1
NMTAEconomic Forecast
November 9, 2011
Jim Hebert
Hebert Research, Inc.
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2011 Nobel Prize WinnersThomas Sargent and Christopher Sims
1. Structural Macroeconomic Model(X,Y) = (Y,X)
2. Mathematical Model - Rate of Change3. Statistical Model - Historical Variables that
do not change:
X= el+allX-1 + a21X-2 +BllYl + b21Y-2 + cllZ-1 + CZ ~ Z+ -elY= c2 + aEX-1 + a22X-2 + buy1 + b22Y-2 + CEZ-+ ~c22Z-2 + e2Z= c3 + a13X-1 + ~ 2 ~X+- 2b i3Y-I + b23x2 + c ~ ~ + Z c2-3Z~-2 + e3
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Market Demand Based on Conditional Probabilities
• Where P(Xi Y│ j) = Pij / (∑ Pij)
• X1 = Ability to purchase
X2 = Willingness
X2 = Delayed Decision
4
Demand Equation For Marine Products and Service
• d = f {Hp + Eu}
• Where beta home price – 0.297• Employment – 0.685• R2 = 0.878
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This is WA’s Worst Downturn in Non-Residential Construction in 30 years
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Single-Family Home Prices Continue to Decline
7
More Foreclosures Can Be Expected
8
Housing Indicators
2006 2007 2008 2009 2010 2011 2012 2013
9
Income and Employment
10
Nonfarm Payroll Employment
2006 2007 2008 2009 2010 2011 2012 2013
11
WA Employment is Still in the Hole
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WA State Businesses Full Time Employees
Mean 42.49Std. Deviation 137.473Kurtosis 46.975
Number PercentageLess than 10 65.0%
11 to 20 10.8%21 to 40 10.2%
41 to 100 7.0%More than 101 7.0%
Number of Full-Time Employees
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Unemployment Rate (% of Labor Force)
Unemployment Rate (Percent of Labor Force) 2009 2010 2011 2012 2013
November Forecast, Preliminary 9.30% 9.60% 9.20% 9.10% 8.60%
2009 2010 2011 2012 20138.00%
8.20%
8.40%
8.60%
8.80%
9.00%
9.20%
9.40%
9.60%
9.80%
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Education and Unemployment
Education Unemployment Rate
Less than a high school education 13.8%
High School graduate, no college 9.6%
Some college or associate degree 8.3%
Bachelor's degree or higher 4.4%
15
Software Publishing Employment is Growing
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Boeing Has Over 7 Years of Commercial Orders on its Books
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Manufacturing Employment
Manufacturing Employment (Thousands) 2009 2010 2011 2012 2013
November Forecast, Preliminary 265.5 257.9 268.1 277.1 282.8
Percent Change -8.80% -2.80% 3.90% 3.30% 2.10%
2009 2010 2011 2012 2013245
250
255
260
265
270
275
280
285
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WA State BusinessesAnnual Gross Revenue
19
Stock Market Volatility has Spiked
20
M2 Money Stock
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Current Market Conditions
Current Last Week Week change Last Year Year Change
Fed Funds 0.25% 0.25% 0 0.25% 0
Prime Rate 3.25% 3.25% 0 3.25% 0
Crude Oil $94.16 $93.96 $0.20 $84.69 $9.47
Unleaded Gasoline $2.65 $2.71 ($0.06) $2.21 $0.44
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Confidence in Overall Economy
0 1 2 3 4 5 6 7 8 9 10
Jan-11
0.0372670807453
416
0.0496894409937
888
0.0434782608695
652
0.0745341614906
832
0.2049689440993
79
0.1304347826086
96
0.1739130434782
61
0.1677018633540
37
0.0993788819875
777
0.0062111801242
236
0.0124223602484
472
Apr-11
0.0310559006211
18
0.0496894409937
888
0.0248447204968
944
0.0869565217391
305
0.1552795031055
9
0.1614906832298
14
0.1987577639751
55
0.1428571428571
43
0.1118012422360
25
0.0310559006211
18
0.0062111801242
236
Aug-11
0.0419161676646
707
0.0419161676646
707
0.0778443113772
455
0.1497005988023
95
0.1976047904191
62
0.2095808383233
53
0.1497005988023
95
0.0838323353293
413
0.0299401197604
79
0 0.0179640718562
874
2.5%
7.5%
12.5%
17.5%
22.5%
Overall Confidence in the Economy P
erc
en
tage
11-Jan 11-Apr 11-Aug 11-Nov
Mean 5 5.2 4.4 5.17Std. Deviation 2.2 2.2 2 1.669Kurtosis 0.4 0.4 0.2 -0.828
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Future Health of the Economy
How do you foresee the health of the local economy twelve months from now?
