Meeting your business information needs. Friday at the Beach Economic Update Rick Harper, Director UWF Haas Center January 11 th, 2008

Meeting your business information needs.

Friday at the Beach

Economic Update

Rick Harper, Director

UWF Haas Center

January 11th, 2008


The National Picture: Economic Drivers

•Slower GDP growth (1% going forward)

•Housing market correction (consumer spending)

•Subprime debacle spreads (whose bonds?)

•Recession risk up (>50% chance)

•Energy prices / inflation (oil, food up, $ down)

•Monetary policy (Fed hemmed in, but lowers)

•Growth abroad (makes up for lower US growth)

•Trade deficit shrinks (US as bargain basement)


Panama City Outlook 2008/2009:

•Insurance crisis

•Housing affordability

•Growth somewhat faster than national average, fail to close the gap with pre-hurricanes growth rate

•Real estate market returns to pre-boom quantities, prices still need to fall

•Unemployment rises

•Availability of skilled labor


The Housing Market

•Subprime excesses continue to haunt the housing market – and the broader economy.•Pool of potential buyers has contracted sharply.•Flow of mortgage credit has slowed to a trickle.•Low interest rates won’t cure what ails housing market.•Inventory glut will worsen during 2008.•Current downturn a blessing and a curse for rental market.•It’s not all bad – long-term housing fundamentals remain positive.


800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

70 75 80 85 90 95 00 05

thousands of unitsSource: U.S. Census Bureau, Mission Residential

Residential Construction

Building permits

Housing starts


Non-prime lending sustained the boom


62

63

64

65

66

67

68

69

70

65 70 75 80 85 90 95 00 05

Homeownership rate, % of households,4-quarter moving averageSource: U.S. Census Bureau

Homeownership rates rose during the boom


0

100

200

300

400

500

600

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

“Active” mortgage equity withdrawal, $ billion,SAAR, 4-qtr moving averageSource: Federal Reserve

There is still unspent housing equity, but the flow is slowing


2.50

3.00

3.50

4.00

4.50

5.00

79 81 83 85 87 89 91 93 95 97 99 01 03 05 07

Ratio of median house priceto median household income, U.S.Source: Moody’s Economy.com, Mission Residential

Affordability took a hit during the housing boom


95

100

105

110

115

120

125

130

12/03 12/04 12/05 12/06

Perc

ent of

12/

03 L

evel

CPI-U PPI for Finished Goods Inputs to Construction Industries

Source: Ken Simonson, AGCA


90

100

110

120

130

140

150

160

170

12/03 12/04 12/05 12/06

Perc

ent of

12/

03 L

evel

CPI-U Plastic Construction Products

Gypsum Products Lumber & Plywood

Source: Ken Simonson, AGC


Panama City MSA employment, 1/00 - 11/07, s.a.

60,000

65,000

70,000

75,000

80,000

85,000

90,000

Jan-

00

May

-00

Sep-0

0

Jan-

01

May

-01

Sep-0

1

Jan-

02

May

-02

Sep-0

2

Jan-

03

May

-03

Sep-0

3

Jan-

04

May

-04

Sep-0

4

Jan-

05

May

-05

Sep-0

5

Jan-

06

May

-06

Sep-0

6

Jan-

07

May

-07

Sep-0

7

emp

loym

ent


Panama City MSA: Employment Change from 12 months prior, 1/01 - 11/07

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

Jan-

01

May

-01

Sep-0

1

Jan-

02

May

-02

Sep-0

2

Jan-

03

May

-03

Sep-0

3

Jan-

04

May

-04

Sep-0

4

Jan-

05

May

-05

Sep-0

5

Jan-

06

May

-06

Sep-0

6

Jan-

07

May

-07

Sep-0

7

Job creation slowed beginning

in early 2006

strong growth performance, Q2/02 - Q1/06

National economic weakness, 01 - 02


Panama City MSA unemployment rate: 1/01 - 10/07

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Jan-

00

May

-00

Sep-0

0

Jan-

01

May

-01

Sep-0

1

Jan-

02

May

-02

Sep-0

2

Jan-

03

May

-03

Sep-0

3

Jan-

04

May

-04

Sep-0

4

Jan-

05

May

-05

Sep-0

5

Jan-

06

May

-06

Sep-0

6

Jan-

07

May

-07

Sep-0

7

November 2006

Area hit hard by September 11th slowdown


Panama City MSA: employment seasonality factors change over time

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1990 - 19992000 - 2007


Panama City MSA: Change in seasonality of retail sales

-30%

-20%

-10%

0%

10%

20%

30%

40%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

perc

ent d

iffer

ence

from

ave

rage

1990 - 1999

2000 - 2007


Panama City MSA: Total taxable retail sales, 1/00 - 10/07, s.a.

150,000,000

170,000,000

190,000,000

210,000,000

230,000,000

250,000,000

270,000,000

290,000,000

200

0:01

200

0:06

200

0:11

200

1:04

200

1:09

200

2:02

200

2:07

200

2:12

200

3:05

200

3:10

200

4:03

200

4:08

200

5:01

200

5:06

200

5:11

200

6:04

200

6:09

200

7:02

200

7:07

dolla

rs p

er m

onth

Sept 05


Panama City MSA: Employment by sector, 1980 and 2005

0

5

10

15

20

25

30

35

Ag,Mining

Constr Mfg TCPU Whlsl Retail FIRE Svc Fed St/Loc

thou

sand

s of

jobs 1980 2005


Panama City MSA: Employment share by sector, 1980 and 2005

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Ag,Mining

Constr Mfg TCPU Whlsl Retail FIRE Svc Fed St/Loc

shar

e of

tota

l em

ploy

men

t

1980 2005


Median Age of Population

20

25

30

35

40

45

Bay US SE FL

med

ian

ag

e o

f p

op

ula

tio

n in

yea

rs

1980 2005 2030


Panama City MSA: Projected change in full-time residents by 5 yr period

-3

-2

-1

0

1

2

3

4

5

6

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

chan

ge in

num

ber

of p

eopl

e in

coh

ort,

in th

ousa

nds

Age 55 - 64 Age 65 - 74


•Real GDP growth of 2.0% in 2007, 2.1% in 2008.•Plenty of downside risks:

•U.S. consumers fall into full retreat;•Credit squeeze evolves into full-blown credit crunch;•Energy shocks push prices higher/limit supplies; •Congress acts on growing protectionist sentiment, rides to the rescue of the housing market, heals health care;

•Limited scope for any additional Fed funds rate cuts.•Long-term housing fundamentals are positive, but the near-term road will be rocky.•Global growth will survive U.S. slowdown, but U.S. recession would be a different matter.

Forecast Summary


Questions?

Rick Harper, Ph.D.

Director

Documents

Meeting your business information needs. Friday at the Beach Economic Update Rick Harper, Director UWF Haas Center January 11 th, 2008