1. Today’s Economic Situation: The Great Recession, The Recovery, Where We (May Be) Going? Principles of Macroeconomics 7/20/12

2. Today’s Agenda

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

4. Headlines

5. Historical Perspective Recession Year Peak Unemployment Trough of GDP change Duration (months) 20016.4-0.6%8 19907.1-1.2%8 198110.8-3.4%16 19807.8-2.4%6 19739.0-4.3%16 Average7.0-2.3%10.8

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

8. NY Times Headline

9. 9 Great Recession vs. Great Depression 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)

10. The Recession is over?

12. The recession is over? Officially ended in June 2009. Means the worst (trough) 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

13. Total Private Employment – U.S.

14. Total Private Employment - Ohio

15. Employment - % Change

16. Unemployment Ohio/National

17. Unemployment Youngstown/U.S.

18. Unemployment by level of education

19. How large is the output gap?

20. Jobless Recovery?

21. Manufacturing

22. Exports

23. Corporate Profits

24. Stock Market

25. Encouraging Sign for the Future

26. What has not rebounded: Housing Prices

27. What has not rebounded: Construction Spending

28. What has not rebounded: Firm borrowing

29. Household Debt

30. Real Wages

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

33. Source: Bureau of Economic Analysis Federal Reserve Board, FOMC Minutes,

34. Projections for the future: Employment

35. Inflation Projections

36. Good News for You!

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

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