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Recession, Recovery & the Repercussions of Both
Springfield, MOSeptember 18th, 2012
U.S. Forecast
U.S. Forecast A Pall of Uncertainty Hangs Over
the Economy
Health Care Reform Supreme Court ruling – now what?
Dodd-Frank Fiscal Cliff / Taxaggedon Euro November Election
U.S. Forecast A recent paper has created an
index that quantifies economic policy uncertainty and analyzes its economic impact:
Measuring Economic Policy Uncertainty
By Scott R. Baker Nicholas Bloom, and Steven J. Davis
U.S. Forecast The index has three components:
1. Newspaper coverage of policy-related economic uncertainty.
2. Number of federal tax code provisions set to expire in future years
3. Disagreement among economic forecasters
(Survey of Professional Forecasters)
U.S. Forecast The economic impact of economic
policy uncertainty
The results of the statistical analysis in the paper show that higher policy uncertainty causes:
1. Lower private investment2. Lower industrial production3. Much lower employment
Economic Policy Uncertainty Index
U.S. Forecast
Sky Mall™ Policy:
An Expensive Policy that Fails to Achieve its Desired Outcome
U.S. Forecast
U.S. Forecast
U.S. Forecast
U.S. Forecast
U.S. Forecast
U.S. Forecast
U.S. ForecastTwo Sky Mall™ Policies:
Health Care Reform
Community Living Assistance Services and Supports ended before it began
American Reinvestment and Recovery Act of 2009
Aka Stimulus Act
Why Didn’t the Stimulus Act Work?
The Nun
The Nobel Prize Winner
Non-starter Stimulus
Why Didn’t the Stimulus Act Work?
U.S. Forecast
Depleted Wealth
Still Weak Labor Market
A continuing downward force on consumer spending
U.S. Household Wealth(Trillions of $)
2005 2006 2007 20082009 Q1*
2012 Q1
Total Assets 71.3 78.6 79.5 66.6 62.8 76.2
Financial Assets
42.9 49.0 51.4 42.2 39.6 52.5
Home Equity 13.2 12.8 10.3 7.0 6.1 6.7
Net Worth 59.1 65.1 65.1 52.4 48.7 62.9
U.S. Economic Outlook
2012Q1
2012Q2
2012Q3
2012Q4
2013 2014
GDP% Change, Annual Rate 2.0 1.7 1.6 1.7 2.1 2.7
Consumer Price Index% Change, Annual Rate 2.5 0.2 0.4 1.3 1.8 1.9
Consumer Sentiment 75.4 75.5 73.8 73.9 75.6 80.0
Consumption% Change, Annual Rate 2.4 1.5 1.9 2.3 2.4 2.6
U.S. Forecast
151413121110090807060504030201009998
145.0
140.0
135.0
130.0
125.0
120.0
Total Nonfarm Payroll Employment(Millions)
Total Nonfarm Employment
U.S. Forecast
151413121110090807060504030201009998
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
Civilian Unemployment Rate(%)
Unemployment Rate
151413121110090807060504030201009998
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
Automobile and Light Truck Sales(Millions Vehicles)
Auto SalesLight Truck Sales
U.S. Forecast
U.S. ForecastWhat Can the Fed Do?
Slowing recovery in economy and labor market
June FOMCOperation Twist Extended
August FOMCStatus quo
Monetary Policy - September:
Fed Funds rate unchanged until second half of 2015
QE III
$40 billion per month – open ended Mortgage backed securities
Is inflation a worry?
U.S. Forecast
151413121110090807060504030201009998
40.0
30.0
20.0
10.0
0.0
-10.0
Money Supply(Annual Growth Rate %)
Annual Growth Rate of M2Annual Growth Rate of M1
U.S. Forecast
151413121110090807060504030201009998
6.0
4.0
2.0
0.0
-2.0
Consumer Prices(% Change Year Ago)
Consumer Price IndexCore Consumer Price Index
U.S. Forecast
A Slippery Subject
Greece
Greek bailouts, haircut & the election are stays of execution and not pardons
Contagion concerns (PIIGS)
Euro still facing greatest threat since inception
Two possible outcomes for the Euro zone
The Euro and the Tacoma Narrows Bridge
A Slippery Subject
Economic Conjoined Twins:
The Housing Market
The Labor Market
U.S. Forecast
What’s Springfield to do?
Recite The Economic Serenity Prayer
Things you can change:
Dynamic educated labor force Invest in transportation
infrastructure Don’t give up on economic
development programs
U.S. Forecast
Sean M. Snaith, Ph.D.
Director
Institute for Economic Competitiveness
(407) 823-1453
WWW.IEC.UCF.EDU
www.facebook.com/seansnaith
Twitter: @seansnaith
Thank you
