Economic OutlookWhen Will It End?
2009 Tri-State ASBO Conference
May 14, 2009
Dennis DelayNHCPPS
“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”
All of our reportsare available on the web:
www.nhpolicy.orgwww.nhpolicy.org
New Hampshire Center New Hampshire Center for Public Policy Studiesfor Public Policy Studies
Board of Directors
Donna Sytek, Chair
John B. Andrews
John D. Crosier
Shelia T. Francoeur
Chuck Morse
Todd Selig
Stuart Smith
James Tibbetts
Brian Walsh
Kimon S. Zachos
Martin Gross
Staff
Steve Norton
Dennis Delay
Ryan Tappin
“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”
Edward Hopper – The Lee Shore:
It’s a Great Time to be an Economist:
Has Bear turned to Bull?
The Bursting Housing Bubble…
Fiserv Case Shiller National House Price Index (-31.6%)
Index: 2000q1 = 100
-20.2%
…Means Homes No Longer Equal to ATMs..
Household debt in delinquency or default, $ bil, annualized
0
100
200
300
400
500
600
700
800
900
1,000
00 01 02 03 04 05 06 07 08
Default90-120 days60-90 days30-60 days30 days
Sources: Equifax, Moody’s Economy.com
…Households Buckle Under the Stress…
Projected losses on assets as of 2008Q3, $ bil
0
200
400
600
800
1,000
1,200
Banks Other financial Government
At risk mortgages 20,000,000Foreclosure rate 50%
Foreclosed mortgages 10,000,000Loss rate 50%
Mortgage loss $1 trillion
Residential mortgages
Consumer loans
Commercial mortgages
Corporate
…Large and Growing Capital Shortfall
Net % of businesses responding positively to Dismal survey
-30
-20
-10
0
10
20
30
40
03 04 05 06 07 08 09
Source: Moody’s Economy.com
…Shattering the Collective Psyche
Difference between 3 month Libor and Treasury bill yields
Looking For Stability in the Financial System…
"TED" RateDifference Between 3 month LIBOR and 3 month T-Bill
0
1
2
3
4
5
6
Jan-
94
Jan-
95
Jan-
96
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
LTCM Y2KTech Bust
SubPrime Shock
Lehman Failure
10/10/08
The Worst Downturn Since the Great Depression
Recessions since World War II
Recession Expansion Real NonfarmPeak Trough Peak to Trough Trough to Peak GDP Employment Low High Change
Dec 2007 Nov 2009 23 - - -3.1 -4.3 4.4 9.3 4.9Mar 2001 Nov 2001 8 120 -0.4 -2.0 3.8 6.3 2.5Jul 1990 Mar 1991 8 92 -1.3 -1.5 5.0 7.8 2.8Jul 1981 Nov 1982 16 12 -2.9 -3.1 7.2 10.8 3.6Jan 1980 Jul 1980 6 58 -2.2 -1.3 5.6 7.8 2.2Nov 1973 Mar 1975 16 36 -3.1 -2.7 4.6 9.0 4.4Dec 1969 Nov 1970 11 106 -1.0 -1.4 3.4 6.1 2.7Apr 1960 Feb 1961 10 24 -1.3 -2.3 4.8 7.1 2.3Aug 1957 Apr 1958 8 39 -3.8 -4.4 3.7 7.5 3.8Jul 1953 May 1954 10 45 -2.7 -3.3 2.5 6.1 3.6Nov 1948 Oct 1949 11 37 -1.7 -5.1 3.4 7.9 4.5
Average for past recessions 10 -2.0 -2.7 4.4 7.6 3.2
Sources: NBER, BEA, FRB, BLS, Moody's Economy.com
Jobless Rate
Peak-to-Trough% ChangeDuration in Months
Anecdotal evidence from the Fed Bank of Boston, April 15, 2009
Business activity continues to slow in the First District, Non-auto retail sector sales are better than expected. Manufacturers report ongoing year-over-year declines in
sales or orders, with the pace worsening in the first quarter. Consulting and advertising firms cite marked declines. Commercial and residential real estate markets remain in
the doldrums, although residential contacts see early signs of improvement.
Costs are generally declining. Real estate prices continue to fall, but most responding
manufacturers and advertising and consulting firms are holding prices steady.
Comparing Recessions – So Far:
Percent Change in Employment
-1.8%
-6.4%
-5.8%
-6.6%
-4.6%
-3.7%
-3.0% -2.9%
-1.6%
-4.6%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
United States New England Maine New Hampshire Vermont
1990 Recession Dec07 to Mar09
Home prices rose much faster than income.
Source: FHFA and Bureau of Economic Analysis
Maine, Annual Percent Change
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Sep
-99
Mar
-00
Sep
-00
Mar
-01
Sep
-01
Mar
-02
Sep
-02
Mar
-03
Sep
-03
Mar
-04
Sep
-04
Mar
-05
Sep
-05
Mar
-06
Sep
-06
Mar
-07
Sep
-07
Mar
-08
Sep
-08
Income Home Price
Home prices rose much faster than income.
Source: FHFA and Bureau of Economic Analysis
New Hampshire, Annual Percent Change
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Sep-9
9
Sep-0
0
Sep-0
1
Sep-0
2
Sep-0
3
Sep-0
4
Sep-0
5
Sep-0
6
Sep-0
7
Sep-0
8
Income Housing Price
Home prices rose much faster than income.
