ODU2015 National Outlook

8/9/2019 ODU2015 National Outlook

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Old Dominion University2015 National Economic

Outlook

anuary 2!" 2015

#arry $C%i&' (iler)ssociate *rofessor of Economics

www.odu.edu/forecasting
http://www.odu.edu/forecastinghttp://www.odu.edu/forecastinghttp://www.odu.edu/forecasting


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2014 Scorecard

Current macroeconomic fundamentals

Fed Watch

Outlook for 2015

he 2015 !udget

he "lo#al $conomic Outlook

he im%act of chea% oil

2015 Forecast

+

*resentation Outline


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2015 Old Dominion University NationalScorecard

,

2-+2.est-

1-/.

5-

0-0.

1-0.

0-0+.

2-55.

,-1.

istorical 201,(orecast

201,)ctual2012 201+

eal 4ross Domestic *roduct 4D*6 2.&'( 1.)2(

Em&loymentgro7t% 1.*5( 1.&0(

Unem&loyment rate .6 '.1 &.4

onsumer &rice inde8 C*96 1.)0( 1.22(

C*9:Core e8cludes food and energy61.')( 1.&1(

+;mont%


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310(

3'(

3*(

34(

32(

0(

2(

4(

*(

5

4ro7t% in 3eal 4ross Domestic *roduct 4D*6"

Seasonally ad>ustedannuali?ed rate

Source, !ureau of $conomic nalsis.

une 200/Dec- 200

Recession


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2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

3

Consumption Fixed Investment Net Exports Government

Contri=utions to 4D* 4ro7t%@ #ast 5 Auarters


)nnuali?ed *ercent C%ange


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*ersonal Consum&tion E8&enditures and 3eal Dis&osa=le*ersonal 9ncome

/

70

728000

748000

7*8000

7'8000

7108000

7128000

7148000

9ecession

9eal -is%osa#le :ncome

9eal ersonal Consum%tion $;%enditures

Billions of 3eal Dollars



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*ersonal Consum&tion E8&enditures and 3eal Dis&osa=le*ersonal 9ncome

10

7)8500

7108000

7108500

7118000

7118500

7128000

7128500

9ecession

9eal -is%osa#le :ncome

9eal ersonal Consum%tion $;%enditures

Billions of 3eal Dollars



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ouse%old De=t;to;9ncome 3atios" 1/!0@A1 :201+@A+

12Source, Federal 9esere !oard of "oernors.

Estimates =egan in 1/!0@A1

0

4

'

12

1*

20

-e#t Serice 9atio Financial O#ligations 9atio

(inancial O=ligations 3atio (O36 de=t service rent auto leases ot%ers6 F after;ta8 income6

De=t Service 3atio DS36 minimum de=t &ayments6 F after;ta8 income6

200@A+

200;0/

*eak

)ll;


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=ouseholds hae im%roed their #alance sheet

hough de#t leels are rising again8 households are

kee%ing their o#ligations in line with income

Consum%tion is %oised to continue its im%ortantcontri#ution to 9eal "- in 2015.

Summary

1+


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120+000

125+000

130+000

135+000

140+000

145+000

13,35

13,4/

, ont%s

ont%s

Nonfarm Em&loyment@


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0

2

4

*

'

10

12

14

1*

1'

9ecession nem%loment 9ate u*rate

*ercent

1

US Unem&loyment Situation

)verage 5-+.

)verage /-1.

Seasonally ad>usted

Source, !ureau of


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)ctual vs *ro>ected #a=or (orce *artici&ation3ates

1

)nnual *ercent" 1/0;201,

5'

5)

*0

*1

*2

*+

*4

*5

**

*&

*'

ctual !ectionsH

Source, !ureau of


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#a=or (orce (lo7s from *rior ont%

1!

-

500

1+000

1+500

2+000

2+500

3+000

3+500

4+000

4+500

5+000

In Thousands

Do7n ;12. from Dec- 201+

U* 11. from Dec- 201+

Source, !ureau of


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"ood to hae slow wage growth right now

Slow wage growth and la#or market slack suggest

a good deal of cclical unem%loment remains.

9a%id wage growth with slack would suggest mostof the unem%loment was structural and those

without o#s would #e unlikel to get new ones.

Structural vs- Cyclical Unem&loyment

1/


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324 344, 330 3,14 35 401/ 4030 40544 40/25 400 4101 412/5 4145 4140

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

e%ession our() Ernin"s Emp(o)ment Cost Index

*rivate Gage 4ro7t%

20

)nnual *ercent C%ange anuary 200 : Decem=er 2

Source, !ureau of


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he la#or market im%roed dramaticall in 2014.


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)nnual Cor&orate *roIts

2+

)fter


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&0

'0

)0

100

110

Small Business O&timism 9nde8 1/!1006

2,

National (ederation of 9nde&endent Business

Source, >ational Federation of :nde%endent !usiness and Old -ominion niersit $conomic Forecasting roect.


