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Dr. Michael Walden analyzes the current economic situation, indicating an improved outlook with recovering job market, manufacturing growth, and increased bank loans. However, challenges like rising gas prices and global energy demand pose risks. Key policy debates include fiscal issues, monetary policies, and structural economic challenges. The North Carolina economy is highlighted with accelerated growth compared to the national average, with job gains in various metro areas. The forecast for 2013 includes better growth prospects, job creation, and a focus on key public issues for state leaders.
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ECONOMIC OUTLOOK: IMPROVEMENT AHEAD? Dr. Michael Walden Reynolds Distinguished Professor North Carolina State University
USEFUL TO THINK OF ECONOMIC ISSUES IN TWO PARTS 1. SHORT-RUN “CYCLICAL” ISSUE RELATED TO THE RECESSION AND RECOVERY 2. LONG-RUN “STRUCTURAL” ISSUES RELATED TO OUR ECONOMIC PATH FOR NEXT 50 TO 75 YEARS
AND CONSUMERS ARE SPENDING MORE (INFLATION-ADJUSTED PERCENTAGE CHANGES)
AND HOUSEHOLDS HAVE REDUCED DEBT BIG QUESTION: ARE WE THERE YET?
HOME INVENTORIES HAVE DROPPED(MONTHS TO SELL EXISTING INVENTORY)
AND SOME OPTIMISM FROM IMPROVED HOME SALES AND CONSTRUCTION (sales are of existing units and permits for planned units)
TOTAL INFLATION HAS BEEN VOLATILE, BUT TAME (CPI, total, annual % chg.)
THE “BITE” FROM GAS PRICES HAS BEEN INCREASING – BUT NOT YET A RECORD(GAS SPENDING AS A % OF TOTAL SPENDING)
FUNDAMENTAL ISSUE – OIL DEMAND INCREASING FASTER THAN OIL SUPPLY (WORLD CONDITIONS, MILLIONS OF BARRELS PER DAY)
COULD RISING GAS PRICES DERAIL THE RECOVERY? EVERY 10 CENT RISE IN GAS PRICE REDUCES GDP GROWTH RATE BY 0.2% GAS PRICE ABOVE $5/GALLON WOULD STALL THE RECOVERY
INTEREST RATES CONTINUE AT HISTORIC LOWS(YIELDS ON TREASURY SECURITIES)
THE “TRI-FECTA” OF IMPROVEMENT MORE JOBS BETTER HOUSING MARKET BETTER HOUSEHOLD NET WORTH
NATIONAL FORECASTS 150,000 – 170,000 JOBS CREATED PER MONTH 2.0% TO 2.25% GDP GROWTH RT CONSUMERS SPENDING MORE DELEVERAGING ALMOST COMPLETE WILDCARD – ENERGY PRICES AND POTENTIAL MIDEAST CONFLICT
KEY ECONOMIC POLICY ISSUES IMMEDIATE: “FISCAL CLIFF” DEBATE OVER ENERGY DEVELOPMENT DEBATE OVER LONG RUN FISCAL PLAN REVISIONS TO NEW TAXES FROM AFFORDABLE CARE ACT?
GOVERNMENT CYCLICAL POLICY QUESTIONS For monetary policy: - creating another “bubble”? - creating more inflation? For fiscal policy: - more stimulus needed? - long run fiscal plan needed? - or austerity needed?
FIVE BIG STRUCTURAL ISSUES GLOBALIZATION AND SKILLS DEMOGRAPHY AND PUBLIC SPENDING EFFICIENT PUBLIC REVENUE COLLECTION INFRASTRUCTURE UPGRADING ENERGY TRANSITION
USING GDP, NC’S ECONOMY HAS RECENTLY ACCELERATED FASTER THAN THE NATION’S
NC’s ECONOMIC RIDE IS BUMPIER (% CHANGE IN SEAS. ADJ. NON-FARM EMPLOYMENT)
Metro NC Job Gains Since Bottom of Recession (seasonally-adjusted) Raleigh-Cary 6.5% Burlington 5.4% Charlotte 5.1% Durham-CH 4.3% Asheville3.4% Goldsboro 2.8% Greensboro/HP 2.6% Hickory 2.2% Fayetteville 2.0% Rocky Mount 0.9% Greenville -0.3% Jacksonville -0.6% Winston-Salem -0.8% Wilmington -1.2%
NC ECONOMIC FORECAST FOR 2013 BETTER GROWTH 60,000 – 65,000 JOBS CREATED 8.9% JOBLESS RATE BY YEAR’S END
PUBLIC ISSUES FOR N.C.’s LEADERS MORE TECH TRAINING IN HIGH SCHOOL MOVING STUDENTS THROUGH COLLEGE FASTER MORE $ FOR ROADS REVAMPING MEDICAID TAX REFORM