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IFRI: Obama réélu : “le meilleur est à venir?”
Florence PisaniDecember 7, 2012
22
Can we trust the current signs of macroeconomic improvement?
Yes we can!
44
Real GDP(2007 = 100)
In the United States, the recovery is ongoing
Source: Thomson Datastream
2007 2008 2009 2010 2011 201296
97
98
99
100
101
102
103
104
105
+5%
Euro area
Euro area ex Germany
United States
55
The situation on the labor market has improved
Source: Thomson Datastream
Unemployment rates(%)
2010 2011 20127.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
United States
Euro area
66
Still, put into perspective, after a recession harsher than in previous cycles, the recovery has been much weaker
Sources: Thomson Datastream, Dexia-AM
Change in US GDP in postwar cycles%
ch
an
ge
fro
m t
he
pe
ak
Quarters from the start of the recession
Cumulated change from peak
Most favorable cycle
Harshest cycle (ex 2007)
-10
0
10
20
30
0 2 4 6 8 10 12 14 16 18 20
19902001
Median
Current(2007-2012)
88
The US economy is slowly healing… but is still wounded!
99
The deleveraging of the private sector is now visible
Source: Thomson Datastream
100
0
20
40
60
80
80 85 90 95 00 05 10 15
Federal government
State and Local governments
Outstanding debt of the public sector*
(% of GDP)
0
20
40
60
80
100
80 85 90 95 00 05 10 15
Government Sponsored Enterprises***
Private depository institutions and brokers& dealers
“Risky” assets** carried by some financial risk-takers
(% of GDP)
60
70
80
90
100
110
120
80 85 90 95 00 05 10 15
Private depository institutions
Outstanding debt of the private non financial sector*
(% of GDP)
(*) Credit market debt
80 85 90 95 00 05 10 15
Households
Non financial corporate businesses
0
20
40
60
80
100
(**) Total assets ex cash and reserves
(***) GSEs and GSE-backed mortgage pools
1212
Residential investment should contribute positively to growth in 2013
Number of households as a share of population
over 16-year (%)
46
47
48
49
01 03 05 07 09 11 13
47.7*
(*) Bringing back the number of households to more “normal” level by end of 2013, would imply the formation of around 3 millions households.
New one-family houses for sale to houses sold
(months of supply)
0
2
4
6
8
10
12
14
90 95 00 05 10
0
10
20
30
40
2012 2013 2014
Residential investment(% annual rate)
Optimistic scenarioCautious scenario
60 65 70 75 80 85 90 95 00 05102.0
3.0
4.0
5.0
6.06.5
Share of residential investment in GDP
(%)
0
400
800
1200
1600
00 03 06 09 12
New home sales(millions of units, annual rate)
0
500
1000
1500
2000
2500
00 03 06 09 12
Housing starts(millions of units, annual rate)
900
09101112400500600700800
Sources: Thomson Datastream, Dexia-AM
1313
After a huge correction, home prices are now more in line with “fundamentals”
Sources: Federal Reserve, Thomson Datastream, Dexia-AM
Over or under-valuation of home prices
Long term national trend
House price index (Core Logic, in log)
10.0
10.5
11.0
11.5
12.0
12.5
75 80 85 90 95 00 05 10 15
Over or under-valuation (%)
-30
-20
-10
0
10
20
30
40
50
75 80 85 90 95 00 05 10 15
20% undervaluation
40% overvaluation
Case Shiller index by metropolitan area(2000 = 100)
0
50
100
150
200
250
300
87 90 93 96 99 02 05 08 11
Washington D.C.
Phoenix Arizona
Los Angeles California San Diego California San Francisco California
Miami Florida Tampa Florida
Las Vegas Nevada
New York New York
“Bubble” areas
Long term national trend
0
50
100
150
200
250
300
87 90 93 96 99 02 05 08 11
Atlanta Georgia
Chicago Illinois
Boston Massachusetts
Detroit Michigan
Minneapolis Minnesota Charlotte North Carolina
Portland Oregon
Dallas Texas
Seattle Washington
No or “light” bubble areas
Long term national trend
Existing home prices
S&P/CS(% year on year)
S&P/CS(% quarter on quarter, annual rate)
-30
-20
-10
0
10
20
30
92 94 96 98 00 02 04 06 08 10 12
82 86 90 94 98 02 06 1090
100
110
120
130
140
Home price to rent ratio(1982 = 100)
1515 $150 bn
(1% of GDP)
Under current law
$110 bn(0. 7% of GDP)
$50 bn(0.3% of GDP)
2013
Amount
$40 bn(0.3% of GDP)
The temporary 2% cut in employee payroll taxes passed last year is set to expire at the end of this year.
