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Economic Forecast Analysis: Insights from the NMTA and Nobel Laureates on Recovery Trends

This economic forecast report from NMTA, presented by Jim Hebert of Hebert Research, discusses the structural macroeconomic models and their implications for markets, particularly in the context of Washington State's downturn in non-residential construction. It highlights the contributions of 2011 Nobel Prize winners Thomas Sargent and Christopher Sims. Key indicators such as employment trends, housing market behaviors, consumer confidence, and the impact of foreclosures are analyzed, revealing a complex interplay of factors influencing the economy into 2012.

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Economic Forecast Analysis: Insights from the NMTA and Nobel Laureates on Recovery Trends

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  1. NMTA Economic Forecast November 9, 2011 Jim Hebert Hebert Research, Inc.

  2. 2011 Nobel Prize WinnersThomas Sargent and Christopher Sims • Structural Macroeconomic Model (X,Y) = (Y,X) • Mathematical Model - Rate of Change • Statistical Model - Historical Variables that do not change: X= el+allX-1 + a21X-2 +BllYl + b21Y-2 + cllZ-1 + CZ ~ Z+ -el Y= c2 + aEX-1 + a22X-2 + buy1 + b22Y-2 + CEZ-+ ~c22Z-2 + e2 Z= c3 + a13X-1 + ~ 2 ~X+- 2b i3Y-I + b23x2 + c ~ ~ + Z c2-3Z~-2 + e3

  3. Market Demand Based on Conditional Probabilities • Where P(Xi │Yj) = Pij / (∑ Pij) • X1 = Ability to purchase X2 = Willingness X2 = Delayed Decision

  4. Demand Equation For Marine Products and Service • d = f {Hp + Eu} • Where beta home price – 0.297 • Employment – 0.685 • R2 = 0.878

  5. This is WA’s Worst Downturn in Non-Residential Construction in 30 years

  6. Single-Family Home Prices Continue to Decline

  7. More Foreclosures Can Be Expected

  8. Housing Indicators

  9. Income and Employment

  10. Nonfarm Payroll Employment

  11. WA Employment is Still in the Hole

  12. WA State BusinessesFull Time Employees

  13. Unemployment Rate (% of Labor Force)

  14. Education and Unemployment

  15. Software Publishing Employment is Growing

  16. Boeing Has Over 7 Years of Commercial Orders on its Books

  17. Manufacturing Employment

  18. WA State BusinessesAnnual Gross Revenue

  19. Stock Market Volatility has Spiked

  20. M2 Money Stock

  21. Current Market Conditions

  22. Confidence in Overall Economy

  23. Future Health of the Economy

  24. Total Revenue

  25. Total Revenue

  26. Expenses and Costs

  27. Overall Business Climate

  28. Federal Debt and Recovery

  29. Consumer Price Index

  30. US LMV Sales are Recovering Slowly

  31. Consumer Confidence is Very Weak

  32. Marine Industry Economic Impact for 2012

  33. 2011 Crisis of Confidence – C5 • Consumer Confidence • Business Confidence • Investors Confidence • Government Confidence • International Confidence

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