusted
GDP Component 2013Growth
20141st Half
U. S. GDP (Output) 2.2% 1.1%Consumer Spending 2.4 1.9Gross Investment 4.9 5.3Residential Construction 11.9 1.0Non-Resid. Construction -0.5 6.2Government Spending -2.0 0.3
2014 GDP Off to A Slow Start
U. S. Bureau of Economic Analysis, GDP Accounts, inflation adjusted
Government Contribution to GDPTurned Negative During Recovery
U.S. Bureau of Economic Analysis
Stimulus
• Accounts for 70% of GDP…but..• Consumer not driving recovery• Paying off debt & saving more• Long-term growth 3.6% year• 2013 growth in low gear (2.0%) • Is this to be the “new normal?”
Consumer is Key to GDP
But Year-Over-Year RealRetail Sales Growth HasFlattened Out at 2.5%/Yr
At Record High
Real Retail Sales
Recovered 2012 Q4(after 5 years)
Why Consumers Worry:American Dream Elusive
Worry Meter
• Middle Class Struggles• Still Paying Off Debt• Real Incomes Stagnant• Job Growth Slow• Unemployment High
Productivity is up ButReal Hourly Worker PayLittle Changed Since 1978
Most Americans Are Not Benefitting From Greater Productivity
Productivity
Real Hourly Pay
Profits Wages
Corporate Profits As % GDP At Record High - Wages As % GDP At Record Low
Profits/GDP
Wages/GDP
Babe Ruth, Baseball Player Herbert Hoover, President
In 1930, how did Babe Ruth explain why hissalary of $80,000 was higher than that of U.S. President Herbert Hoover…?
That’s because I Had a better yearthan Hoover…!
U.S. Regains Lost Jobs – Finally!
U. S. Bureau of Labor Statistics, Seasonally Adjusted
Jan. 2008: 138,365,000 May 2014: Recovery
Time Period: 7 yrs 5 mos
Feb. 2010 Bottom
U. S. Bureau of Labor Statistics, Seasonally Adjusted, Payroll Employment, August 2014
Arizona Has Regained 63% of Lost Jobs 114,600 Jobs (37%) Still to Recover
312,600 ArizonaJobs Lost (12%)
198,000 Jobs Regained (63%)
Sept. 2010 Bottom
Peak 2,687,000 Oct. 2007
Arizona Industry % Growth U.S. RankArizona Job Growth 1.9 14Health Care 3.2 4Financial Sector 4.9 5Retail Trade 2.8 14Food Services 3.5 19Construction 0.4 37Manufacturing -0.1 37Local Government -0.7 38
Latest Arizona Job GrowthRanked by Year-to-Date Growth: July 2014
U. S. Bureau Labor Statistics & W. P. Carey School of Business
Health Care Grew By Two milJobs Since Recession Began
Health Care Jobs(Right Scale)
All U.S. Jobs(Left Scale)
Top Ten Metro Destinations: 20131. Houston (55,620) 6. San Antonio (22,392)2. Dallas (32,641) 7. Charlotte (21,382)3. Phoenix (32,014) 8. Nashville (17,975)4. Denver (26,536) 9. Seattle (17,926)5. Austin (25,908) 10. Orlando (17,316)
Phoenix 3rd as DomesticMigration Destination
(Phoenix Gained 96,000 in 2006)
U. S. Census Bureau
Economic Outlook:
Picking UpSteam Into
2015
“The function of economic forecasting is to make astrologylook respectable.”
John Kenneth Galbraith
Indicator 2013 2014 2015Real GDP Growth 2.2% 2.3% 3.0%10 Year Treasury Note 2.4% 2.7% 3.3%Inflation (CPI) 1.5% 1.9% 2.1%Employment (Jobs) 2.3 mil. 2.6 mil. 2.6 mil.Unemployment Rate 7.4% 6.2% 5.7%
U.S. Economic OutlookTight Fiscal Policy, Uncertainty, and Slow Global Growth Affect U.S. GDP
W. P. Carey School of Business, ASU & Blue Chip Economic Indicators, Sept. 2014
3% GDP Growth? The Last Time GDP Grew By 3% Was 10 Years Ago!
-4.0-3.0-2.0-1.00.01.02.03.04.05.06.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
3.32.7
1.8
-0.3
-2.8
2.51.6
2.3 2.2 2.33.0
U. S. Bureau of Economic Analysis
Real Growth (%)
RECESSION AND RECOVERYRecession Cause Recession Cure
Too Much Confidence Increase Confidence
Too Much Credit Increase Credit
Too Much Spending Increase Spending
The Way Out of the Woods:The Paradox of Recovery
Real GDP Growth of 3% Will Signal Economy is “Out of the Woods”
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2012 2013 2014 2015
2.3 2.22.3
3.0Venti
Tall Grande
Real Growth (%)
Network For Value Chain Excellence
Are We Out of the Woods Yet?Economic Update & Outlook
September 172014
