UpdateontheNewEnglandEconomyandHousingMarketsBanker & Tradesman Real Estate Outlook BreakfastFebruary 27, 2013
Alicia Sasser Modestino, Senior EconomistNew England Public Policy CenterFederal Reserve Bank of Boston
The views expressed in the presentation are not necessarily those of either the Federal Reserve Bank of Boston or the Federal Reserve System.
AreasofFocus
• Employment situation
• Consumer and business confidence round‐up
• Housing situation
• Economic outlook for New England
NewEnglandEmploymentSituation
Good News: Employment and incomes are higher than they were one year ago.
• Employment is growing in most major industries.• Regional unemployment still below the national rate.• Personal incomes grew over the past year.
Bad News: Growth has been slower than the nation and unemployment ticked up over the summer.
• Job growth has been unsteady and lags behind the nation.• Unemployment rate increased slightly in July and August. • Growth of personal incomes has been below that of the U.S. each quarter over the past year.
IEmploymentgrowthinNewEnglandhasbeen
unsteadyin2012.
Source: Bureau of Labor Statistics, NBER, Haver Analytics
Monthly Employment Change, New England
‐60
‐50
‐40
‐30
‐20
‐10
0
10
20
30
40
Dec‐98 Dec‐00 Dec‐02 Dec‐04 Dec‐06 Dec‐08 Dec‐10 Dec‐12
Thou
sand
s of Job
s
Asaresult,year‐over‐yearemploymentgainsforNewEnglandwerebelowthatoftheU.S.
Annual Employment Growth
Source: Bureau of Labor Statistics, NBER, Haver Analytics
US
NE
‐6
‐4
‐2
0
2
4
6
Dec‐98 Dec‐00 Dec‐02 Dec‐04 Dec‐06 Dec‐08 Dec‐10 Dec‐12
Percen
t Cha
nge from
a Year E
arlier
New EnglandLast 12 months: +0.8%Since peak: -3.1%
United StatesLast 12 months: +1.6%Since peak: -2.5%
Byindustry,employmentgrowthinNewEnglandwasmixedcomparedtoayearearlier.
Source: Bureau of Labor Statistics, NBER, Haver Analytics
Annual Employment Growth by Industry
1.9
1.2
‐0.2
2.0
1.4
1.6
3.2
1.3
2.2
3.0
0.0
2.9
‐1.1
‐0.4
‐0.4
‐0.1
‐0.1
0.5
0.6
0.7
1.4
1.7
2.5
2.7
‐4 ‐2 0 2 4
Construction
Manufacturing
Government
Wholesale Trade
Finance
Retail Trade
Transportation, Warehousing, and Utilities
Other Services
Education & Health
Leisure & Hospitality
Information
Professional & Business Services
Percent Change, December 2011 ‐ December 2012
NE US
Aftertwoyearsofsteadyimprovement,NewEngland’sunemploymentratetickedupover
thesummerandnowstandsat7.3%.Unemployment Rates
Source: Bureau of Labor Statistics, NBER, Haver Analytics
NE
US
0
2
4
6
8
10
12
Dec‐98 Dec‐00 Dec‐02 Dec‐04 Dec‐06 Dec‐08 Dec‐10 Dec‐12
Percen
t
Year‐over‐year,theunemploymentratewasupslightlyfortheregion,butimprovedmarkedly
inConnecticutandRhodeIsland.
Source: Bureau of Labor Statistics, Haver Analytics
Unemployment Rates
5.1
10.2
5.7
6.7
7.3
8.6
7.3
7.8
5.2
11.0
5.2
6.9
7.0
8.1
7.2
8.5
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Vermont
Rhode Island
New Hampshire
Massachusetts
Maine
Connecticut
New England
United States Dec‐11
Dec‐12
PersonalincomecontinuedtogrowinNewEngland,althoughataslowerratethantheU.S.
Annual Personal Income Growth
Source: Bureau of Economic Analysis, NBER, Haver Analytics
NE
US
‐8
‐6
‐4
‐2
0
2
4
6
8
10
12
Q3‐98 Q3‐00 Q3‐02 Q3‐04 Q3‐06 Q3‐08 Q3‐10 Q3‐12
Percen
t Cha
nge from
Year E
arlier
ConsumerandBusinessConfidenceGood News: Confidence is higher than one year ago and forward looking indictors suggest greater growth.
