US Economic Outlook

Global Interdependence Center

Oregon U.S. Economic Outlook January 15, 2013

Mark McMullen Chief Economist State of Oregon

The Near Term Looks Soft‌ (New Orders, % change year ago, 3-month moving avg.)

60% 40% 20% 0% -20%

-40% -60%

Recession Metals Machinery Transportation Equipment (Right Axis)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20% 10% 0% -10% -20% -30% -40%

Recession Computers & Electronics Furniture & Appliances

2000 2001 22002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

75% 60% 45% 30% 15% 0% -15% -30% -45% -60% -75%

…but Businesses Are Profitable…

Corporate Profits, % share of GDP 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 1959Q3

1964Q3

1969Q3

1974Q3

1979Q3

1984Q3

1989Q3

1994Q3

1999Q3

2004Q3

2009Q3 3

…and Sitting on Cash Trillions

Nonfinancial Corporate Businesses, Real Liquid Assets $1.8 $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 1960Q1

1970Q1

1980Q1

1990Q1

2000Q1

2010Q1

4

Household’s Gaining Wealth…

5

‌ And Lowering Liabilities

6

The 2013 Policy Drag THE THREAT All figures are calendar year

THE OUTCOME

$ billions

% of GDP

$ billions

% of GDP

Bush tax cut expiry

197

1.2

35

0.2

Payroll tax cut expiry

113

0.7

113

0.7

Sequester spending cuts

72

0.4

postponed two months

Emergency UI benefits expiry

30

0.2

extended one year

Depreciation incentives expiry

66

0.4

extended one year

AMT Fix not extended

114

0.7

extended permanent

Doc Fix not extended

14

0.1

extended one year

606

3.7

148

0.9

Affordable Care Act taxes

24

0.1

24

0.1

Other spending cuts

34

0.2

34

0.2

664

4.1

206

1.3

Total Fiscal Cliff

Total Fiscal Tightening

Source: IHS calculations based on CBO and OMB data 7

Jobless Claims in Check Initial Unemployment Claims per 1,000 Labor Force (SA) Recession

Oregon

Oregon, Current Level

United States

US, Current Level

8

7

6

5

4

3

2

1

0 Jan-87

Jan-90

Jan-93

Jan-96

Jan-99

Jan-02

Jan-05

Jan-08

Jan-11

8

The Handoff: Manufacturing to Housing Economic Drivers Recession

Residential Investment (Y/Y, Left)

ISM Manufacturing (Right)

30%

68

20%

62

10%

56

0%

50

-10%

44

-20%

38

-30%

32 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

9

Impressive New Construction Growth Rates‌ Total Housing Permits (SA, Y/Y) Recession

Oregon Total

U.S. Total

80%

60%

40%

20%

0%

-20%

-40%

-60%

-80% Jan-96

Jan-98

Jan-00

Jan-02

Jan-04

Jan-06

Jan-08

Jan-10

Jan-12

10

‌ But From a Low, Low Base Oregon Housing Permits (Monthly, SA 3 MMA) 3,000 Total Permits Single Family 2,500

2,000

1,500

1,000

500

0 Jan-90

Jan-94

Jan-98

Jan-02

Jan-06

Jan-10

11

Bottom Line: Eventually Some Acceleration

12

Long Run Growth will be Relatively Weak‌ Oregon Nonfarm Employment Growth (Y/Y) Recession

10%

Employment

Expansion Average

8%

6%

4%

2%

0%

-2%

-4%

-6%

-8% Jan-60

Jan-65

Jan-70

Jan-75

Jan-80

Jan-85

Jan-90

Jan-95

Jan-00

Jan-05

Jan-10

Jan-15

Jan-20

13

…as Productive Older Workers Retire…

Oregon Working Age Population (25-64) PPT Change (Right)

Share of Population (Left)

55%

0.5%

54% 53%

0.3%

52% 51%

0.1%

50% 49%

-0.1%

48% 47%

-0.3%

46% 45%

-0.5% 1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

…and Households Repair their Balance Sheets Savings Rate (Percent of Disposable Income) 14

12

10

8

6

4

2

0 1960

1970

1980

1990

2000

2010

2020

15

Consumer Spending Will No Longer Drive Growth 50%

Real spending and output, % change by decade 45% Gross Domestic Product Consumer Spending 40%

35%

30%

25% 1950's

1960's

1970's

1980's

1990's

2000's

2010 to 2020 16

For More Information Standard Contact: 155 Cottage Street NE Salem, OR 97301 (503) 378-3405 oea.info@state.or.us www.oregon.gov/das/oea Social Media: oregoneconomicanalysis.wordpress.com @OR_EconAnalysis

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