Source: FHFA and Bureau of Economic Analysis
Vermont, Annual Percent Change
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Sep
-99
Mar
-00
Sep
-00
Mar
-01
Sep
-01
Mar
-02
Sep
-02
Mar
-03
Sep
-03
Mar
-04
Sep
-04
Mar
-05
Sep
-05
Mar
-06
Sep
-06
Mar
-07
Sep
-07
Mar
-08
Sep
-08
Income Home Price
Homebuilding at a stand still.
Source: US Dept of Commerce
Total Housing Permits
0
100
200
300
400
500
600
700
800
2001Average
2002Average
2003Average
2004Average
2005Average
2006Average
2007Average
2008Average
ME NH VT
If and When? Market is continuing to deteriorate in terms of
backlog of unsold homes and price declines• Price decline is approaching that experienced in the early 1990s
Major problem now is buyers sitting on the sidelines• New construction is not adding much inventory (that’s good)• Inventory in absolute terms is stable/modestly improving (that’s good)
To get buyers back in the game:• They need confidence they will have a job• They need confidence prices will not drop further• They need reasonable access to mortgage credit• They need low interest rates
Major national economic and buyer incentives could take hold in second half of 2009 to provide some stability, if not recovery.
50-50 chance we will see price and inventory stability by the end of the year, but at low levels
Look for a very gradual recovery, when it comes
Variation in State Tax Structure
Source: The Tax Foundation
State and Local Government Revenue by Source 2005
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%
From FederalGovernment
Property Taxes
Sales Taxes
Individual IncomeTaxes
Corporate IncomeTaxes
From Non-TaxCharges and Misc.
U.S. AverageMaineNew HampshireVermont
AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009
Recovery.gov
Save or create • 15,000 jobs in ME
• 16,000 jobs in NH
• 8,000 in VT
Formula block grant awards 2/19/09 Fed agencies report use of funds
3/3/09 More reporting from Feds in May States start reporting in July
> $1,850
$1,750 to $1,850
$1,650 to $1,750
< $1,650
Northeast Scores Big in Stimulus Package – Source: Economy.com
Stimulus funding, $ per capita
ARRA 2009 funds for Education
Source: Economy.com and Recovery.gov
Title I GrantsIDEA, Part B State
Grants
Child Care Development Block
Grant Head Start Pell GrantsState Fiscal
Stabilization Fund
Quoted amount ($) $13,000,000,000 $12,200,000,000 $2,000,000,000 $2,100,000,000 $15,636,000,000 $53,600,000,000
Maine $51,443,951 $59,132,572 $6,757,950 $2,813,426 $57,819,239 $198,199,761New Hampshire $37,644,428 $51,284,643 $4,736,238 $1,359,668 $37,433,673 $205,981,865Vermont $32,381,262 $28,698,693 $2,823,372 $1,214,941 $25,166,252 $93,865,373
Per Capita Amount
United States $43 $40 $7 $7 $51 $176Maine $39 $45 $5 $2 $44 $150New Hampshire $29 $39 $4 $1 $28 $156Vermont $52 $46 $5 $2 $41 $151
EDUCATION FOR THE 21st CENTURY
ARRA of 2009 targeted to Education and Healthcare
Source: PolEcon Research, April 2009
ARRA of 2009 will see most of the impact next year
Source: PolEcon Research, April 2009
A significant recession with difficult challenges over the full forecast period
Global credit crisis and its after effects have pushed New England economy into recession.
Declining employment in the New England region (since first half of 2008). Forecast to lose over 250,000 jobs in the region by end of decline in 2010, or 3.6% of employment.
Unemployment rate is expected to rise to highest rate since 1992, to 9.2% in US, over 8% in the region by mid-2010.
Housing price decline expected till 2010. Slow recovery expected ….in housing, employment and overall
regional economy.
Declining oil prices have softened the blow.
When Will it End? (Economy.com)
’08q1 ’08q2 ’08q3 ’08q4 ’09q1 ’09q2 ’09q3 ’09q4 ’10q1 ’10q2 ’10q3 ’10q4
Stock MarketBottoms
Oil PricesPeak Home Sales
Bottom
Housing StartsBottom
EmploymentBottoms
House PricesBottoms
ForeclosuresPeak
Jobless RatePeaks
House PricesResume Rising
Major Financial Failures Abate
Extraordinary WritedownsEnd
Fed Tightens
$ Rises
Right Place, Right Time.
Recasts- The Next Lee Shore?
Northern New England Scores Well
Northern New England Economic Scoreboard for 2008Ranking among the 50 states(Rank of '1' is best; for example 1 is lowest tax rate, highest income, etc.)
ME NH VTCategories Rank Rank RankFavorable Tax Climate (by burden on income, 2005) 45 1 41Standard of Living (by poverty rate 2005-2007) 26 1 4Most Livable State (CQ Press, 2008) 20 1 8Safest State (CQ Press, 2008) 2 1 4Child and Family Well Being (Annie E. Casey Foundation, 2007) 16 1 10Education – High School Degree or better (2006) 18 3 10Healthiest State (CQ Press, 2008) 4 2 3Per Capita Income (2008) 33 9 22Education – College Degree or better (2006) 25 10 7
A full proof economic indicator!
New Hampshire Boat Registrations and Payroll Employment (000's)
60000
65000
70000
75000
80000
85000
90000
95000
100000
105000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
400
450
500
550
600
650
700
NH Boat Registrations NH Payroll Employment