Recession, Recovery & the Repercussions of Both Springfield, MO September 18 th, 2012

U.S. Forecast

 A Pall of Uncertainty Hangs Over the Economy  Health Care Reform  Supreme Court ruling – now what?  Dodd-Frank  Fiscal Cliff / Taxaggedon  Euro  November Election

U.S. Forecast  A recent paper has created an index that quantifies economic policy uncertainty and analyzes its economic impact:  Measuring Economic Policy Uncertainty By Scott R. Baker Nicholas Bloom, and Steven J. Davis

U.S. Forecast  The index has three components: 1.Newspaper coverage of policy- related economic uncertainty. 2.Number of federal tax code provisions set to expire in future years 3.Disagreement among economic forecasters (Survey of Professional Forecasters)

U.S. Forecast  The economic impact of economic policy uncertainty The results of the statistical analysis in the paper show that higher policy uncertainty causes: 1.Lower private investment 2.Lower industrial production 3.Much lower employment

Economic Policy Uncertainty Index

U.S. Forecast  Sky Mall™ Policy:  An Expensive Policy that Fails to Achieve its Desired Outcome

U.S. Forecast

 Two Sky Mall™ Policies:  Health Care Reform  Community Living Assistance Services and Supports ended before it began  American Reinvestment and Recovery Act of 2009  Aka Stimulus Act

Why Didn’t the Stimulus Act Work?

 The Nun  The Nobel Prize Winner  Non-starter Stimulus Why Didn’t the Stimulus Act Work?

U.S. Forecast  Depleted Wealth  Still Weak Labor Market  A continuing downward force on consumer spending

U.S. Household Wealth (Trillions of $) Q1* 2012 Q1 Total Assets Financial Assets Home Equity Net Worth

U.S. Economic Outlook 2012 Q Q Q Q GDP % Change, Annual Rate Consumer Price Index % Change, Annual Rate Consumer Sentiment Consumption % Change, Annual Rate

U.S. Forecast

 What Can the Fed Do?  Slowing recovery in economy and labor market  June FOMC  Operation Twist Extended  August FOMC  Status quo

 Monetary Policy - September:  Fed Funds rate unchanged until second half of 2015  QE III  $40 billion per month – open ended  Mortgage backed securities  Is inflation a worry? U.S. Forecast

A Slippery Subject  Greece  Greek bailouts, haircut & the election are stays of execution and not pardons  Contagion concerns (PIIGS)  Euro still facing greatest threat since inception  Two possible outcomes for the Euro zone

The Euro and the Tacoma Narrows Bridge A Slippery Subject

 Economic Conjoined Twins:  The Housing Market  The Labor Market U.S. Forecast

 What’s Springfield to do?  Recite The Economic Serenity Prayer  Things you can change:  Dynamic educated labor force  Invest in transportation infrastructure  Don’t give up on economic development programs U.S. Forecast

Sean M. Snaith Sean M. Snaith, Ph.D.Director Institute for Economic Competitiveness (407) Thank you