• Business confidence increased in Massachusetts in January, reversing several months of declines.
• Consumer confidence among New England residents had been falling since October, but rebounded in February.
• Forward‐looking indicators point to greater expected growth over the coming six months for most of the New England states.
ConfidenceamongMassachusettsemployerstickedupinJanuary,justabovetheneutralmark.
AIM Business Confidence Index
Source: Associated Industries of Massachusetts, NBER
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
Jan‐01 Jan‐02 Jan‐03 Jan‐04 Jan‐05 Jan‐06 Jan‐07 Jan‐08 Jan‐09 Jan‐10 Jan‐11 Jan‐12 Jan‐13
Inde
x
Massachusetts
0
10
20
30
40
50
60
70
80
90
100
US NE US NE US NE
Consumer Confidence Present Situation Future Expectations
Feb‐12
Feb‐13
Overall,consumerconfidenceinNewEnglandisslightlyhigherthanayearagobutbelowtheU.S.
Consumer ConfidenceIndex, 1985 U.S. Average = 100
Source: The Conference Board, Haver Analytics
Forward‐lookingindicatorssuggestgreaterexpectedgrowthoverthecomingsixmonths.
Federal Reserve Bank of Philadelphia Leading Economic Index
Source: Federal Reserve Bank of Philadelphia.
‐6
‐4
‐2
0
2
4
Dec‐06 Dec‐07 Dec‐08 Dec‐09 Dec‐10 Dec‐11 Dec‐12
Percen
t
Recession
US
CT
ME
MA
NH
RI
VT
HousingMarketSituation
Good News: There are positive signs of recovery.
• Price declines have moderated in much of New England.• Sales and permits are up compared to a year ago.• Foreclosures have fallen sharply over the past year.
Bad News: The housing recovery continues to be slow.
• Regional house prices grew more slowly than the U.S.• Existing home sales and single family permits lag the nation. • Foreclosures are persistently high compared to historical levels.
Attheendof2012,housepricesinNewEnglandwereslightlyhigherthanayearago,butgrowing
muchmoreslowlythanthenation.Repeat‐Sales Home Price Indices
Source: FHFA, NBER, S&P/Case‐Shiller, Haver Analytics
‐25
‐20
‐15
‐10
‐5
0
5
10
15
20
Q4‐98 Q4‐00 Q4‐02 Q4‐04 Q4‐06 Q4‐08 Q4‐10 Q4‐12
Percen
t Cha
nge from
Year E
arlier
Recession
NE FHFA Purcharse Only
US FHFA Purchase only
US S&P Case‐Shiller
Year‐over‐year,housepricesfellinfourofsixNewEnglandstates.
FHFA Purchase‐Only House Price Index
Source: FHFA, NBER, S&P/Case‐Shiller, Haver Analytics
‐0.5
1.4
‐1.0
1.8
‐0.1
‐0.8
0.5
5.5
‐2.00 ‐1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00
Vermont
Rhode Island
New Hampshire
Massachusetts
Maine
Connecticut
New England
Boston
United States
Percent Change, Q4 2011 ‐ Q4 2012
InBoston,pricesneverfellasmuchasinsomemetropolitanareas,althoughrecoveryisstillslow.
Source: S&P/Case‐Shiller, NBER, Haver Analytics
S&P/Case Shiller Home Price Indices
‐20
‐15
‐10
‐5
0
5
10
15
20
25
Dec‐98 Dec‐00 Dec‐02 Dec‐04 Dec‐06 Dec‐08 Dec‐10 Dec‐12
Percen
t Cha
nge from
a Year E
arlier
Composite Index, Top 20 Cities
Composite Index, Top 10 Cities
Boston
Over2012,pricesinBostonincreasedbutlaggedbehindmostoftheComposite10cities.
S&P/Case Shiller Home Price IndicesPercent Change, Dec‐11 to Dec‐12
Source: S&P/Case‐Shiller, Haver Analytics
5.8
14.4
9.2
‐0.5
10.7
10.2
12.9
8.5
2.2
3.6
6.0
6.9
‐2 0 2 4 6 8 10 12 14 16
Washington DC
San Francisco
San Diego
New York
Miami
Los Angeles
Las Vegas
Denver
Chicago
Boston
Composite 10
Composite 20
ExistinghomesalesintheNortheastlagbehindtherestofthenationbutarestartingtocatchup.
