An Outlook on the Economy, Trade and Technology

An Outlook on the Economy, Trade and Technology January 15, 2013 University Place Hotel Portland State University

Tom Potiowsky Northwest Economic Research Center Portland State University

Joyce Brothers

“Credit Buying is Much Like Being Drunk. The Buzz Happens Immediately and Gives You a Lift…

The Hangover Comes the Day After.”

Employment Losses (through October 2012)

But We’ve Done Something Right Financial Crisis Employment Loss 4%

Percent Job Loss From Peak

0%

-4%

-8%

-12%

Spain 1977 (13.0 Years) Norway 1987 (8.5 Years) Finland 1991 (17.3 Years) Sweden 1991 (17.8 Years) Japan 1992 (NA) U.S. 2007 (?)

U.S. 1929 (10.0 Years)

-16%

-20% Peak

2 Years

4 Years

6 Years

8 Years

10 Years

12 Years

14 Years

16 Years

18 Years

Note: Return to peak duration given in parenthesis. Japan’s employment essentially reached a plateau in 1992, the start date used here is 1992 Q1.

Sources: OECD, BLS

Global slowdown but minor current account improvements (Year-over-year percent change, 2005 dollars)

1998

2000

2002

2004

Real US exports 5

2006

2008

2010

Real US imports

2012

The dollar’s real exchange value (Real trade-weighted dollar index, 2005=1.0)

1980

1984

1988

1992

Major trading partners

6

1996

2000

2004

2008

2012

Other important trading partners

Exports to Europe (Percent of State GDP, 2010) U.S. 1.89% Oregon: 1.05%

0.0% to 0.75%

0.75% to 1.5%

1.5% to 2.25%

2.25% to 3.0%

> 3.0%

Oregon Exports and APEC Member Countries 2010 Data Country China Malaysia Canada Japan Korea, Republic Of Taiwan Singapore Philippines Hong Kong Australia Mexico Vietnam Indonesia Thailand Russia Chile Peru New Zealand Papua New Guinea Brunei Cambodia APEC SUM

Amount ($ Millions) $4,046.9 $2,667.4 $2,423.9 $1,367.1 $936.6 $669.9 $324.9 $322.7 $299.6 $253.2 $233.2 $181.2 $126.0 $124.8 $56.9 $51.2 $50.2 $28.1 $15.4 $0.4 $0.4 $14,180.1

2010 Rank 1 2 3 4 5 6 10 11 13 14 15 17 19 20 29 33 34 42 49 116 123 ---

Percent of All Oregon Exports 22.9% 15.1% 13.7% 7.7% 5.3% 3.8% 1.8% 1.8% 1.7% 1.4% 1.3% 1.0% 0.7% 0.7% 0.3% 0.3% 0.3% 0.2% 0.1% 0.0% 0.0%

Top 6 = 68.5%

80.2% Source: WISER

Global Slowdown Hits Home Oregon Export Growth 2010

2011

2012 YTD

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%

Total Exports

China & Malaysia

Japan & S. Korea

North America

9

Other Asia

Eurozone

Other Europe

All Other

Trade Volume Remains High‌ Oregon Exports ($ millions) $3,500

Computer And Electronic Products

Total ex Computer and Electronic

$3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Q1 1997

Q1 1999

Q1 2001

Q1 2003

Q1 2005 10

Q1 2007

Q1 2009

Q1 2011

…but Growth is Lackluster Oregon Exports (Year-over-Year Change) 50%

Total Exports

Total excluding Computer and Electronic Products

40% 30% 20% 10% 0% -10% -20% -30% -40% -50% Q1 1998

Q1 2000

Q1 2002

Q1 2004

Q1 2006 11

Q1 2008

Q1 2010

Q1 2012

Labor Markets Slow Heading into the Summer

Coincident Index Components 1) Nonfarm Employment 2) Average Hours Worked Manufacturing 3) Unemployment Rate 4) Inflation Adjusted Wages and Salaries Long-term growth trended to state GDP. 12

Slowing Down Last Summer – What to Do at the Federal Level?

• Increase Spending – You’ve got to be kidding!?

– Maybe D’s but R’s not willing to go down this path

• Decrease Taxes – R’s were willing if coupled with decrease spending – D’s not willing to go along – Even if R’s got their way, short term no help.

• Federal Reserve: QEIII

Slow as She Goes Picture for the US Economy‌ The outlook for the U.S. economy is little changed from the survey of three months ago, according to 39 forecasters surveyed by the Federal Reserve Bank of Philadelphia. On the employment front, the forecasters have made small revisions to their estimates of the growth in jobs over the next four quarters.

(November 9, 2012)

Stabilizing to Mild Improvement

17

Quarterly Real GDP Year-over-Year Percentage Change 14.0%

Relatively Slower Expansions Over Time

9.0%

4.0%

-6.0%

Real GDP % Chg

2012

But Longer Expansion Periods

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

1966

1964

1962

1960

1958

1956

1954

1952

1950

1948

-1.0%

Output Gap

Output Gap

Risks to the US Economic Outlook and Spillover to Oregon…?

Near term risks  European Sovereign Debt Issues (Who’s next? Austerity debates? Greek exit in 2013?)  Federal Deficit and Debt Ceiling Debates (Fiscal Cliff. $480 to $600 billion hit – 3% to 3.5% of GDP)  Housing Market Stays Depressed  Middle East Unrest and Oil Prices (Iran, Syria, Israel?)  China’s Economy and Currency Policies  State and Local Governments ▲ Upside ▲ Financial Markets (and Housing) Return More Quickly to Normal ▲ Some Commodity Price Retreats (Natural Gas and Food) ▲ Greater Business and Consumer optimism and spending (Maybe?) ▲ More Robust Global Growth, Emerging Markets Lead the Way ▲ Near Term Outlook for low inflation and interest rates

For More Information Information for the presentation draws from the Oregon Office of Economic Analysis 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 Contact Info for Tom Potiowsky: Economics Department, PSU 503-725-3915 http://www.pdx.edu/nwiaer/ Northwest Institute for Applied Economic Research 22