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WHAT JUST HAPPENED AND WHERE DO WE GO FROM HERE?

WHAT JUST HAPPENED AND WHERE DO WE GO FROM HERE?. Dennis K. Winters Chief, Office of Economic Advisors Wisconsin Department of Workforce Development. December 3, 2010. WELCOME. FIRST, YOU HAVE TO UNDERSTAND WISCONSIN’S ECONOMY.

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WHAT JUST HAPPENED AND WHERE DO WE GO FROM HERE?

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  1. WHAT JUST HAPPENEDANDWHERE DO WE GO FROM HERE? Dennis K. Winters Chief, Office of Economic Advisors Wisconsin Department of Workforce Development December 3, 2010

  2. WELCOME

  3. FIRST, YOU HAVE TO UNDERSTAND WISCONSIN’S ECONOMY http://flowingdata.com/2010/03/02/where-bars-trump-grocery-stores/

  4. HOW BAD WAS IT?

  5. HOW BAD WAS IT?THINGS THAT NEVER HAPPENED BEFORE • Longest recession since the Great Depression • Four negative U.S. GDP quarters in a row • Global GDP declined • The U.S. and Japan were in recession at same time • Personal consumption expenditures were down 3 out of four quarters, with the one registering just +0.1%

  6. INDUSTRIAL ACTIVITY PLUNGED U.S. AND ESPECIALLY THE MIDWEST Source: Chicago Fed, OEA

  7. EMPLOYMENT DROPPED PRECIPITIOUSLY JOB LOSSES WORSE THAN 1981 RECESSION Source: Bureau of Labor Statistics, LMI, OEA

  8. UNEMPLOYMENT CLIMBED NOT QUITE TO LEVELS OF 1981 RECESSION Source: Bureau of Labor Statistics, LMI, OEA

  9. WORKERS DROPPED OUT OF THE WORKFORCE “MARGINAL” WORKER Jan 2010 U3 = 9.7% U6 = 17.6% Source: U.S. DOL, WI Dept. of Workforce Development; Local Area Unemployment Statistics and National Bureau of Economic Research

  10. DURATION OF FINDING NEW JOB IS PROTRACTED Source: U.S. Dept. of Labor, Bureau of Labor Statistics and National Bureau of Economic Research

  11. WORKER ANGST DIDN’T DECREASEJUST SHIFTED Source: UI, OEA

  12. YES VIRGINIA, WE ARE IN RECOVERY MODE, BUT…

  13. BOTH MAJOR SECTORS RECOVERING MANUFACTURING AND NON-MANUFACTURING Source: St. Louis Fed, OEA

  14. HOW DO YOU SPELLRECOVERY? • GDP • DJIA • JOBS

  15. HOW DO YOU SPELL RECOVERY?GDP; Five positive quarters, Q3 up 2.5% Source: Bureau of Economic Analysis, OEA

  16. HOW DO YOU SPELL RECOVERY?DJIA; UP 72% SINCE MARCH 9, 2009 Source: http://moneycentral.msn.com/investor/charts/chartdl.aspx

  17. HOW DO YOU SPELL RECOVERY?JOBS; STILL DOWN 150,000 Source: Bureau of Labor Statistics, LMI, OEA

  18. JOB RECOVERY WILL TAKE TIME Source: BLS, OEA

  19. EVEN JOB NUMBERS CAN BE DECEIVING THE UNDEREMPLOYED

  20. CAUTION STILL REIGNS MANAGING YEAR-END COSTS

  21. NEW CLAIMS MOVING SIDEWAYS INDUSTRIES CONTINUE TO ADJUST

  22. GDP = C + I + G + (I-M)

  23. C = CONSUMPTION

  24. PERSONAL INCOME NOT SNAPPING BACK LIKE BEFORE

  25. RETAIL SALES CLIMBING WHAT WILL BE THE NEW NORMAL

  26. EVEN WITH LOW MORTGAGE RATES NEW HOME SALES AREN’T RESPONDING

  27. HOUSING MARKETS WON’T BE AN ECONOMIC DRIVER Source: Wisconsin Department of Revenue

  28. WHERE HAVE ALL THE YUPPIES GONE? WHO WILL BUILD A NEW HOUSE NOW?

  29. TAKE MY HOUSE PLEASE

  30. MORTGAGE RISK STILL HAS CHALLENGES PENDING

  31. ALL SECTORS OVERBUILT RESIDENTIAL, COMMERCIAL, HEAVY

  32. INTEREST IS LESS DISMAL BUT STILL CONTRACTING

  33. AUTO SALES LIMITED CONTRIBUTION

  34. FUTURE UNCERTAINTY DAMPENS CONSUMER MOOD

  35. IS THE PHILLIPS CURVE BACK? IF YES, THEN FED HAS LEEWAY

  36. I = INVESTMENT

  37. LOW INTEREST RATES GAVE INCENTIVES TO BORROW All sectors Domestic government sector Source: William R. Emmons, Federal Reserve Bank of St. Louis, May 7, 2010 talk on the District II Economic Outlook.

  38. EXTENDING CREDIT BANKS ARE RETICENT TO LEND FUNDS Source: Federal Reserve Board, Data Download Program

  39. STILL UNCERTAIN ABOUT ECONOMIC STRENGTH Source: Prof. Don Nichols, Emeritus

  40. MANAGING RISK WHERE IS THE INCENTIVE TO EXPAND

  41. CORPORATE PROFITS LOOK HEALTHY MOSTLY DUE TO COST CUTTING

  42. FROM WHERE ELSE WILL PRIVATE INVESTMENT COME Source: Prof. Don Nichols, Emeritus

  43. DEMAND STILL INSUFFICIENT TO EXPAND WILL KEEP INFLATION AT BAY

  44. G = GOVERNMENT

  45. Source: http://seekingalpha.com/article/115525-the-scariest-chart-ever?source=article_sb_popular

  46. QE1 TRACK IT http://money.cnn.com/news/specials/storysupplement/stimulus-tracker/index.html

  47. QE2 = MORE MONEYTO BE APPLIED WHERE? • Fed Reserve Rescue Efforts • ABCPMMMFL • BoALLB • BSB • CLLB • CPFF • FEDS • GSEDP • GSEMBSP • MMIFF • PDCF • TABSLF • TAF • TSLF • US Bond purchases • TARP • AIG • AGP • ASSP • AITP • CPP • CBLI • MHA • PPIP • TIP

  48. QE2 = MORE MONEY (continued)TO BE APPLIED WHERE? • Federal Stimulus Programs • ESA of 2008 • UIBE • SLG • ARRA • ATVMP • CARS • AIG • Asset purchases • Bridge loan • Gov’t stakes in subs • TARP • FDIC • 2008 Bank takeovers • 2009 Bank takeovers

  49. QE2 = MORE MONEY (continued again)TO BE APPLIED WHERE? • Other Financial Initiatives • CUDIG • MMGP • NCUA Bailout of credit unions • USFCUI • TLGP • Other Housing Initiatives • Fannie • Freddie • FHA • MHAI $11 trillion committed $3 trillion invested http://money.cnn.com/news/storysupplement/economy/bailouttracker/#TARP

  50. LONG-TERM RATES RELATIVELY HIGH FED TRYING TO BRING THEM DOWN Source: Prof. Don Nichols, Emeritus

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