Rissmiller, don

Economic Highlights: Growth & Profits Don Rissmiller

October 10, 2013

Strategas Research Partners 212-­‐906-­‐0134 drissmiller@strategasrp.com

Where Are We In the Business Cycle?

U.S. Real Gross Domestic Product % Change - Year to Year

SAAR, Bil.Chn.2009$

10.0

10.0

7.5

7.5

5.0

5.0

2.5

2.5

0.0

0.0

-2.5

-2.5

-5.0

-5.0 60 65 70 75 80 85 Source: Bureau of Economic Analysis

90

95

00

05

10

Where Are We In the Business Cycle?

U.S. Real Gross Domestic Product % Change - Year to Year

SAAR, Bil.Chn.2009$

10.0

10.0

7.5

7.5

5.0

5.0

2.5

2.5

0.0

0.0

-2.5

-2.5

-5.0

-5.0 60 65 70 75 80 85 Source: Bureau of Economic Analysis

90

95

00

05

10

Even in Bad Times, It’s Easy To Get a “Bounce” Real Gross Domestic Product % Change - Year to Year

Bil.Chn.2009$

15

15

1930s 10

10

5

5

0

0

-5

-5

-10

-10

-15

-15 30 31 32 33 34 Source: Bureau of Economic Analysis

35

36

37

38

39

Pent-­‐Up Demand Is Powerful 3 U.S. Areas To Watch:

1) Capex 2) Housing 3) State & Local Govt

Pent-­‐Up Demand Is Powerful Mfrs' Shipments: Nondefense Capital Goods ex Aircraft % Change - Year to Year

SA, Mil.$

15.0

15.0

7.5

7.5

0.0

0.0

-7.5

-7.5

-15.0

-15.0

-22.5

-22.5 04 05 06 Source: Census Bureau

07

08

09

10

11

12

13

Pent-­‐Up Demand Is Powerful Mfrs' Shipments: Nondefense Capital Goods ex Aircraft % Change - Year to Year

SA, Mil.$

All Employees: Total Nonfarm

% Change - Year to Year

SA, Thous

15.0

4

7.5

2

0.0

0

-7.5

-2

-15.0

-4

-22.5

-6 04 05 06 07 08 09 10 Sources: Census Bureau, Bureau of Labor Statistics

11

12

13

Household FormaQon Is Key Total Number of Households, Break-adjusted % Change - Year to Year

Thous

2.4

2.4

2.0

2.0

1.6

1.6

1.2

1.2

0.8

0.8

0.4

0.4

0.0

0.0 90 95 00 Source: Census Bureau/Haver Analytics

05

10

Economic Symmetry

2007-2009 Deep Recession 2013-14 Recovery (We get housing & capex back)

2009-2010 Moderate Recovery (Missing housing)

2011 Muddle Through (Deleveraging)

2012 Muddle Through (Deleveraging)

Late-2012, early 2013 Slowdown (Fiscal Cliff / Sequester Uncertainty)

But U.S. InflaQon Is Not a Problem, With Wage Growth Restrained CPI-U: All Items

% Change - Year to Year

SA, 1982-84=100

Nonfarm Business Sector: Compensation Per Hour % Change - Year to Year

SA, 2009=100

16

16

12

12

CompensaMon

8

8

4

4

0

0

-4

-4 60 65 70 75 80 Source: Bureau of Labor Statistics

85

90

95

00

05

10

So – Even AXer the Sept Punt – Why Is the Fed Talking About Tapering (Ever)?

Civilian Unemployment Rate: 16 yr + SA, % 12

12

10

10

8

8

6

6

4

4

2

2 60 65 70 75 80 Source: Bureau of Labor Statistics

85

90

95

00

05

10

Labor Share At a Low U.S. Corporate Compensation % Corporate GDP

66

66

64

64

62

62

60

60

58

58

56

56 50 55 60 65 Source: Haver Analytics

70

75

80

85

90

95

00

05

10

Future ProducQvity Gains Will Be Important Nonfarm Business Sector: Real Output Per Hour of All Persons % Change - Year to Year

SA, 2009=100

6

6

4

4

2

2

0

0

-2

-2 60 65 70 75 80 Source: Bureau of Labor Statistics

85

90

95

00

05

10