Total Existing Home SalesSeasonally Adjusted at Annual Rates
Source: National Association of Realtors, NBER, Haver Analytics
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Jan‐00
Jan‐01
Jan‐02
Jan‐03
Jan‐04
Jan‐05
Jan‐06
Jan‐07
Jan‐08
Jan‐09
Jan‐10
Jan‐11
Jan‐12
Jan‐13
Inde
x, 1999 Av
erage = 1
USNortheastMidwestSouthWest
Single‐familyhousingpermitsinNewEnglandhaveshownlittleincreaseoverthepastyear.
Single Family Permits
Source: Census Bureau, NBER, Haver Analytics
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Dec‐98 Dec‐00 Dec‐02 Dec‐04 Dec‐06 Dec‐08 Dec‐10 Dec‐12
Inde
x, 1988 Av
erage = 1
United States
New England
Multi‐familyhousingpermitsinNewEnglandarereboundingmorestrongly.
Multi Family Permits
Source: Census Bureau, NBER, Haver Analytics
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Dec‐98 Dec‐00 Dec‐02 Dec‐04 Dec‐06 Dec‐08 Dec‐10 Dec‐12
Inde
x, 1988 Av
erage = 1
United StatesNew England
Foreclosures Started, All Loans
Foreclosureshavefallenfromtheirpeakbutremainpersistentlyhighcomparedtohistoricallevels.
Source: Mortgage Bankers Association, NBER, Haver Analytics
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Q4‐98 Q4‐00 Q4‐02 Q4‐04 Q4‐06 Q4‐08 Q4‐10 Q4‐12
Percen
t of M
ortgages
Recession
CT
ME
MA
NH
RI
VT
NE
US
NewEnglandEconomicPartnership’sEconomicOutlook
Employment• Employment forecast to grow more slowly than the nation.
Housing• House prices expected to post steady gains through 2016.
Overall Economic Growth• Real gross product for the region is expected to grow moderately along with the nation.
• Continued fiscal cliff negotiations are expected to slow growth but not derail the region’s recovery.
EmploymentinNewEnglandisexpectedtogrowmoreslowlythantheU.S.overthenext4years.
Source: New England Economic Partnership
Annual Growth Rate 2012‐16: Employment
2.0
1.31.1
1.4
1.1
1.51.3
1.5
0
1
1
2
2
3
US NE CT MA ME NH RI VT
Percen
t
Housepricesareexpectedtopoststeadygainsthrough2016formostNewEnglandstates.
Source: New England Economic Partnership
2006‐2016 Median House Price Change
‐15.0
‐10.0
‐5.0
0.0
5.0
10.0
15.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Percen
t Cha
nge from
Previou
s Year
US NECT MAME NHRI VT
NewEnglandisexpectedtogrowslowerthanthenationonaveragethrough2016.
Source: New England Economic Partnership
Annual Growth Rate 2012‐16: Gross State Product
3.1 3.1 3.1 3.1
2.4
3.6
2.3
2.8
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
US NE CT MA ME NH RI VT
Percen
t
0
0.5
1
1.5
2
2.5
1950 1957 1964 1971 1978 1985 1992 1999 2006 2013
New England Sports Index (NESI)
Inde
x 1920=1
(Bab
e Ru
th trad
ed to
the Yankees, th
e curse be
gins)
Celtics Reign of Terror (57-69) Multiple Bruins and
Celtics Championships
Buckner!
Patriots Super Bowl Wins
Yankees win Game 7 ALCS with walk-off homerun
Red Sox come back to beat Yankees in ALCS and win WS
Red Sox 2007 WS Champs
Sox miss playoffs
Note: Red Sox given favorable weights.
Bruins are back in black after NHL lockout
ButNewEnglandhasbeenthroughtoughtimesbefore...
Celtics beat Lakers to win 17th NBA Championship
Bruins win the Stanley Cup
Pats defeated by Giants in Superbowl, AGAINCelts defeated by Heat in Eastern Conference FinalsSox first losing season since 1997, worst since 1965