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

2. Today’s Agenda

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

4. Headlines

5. 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%

6. 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

7. The Great Recession: Employment

8. NY Times Headline

9. 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

10. The Recession is over?

11. 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

12. Total Private Employment – U.S.

13. Total Private Employment - Ohio

14. Employment - % Change

15. Unemployment Ohio/National

16. How large is the output gap?

17. Jobless Recovery?

18. Housing Prices

19. Encouraging Signs

20. Manufacturing

21. Exports

22. Corporate Profits

23. Stock Market

24. Real Wages

26. Household Debt

27. 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

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

29. 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 % % %
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 ,

30. Projections for the future: Employment

31. Inflation Projections

32. Good News for You!

33. 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.

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