(0-10 Scale)
0.0%
10.0%
20.0%
30.0%
40.0%
Perc
enta
ge
Rating 2.4% 1.8% 6.0% 7.8% 10.2% 29.3% 20.4% 12.0% 7.2% 1.2% 1.8%
0 1 2 3 4 5 6 7 8 9 10
11-Aug 11-Nov
Mean 5.2 5.52
Std. Deviation 2 0.994
Kurtosis 0.5 1.99
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Total Revenue
Change PercentageDecrease of 25% or more 5.9%
Decrease 1% to 24% 15.0%No Change 31.5%
Increase 1% to 10% 25.2%Increase 11% to 25% 11.8%
Increase more than 26% 10.7%
Forecasted Change in Total Revenue for Next 12 Months Compared to the Last 12 Months
11-Aug 11-Nov
Median 0 2
Mean 6.3 7.9
Std. Deviation 23.8 22.6
Kurtosis 6.5 15.2
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Total Revenue
Percent of Firms Expecting an Increase In Revenues
47.6%
0.0%
20.0%
40.0%
60.0%
80.0%
2007 2008 2009 2010 2011
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Expenses and Costs
Number PercentageDecrease 5.7%
No Change 31.8%Increase 1% to 5% 29.5%
Increase 6% to 10% 11.9%Increase 11% to 20% 13.1%
Increase more than 20% 8.0%
Percentage Change in Expenses and Costs
11-Aug 11-Nov
Median 3.5 5
Mean 7.2 6.1
Std. Deviation 16 6.8
Kurtosis 21.6 2.2
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Overall Business Climate
How would you rate the overall quality of the business climate in Washington, and whether the
state government is doing everything it can to retain and promote business? (0-10 Scale)
0.0%
10.0%
20.0%
30.0%
Perc
enta
ge
Q1 8.9% 4.5% 14.0% 10.2% 17.8% 21.0% 12.1% 5.7% 4.5% 0.0% 1.3%
Q2 10.6% 3.2% 10.1% 15.4% 13.3% 20.2% 11.7% 9.0% 4.8% 1.6% 0.0%
0 1 2 3 4 5 6 7 8 9 10
Q1 Q2 Q3
Mean 4 4.1 4.45
Std. Deviation 2.2 2.3 1.7
Kurtosis -0.3 -0.6 1.34
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Federal Debt and Recovery
Currently, the US Treasury represents $9.7 trillion of securities outstanding and comprises 95% of the total issuance of fixed income securities with a AAA rating. Which of the following
economic scenarios do you most agree with?
Don't Know/ Refused, 8.6%
If the debt ceil ing were raised, federal spending reduced and taxes were
increased, this would result in an economic recovery.,
17.2%
The lack of an economic solution to the problems of
unemployment, major public debt and lack of
competitiveness will continue to prolong the
economic recovery., 74.2%
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Consumer Price Index
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US LMV Sales are Recovering Slowly
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Consumer Confidence is Very Weak
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Marine Industry Economic Impact for 2012
Economic value Employment
Direct Impact $2.2 b 10,948
Indirect Impact $826.4 M 11,129
Induced Impact $971.9 M 6,481
Total Output $3.998 b 28,558
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2011 Crisis of Confidence – C5
• Consumer Confidence
• Business Confidence
• Investors Confidence
• Government Confidence
• International Confidence