Jobs (awful), Productivity (slowing), and Profits (amazing)

Jobs (awful), Productivity (slowing), and Profits (amazing)

Stephen Sexauer Portland, OR January 2013

The Really Long Term Productivity growth = 2.0% since 1890 Productivity growth = 2.1% since 1950 Population growth = 1.1% since 1950

US Log of Real Per Capita GDP

10.8

slope is 2.0% 10.3

9.8

9.3

8.8

8.3

1880

1905

1930

1955

1980

2005

source: Robert Lucas, Kevin Murphy. Bureau of Census. Department of Congress

2

Stephen Sexauer Global Interdependence Center Portland, OR January 2013

A Quick Reminder: rGDP = C + I + G +(X-I) rGDP = P + N (P = productivity growth and N = employment growth) US GDP per person employed slope 1990-2010 1.8% 2010 base USD

110,000

Slope: 1.5% per year 2000 to 2010

105,000 100,000 95,000 90,000 85,000 80,000 75,000

Slope: 2.0% per year 1990 to 2000

70,000 65,000 60,000 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

US Employment 145,000 135,000 125,000 115,000 105,000 95,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 source: Conference Board Total Economy Data Base (TEDI). Stephen Sexauer

3

Stephen Sexauer Global Interdependence Center Portland, OR January 2013

U.S. Trend Productivity US GDP per person employed slope 1990-2011 1.8% 2010 base USD 110,000

Slope: 1.3% per year 2000 to 2011

105,000 100,000 95,000 90,000 85,000 80,000 75,000 70,000

Slope: 2.0% per year 1990 to 2000

65,000 60,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

source: Conference Board Total Economy Data Base (TEDI). Stephen Sexauer

4

Stephen Sexauer Global Interdependence Center Portland, OR January 2013

5 Stephen Sexauer Global Interdependence Center Portland, OR January 2013

2012-07-01

2011-09-01

2010-11-01

2010-01-01

2009-03-01

2008-05-01

2007-07-01

2006-09-01

2005-11-01

2005-01-01

2004-03-01

2003-05-01

2002-07-01

2001-09-01

2000-11-01

2000-01-01

1999-03-01

1998-05-01

1997-07-01

1996-09-01

1995-11-01

1995-01-01

1994-03-01

1993-05-01

1992-07-01

1991-09-01

1990-11-01

150,000

1990-01-01

1989-03-01

1988-05-01

1987-07-01

1986-09-01

1985-11-01

1985-01-01

1984-03-01

1983-05-01

1982-07-01

1981-09-01

1980-11-01

1980-01-01

Jobs (awful)

Non-Farm Employment (000)

140,000

130,000

120,000

110,000

100,000

90,000

80,000

Labor Force Participation

68%

67%

66%

65%

64%

63%

62%

61%

National Federation of Independent Business

6

Stephen Sexauer Global Interdependence Center Portland, OR January 2013

Profits (amazing) US Profits (NIPA) billions a/t no IVA & CCA 2000

5% trend

1600

1200

Profits, q3.2012: after tax wo IVA/CCA: 1,743 % GDP: 11

800

source: BEA

400 2006q4

2007q2

2007q4

2008q2

2008q4

2009q2

2009q4

2010q2

2010q4

2011q2

2011q4

2012q2

1024 256 64 16 4

7

Stephen Sexauer Global Interdependence Center Portland, OR January 2013

Political Poison Compensation % of GDP 62% 60% 58% 56% 54% 52% 50% 48% 1950

1960

1970

1980

1990

2000

2010

2012.q3

Ratios to GDP 1950 1960 1970 1980 1990 2000 2010 2012.q3

compensation

profits a/t

corporate taxes

53% 56% 60% 59% 57% 59% 55% 54%

7% 6% 5% 7% 4% 5% 10% 11%

6% 5% 4% 4% 3% 3% 3% 3%

source: BEA

8

Stephen Sexauer Global Interdependence Center Portland, OR January 2013

U.S. Outlook – Broad Growth Investment Housing Energy Energy-Industrial Exports Manufacturing Chemical Auto -Energy

Slow to No Growth Government Consumption

Except for housing, the growth areas are not "job heavy" Most job growth comes from new, small business. The boom are elsewhere U.S. financial system: stable, well capitalized, $1.5 trillion excess reserves Long term, slowing productivity is a big issue 9

Stephen Sexauer Global Interdependence Center Portland, OR January 2013

U.S. Outlook – Specifics  Slow U.S. growth: 1.5% to 2.5%. No Recession.  Growth led by investment and net exports, and job-light industries  Debt and deficits dominate  Financial repression continues  Political poison continues  Risk-on Risk-off continues, but diminishes. Driven by  Fear of Fed/ECB mistakes  Fear of crisis contagions  Fear of missing continued equity market returns (all PE driven)  Bad news headlines: Iran, U.S. fiscal cliff, Arab Springs become winters 10

Stephen Sexauer Global Interdependence Center Portland, OR January 2013

Stephen Sexauer Allianz Global Investors (AGI) (2003–2012) Stephen Sexauer is Chief Investment Officer of AGI Multi Asset U.S. and has been a Managing Director of Allianz Global Investors of America LLC or one of its affiliates since May, 2003. Morgan Stanley Asset Management (1989–2002) Salomon Brothers (1988-1989) Mr. Sexauer holds an MBA from The University of Chicago with concentrations in economics and statistics, and a BS from the University of Illinois in economics.

Economic data in this presentation are derived from internal research, publicly available statistics published by Bloomberg, the US Federal Reserve, the US Department of Commerce, the International Monetary Fund, the Conference Board, and the National Federation of Independent Business. The information herein is provided for informational purposes only and should not be construed as a recommendation of any security, strategy, or investment product, nor an offer or solicitation for the purchase or sale of any financial instrument. This material contains the current opinions of the author, which are subject to change without notice.

11

Stephen Sexauer Global Interdependence Center Portland, OR January 2013