Today’s Economic Situation: The Great Recession, The Recovery, Where We (May Be) Going? Principles of Macroeconomics 2/24/12.

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Presentation transcript:

Today’s Economic Situation: The Great Recession, The Recovery, Where We (May Be) Going? Principles of Macroeconomics 2/24/12

Today’s Agenda

Today’s Agenda Where We Are Today Historical Perspective Reasonable Expectations for the Future Summary

Headlines

Historical Perspective Recession Year Peak Unemployment Trough of GDP change Duration (months) 2001 6.4 -0.6% 8 1990 7.1 -1.2% 1981 10.8 -3.4% 16 1980 7.8 -2.4% 6 1973 9.0 -4.3% Average 7.0 -2.3%

The Great Recession Worst since the Great Depression. Duration: 18 months (Dec 2007-June 2009) 7 months longer than average Peak Unemployment: 10.2% 3.2% worse than average Trough GDP change: -4.1% 1.8% worse than average

The Great Recession: Employment

NY Times Headline

Great Recession vs. Great Depression (1929 – 1933) Great Recession (2007 –2009) GDP Growth (%) -29% -4.2% Unemployment (%) 25% 10.2% Inflation (%) -25% +2% DJIA Change (%) -89% -54% Bank Failures (#) 9,096 (50% of total) 137 (1% of total) 9 9 9

The Recession is over?

The recession is over? Officially ended in June 2009. Means the worst is over, does not mean the pain is over! We had two consecutive quarters of GDP growth. Still have unemployment of 8.3%, 14 million unemployed workers. Lots of major economic/social issues

Total Private Employment – U.S.

Total Private Employment - Ohio

Employment - % Change

Unemployment Ohio/National

How large is the output gap?

Jobless Recovery?

Housing Prices

Encouraging Signs

Manufacturing

Exports

Corporate Profits

Stock Market

Real Wages

Household Debt

Total Factor Productivity TFP–Measure of output changes not caused by observable inputs (labor and capital). Tells us how economy changes as a result of technology

Why It Matters: It’s very closely tied to median family income

Source: Bureau of Economic Analysis GDP Growth of 2.2% in 2009Q3 Auto Sales = 0.81% Residential = 0.43% Combined = 1.24% Home furnishings and equipment Recreational goods Food and beverages Business equipment and software Forecast 2009 2010 3% 2011 4% 2012 4.2% Inventories have fallen since 2008Q1 7 consecutive quarters sum of nearly $600 billion in inventory drawdowns Source: Bureau of Economic Analysis Federal Reserve Board, FOMC Minutes ,

Projections for the future: Employment

Inflation Projections

Good News for You!

Summary Recovery is not as strong as we would like, but many encouraging signs. Most leading indicators remain strong. Manufacturing, Exports, and Investments have all grown substantially. Consumer debt has declined. Projections for solid GDP and employment growth. Real GDP growth between 3-4%/yr., unemployment declines between 1.5-2%/yr. Recoveries take time (especially after a financial crisis). This recovery is stronger than previous (2003) recovery If history is a guide, the growth during the recovery will be greater than the decline during the Recession.

LEST WE FORGET THE TREND! U.S. Per Capita Income past 100 years