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340

320

0

20

40

*0

Net *ercentage 3es&onding

(irms E8&ecting $Better' or $Gorse' Conditionsin ont%s

25

*ositive Jalue eans a>ority E8&ect Better Conditions

Source, >ational Federation of :nde%endent !usiness.

ore res&ondents e8&ectconditionsto =e $=etter' in mont%s

ore res&ondents e8&ectconditionsto =e $7orse' in mont%s

(irst E8&ectation of $=etter' conditions

in 2, mont%sH


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(ED Gatc%

2


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When will the Fed raise the Federal Funds 9atetarget

Will short3term rates increase immediatel whenthe target rate starts to increase

2


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$nding of D$

>ormaliEation and O%erational 9eadiness esting

Continuation of considera#le timeG language

Forward guidance now using %atientG language

he dawn of dissentsH in -ecem#er meeting

+ dissents for the Irst time since 2011

2!

onetary *olicy in 201,


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30,3

31/3

324

335

344,

353

330

3/22

3,14

304

35

400,/

401/

402

4030

40452

40544

4034

40/25

40,1/

400

41000

4101

411,3

412/5

4135

4145

4154,

4140

41/30

41,21

4113

-

-4

-2

0

2

4

,

-2.,4

0.0

0.2

u-i S'do# Fed Funds te Fed Funds Ee%tive te &)(or 16 u(e 2/

S%ado7 3ate 4iven Current *oli


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(ederal 3eserve Balance S%eet" anuary 200 :Decem=er 201,

Source, Federal 9esere !oard of "oernors.

0

500000

1000000

1500000

2000000

2500000

+000000

+500000

4000000

Fed genc -e#t ortgage3!acked Securities urch


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+1

Kield Curve Com&arisons

1O +O *O 1?9 2?9 +?9 5?9 &?9 10?9 20?9 +0?9

0

0.5

1

1.5

2

2.5

+

+.5

4

2.5

3.-

Source, nited States -e%artment of the reasur.

*ercent


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(OC E8&ectations of *olicy (irming

+2

E8&ected year of Irst increase in target federal funds rate

0

2

4

*

'

10

12

14

1*

1 1 1

0

1+

12

1,

15

2

+

2 2

0 0 0 0

2014 2015 201* 201&

(OC eeting Dates

Num=er of 3es&ondents

Source, !oard of "oernors of the Federal 9esere and Old -ominion niersit $conomic Forecasting


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$r%'

7pri(

8une

8u()

Septem9er

:%to9er

;e%em9er

0 0.1 0.2 0.3 0.4 0.5 0. 0./

0.13

0.13

0.2

0.2,

0.3

0.4/

0.1

++

arket E8&ectations of *olicy (irming (utures


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Fed will need to,

9educe the siEe of its #alance sheet

>ormaliEe short3term interest rates

ccom%lishing #oth o#ecties will reLuire far morethan ust adustments to the target rate

What does the Fed do if inBation remains low

+,

G%at can 7e e8&ect from t%e (ed in 2015L


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Gas%ington Gatc%

+5


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+

4overnment S&ending in 2015

-efenceN 7*+1

>on3-efenceN 75+4

=ealthcareN 718045

:ncome SecuritN 75+*

Social SecuritN 7)0+

>et :nterestN 7252

(K 2015 (ederal Budget *ro&osal" Billions of Dollars

1-1


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4lo=al Economy Gatc%

) #ooming


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*ro>ected C%ange in 4ro7t% for Our a>or


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-1.0

0.0

1.0

2.0

3.0

4.0

5.0

-0. -0.2

,0

C*9 9nation : )ll 9tems Kear over Kear6

Euro )rea


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71.2' trillion initial %lan

7&0 #illion each month

O%en3ended

sustained adustmentG in inBation

here are some er uniLue issues with $uro PoneD$ gien the Iscal soereignt of the countries.

rogram must utiliEe each >ational Central !ank@>C!A to make %urchases.

Who takes the losses

Auantitative #ockerung

,1


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0

20000

40000

-0000

,0000

100000

120000

Greece


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Oil Gatc%

,+


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>0

>20

>40

>-0

>,0

>100

>120

>140

>1-0

>142.52

>32.,

>4,.//

About $24 of the $55 decrease can be

attributed to demand factors

,,

Oil S&ot *rices

*rice of a $Barrel' of Oil anuary 2005 : anuary 201

Source, nited States $nerg :nformation dministration.


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*ositive

71000 %er household

$Luialent to a 7100 #illion ta; cut

Negative

"lo#al contraction

erha%s a .2 to .5 ( decrease in I;ed inestment

Certain regions ma feel the sLueeEe


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,

Nonresidential (i8ed 9nvestment

)nnual Energy 9ndustry S%are

0*

5*

10*

15*

20*

25*

22.5/*

20./,*



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National Outlook for 2015

,

2-+2.est

+-0,.

1-0.

5-

0-0. 1-/.

1-0. 1-.

0-10.

2-!.

,-10.

istorical 2015(orecast2012 201+ 201,

al 4ross Domestic *roduct 4D*62.&'( 1.)2(

Em&loymentgro7t% 1.*5( 1.&0(

Unem&loyment rate .6 '.1 &.4

onsumer &rice inde8 C*96 1.)0( 1.22(

C*9:Core e8cludes food and energy61.')( 1.&1(

+;mont%


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ODU2015 National Outlook

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