$350 bn (2.3% of GDP)
Total
AmountScheduled expiration of large and highly visible programs
2012
The extended unemployment provision (to 99 weeks) extended for 2012.
ARRA (Obama plan) $130 bn(0.8% of GDP)
Other measures (non ARRA) $20 bn(0.2% of GDP)
$110 bn(0. 7% of GDP)
$50 bn(0.3% of GDP)
$305 bn(2.0% of GDP)
$90 bn(0.6% of GDP)
$20 bn(0.1% of GDP)
Bush tax cuts, AMT…
Debt deal (automatic spending cuts of 1.2 trillions)
Cut in Medicare's payment rates for physicians
$40 bn(0.4% of GDP)
Firms investment incentives
Sources : CBO, Dexia-AM
$615 bn(4.1% of GDP)
Given the vulnerability of the recovery, finding a compromise to avoid the “fiscal cliff” is all the more important
1818
With a “reasonable” fiscal tightening, growth should remain around 2% next year
Sources: Thomson Datastream, Dexia-AM
GDP growth in the United States
Q4 11 Q1 12 Q2 12 2008 2009 2010 2011 2012 2013
2.0 2.4 -0.6 -1.9 1.8 2.5 1.9 1.7
9.9 9.6 -7.5 -18.9 7.0 6.8 8.1 5.9
12.0 20.6 -23.9 -22.4 -3.7 -1.4 11.5 11.4
8.8 5.4 -4.3 -16.4 8.9 11.0 6.7 4.4
11.5 12.8 6.4 -21.1 -15.6 2.8 9.5 5.1
2.2 -0.4 -0.5 -0.8 1.5 -0.2 0.0 -0.1
-2.2 -3.0 2.6 3.7 0.6 -3.1 -1.3 -1.8
-0.6 0.1 1.2 1.1 -0.5 0.1 0.0 0.3
1.4 4.4 6.1 -9.1 11.1 6.7 3.8 5.2
4.9 3.1 -2.7 -13.5 12.5 4.8 2.8 2.5
Q3 12
2.0
1.8
14.4
0.0
-4.4
-1.0
3.7
-0.2
-1.6
-0.2
2.04.1 2.0 -0.3 -3.1 2.4 1.8 2.1 1.9
Q/Q annual rate (%)
Consumption
Investment
- Residential
- Equipment
- Structures
Inventory change(contribution)
Government
External balance(contribution)
- Exports
- Imports
GDP
-6
-4
-2
0
2
4
6
95 97 99 01 03 05 07 09 11 13
2
4
6
8
10
12
95 97 99 01 03 05 07 09 11 13
GDP growth(%, year on year)
Unemployment rate(%)
1.5
4.6
8.4
4.8
0.6
-0.2
-0.7
0.2
5.2
2.8
1.3
1919
The challenges ahead
2020 Sources: Thomson Datastream, BLS, Dexia-AM
5-million jobs gap
Ageing-related decline in participation rate**
(*) Level of employment necessary for the unemployment rate to return to 5.8% (its January 2004 level), assuming no change in the labor force participation rate over the period.
(**) Level of employment necessary for the unemployment rate to return to 5.8% assuming a 1% decline in the participation rate over the period.
Employment and labor force(millions)
135
140
145
150
155
160
04 05 06 07 08 09 10 11 12
No change in participation rate*
UR stabilizing employment trend
Labor force
Trend labor force
Employment
The return to a more “normal” labor market will definitely take time
2
3
4
5
6
7
56 60 64 68 72 76 80 84 88 92 96 00 04 08 12
Involuntary part-time employment(% of labor force)
Employment rate(%)
90 93 96 99 02 05 08 1158
59
60
61
62
63
64
65
Employment to population aged 16 & over
2121
Tackling longer term Budget issues is all the more important that without action, public debt is projected to skyrocket from 2022 on
0
20
40
60
80
100
120
1790 1840 1890 1940 1990
US federal debt (% of GDP)
An historical perspective
Long term CBO projections
0
50
100
150
200
250
72 82 92 02 12 22 32 42
Current policies (tax cuts extended and no spending cuts)
Bush tax cuts expire but no spending cuts
Current legislation(Bush tax cuts expire and debt deal spending cuts)
Sources: CBO, Dexia-AM
2222
Conclusions
□ For the US economy to continue to move closer to a self sustained recovery, fiscal tightening has to remain moderate.
□ If the present fiscal uncertainty does not dissipate quickly, business investment could falter… and the recovery stall.
□ The best fiscal compromise would be one that seriously tackles the long term issues (mainly Medicare and Medicaid) without imposing too much of a fiscal drag in the short term.
□ Whatever the result of the “grand fiscal bargain”, monetary policy will remain accommodative for a further while
2626
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