Economic Outlook for 2015 R. Andrew Bauer, Ph.D. Senior Regional Economist Research Department Lower Shore Economic Forecast and Eastern Shore Delegation Forum December 18, 2014 Economic Outlook for 2015 R. Andrew Bauer, Ph.D. Senior Regional Economist December 18, 2014 The views expressed here are those of the author, and do not necessarily represent those of the Federal Reserve Bank of Richmond or the Federal Reserve System. 2 International Outlook • Global growth is still mediocre & investment has been weaker than expected for some time • Global growth forecast: • Advanced economies: 2014: 1.8% || 2015: 2.3% • • Recovery from financial crisis still weighs on growth (high debt burdens & unemployment) • Lower potential growth Emerging market & developing economies: • • • 2014: 3.3% || 2015: 3.8% 2014: 4.4% || 2015: 5.0% Considerable downside risks Source: International Monetary Fund, October 2014 3 International Outlook Source: IMF, October 2014 4 International Outlook 5 National Outlook Real Gross Domestic Product 6 Percent change from previous quarter at annual rate 6 Q3 3.9% 5 5 FOMC Projection 4 4 3 3 2 2 1 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 -5 -5 -6 -6 -7 -7 -8 -8 -9 -9 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Note: Projection is the central tendency from the September 2014 Summary of Economic Projections. Projections of change in real gross domestic product (GDP) are from the fourth quarter of the previous year to the fourth quarter of the year indicated. Source: Bureau of Economic Analysis via Haver Analytics & Federal Reserve Board 6 National Outlook Decomposition of Real GDP 5 5 10-year annual growth rates 4.5 4.5 GDP 4 4 3.5 3.5 3 3 Productivity 2.5 2.5 2 2 1.5 1.5 1 1 HH Employment 0.5 0.5 0 0 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Note: Productivity is calculated as real GDP per employee, from the Household Survey. Source: Bureau of Economic Analysis via Haver Analytics 7 National Outlook Unemployment Rate Percent 11 11 10.5 10.5 10 10 9.5 9.5 9 9 8.5 8.5 8 8 7.5 7.5 7 7 November 5.8% 6.5 6.5 FOMC Projection 6 6 5.5 5.5 5 5 4.5 4 2007 4.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 4 2018 Notes: FOMC projection is the central tendency for the Q4 levels, from the September 17, 2014 meeting. Source: Bureau of Labor Statistics & Board of Governors via Haver Analytics 8 National Outlook 12 Month % Change Personal Consumption Expenditure Price Index 5 5 4.5 4.5 4 4 3.5 3.5 3 3 FOMC Projection 2.5 2% Longer-run Target 2 2 1.5 1.5 October 1.4% 1 1 0.5 0.5 0 0 -0.5 -0.5 -1 -1.5 2007 2.5 -1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -1.5 2018 Notes: FOMC projection is the central tendency for Q4/Q4 percent changes, from the September 17, 2014 meeting. Source: Bureau of Economic Analysis & Board of Governors via Haver Analytics 9 National Outlook Summary of Economic Projections: Federal Funds Rate Percent 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2014 2015 2016 2017 Note: Each dot in the chart represents the value of an FOMC participant’s judgment of the midpoint of the appropriate target range (or the appropriate target level) for the federal funds rate at the end of the calendar year. Source: Board of Governors 10 State Outlook Gross Domestic Product: All Industries percent change 5 4 3 2 1 0 -1 -2 No GDP growth in MD or VA in 2013 -3 -4 2004 2005 2006 Maryland 2007 2008 2009 U.S. 2010 2011 2012 Virginia 2013 Source: Bureau of Economic Analysis/Haver Analytics Federal cuts a considerable drag on regional economy Federal Contract Spending (2010 = 100) 110 103.9 100.0 102.2 100 94.5 90 FY2010 to FY2014: DC: -18% 80 MD: -6% VA: -23% 70 78.7 81.9 76.9 77.9 2013 2014 DC MSA: -22% 2010 DC 2011 2012 MD VA DC MSA Source: USASpending.gov/Federal Data Procurement System Business formation has yet to recover Source: Bureau of Economic Analysis/Haver Analytics Slow recovery in the labor market Source: Bureau of Labor Statistics/Haver Analytics 14 Slow recovery in the labor market Payroll Employment Mar. 2013 to Mar 2014 Mar. 2013 to Mar 2014 Mar. 2010 to Mar 2014 Mar. 2010 to Mar 2014 Mar. 2008 to Mar 2010 (% change) # (% change) # # -1.2 -111 8.4 718 -355 Cecil 2.0 580 10.4 2,847 -3,637 Dorcester 3.2 337 0.8 87 -471 Kent -0.2 -13 -0.7 -51 -710 Queen Anne's -0.8 -109 5.1 637 -1,241 Somerset 1.1 72 0.7 48 -523 Talbot 3.3 574 4.2 739 -1,865 Wicomico -0.6 -283 0.8 338 -3,409 Worcester 0.4 71 5.1 960 -1,854 Maryland 0.1 3,399 3.8 92,740 -110,449 Caroline Source: Bureau of Labor Statistics/Haver Analytics 15 Slow recovery in the labor market March 2014 Payroll Employment Growth by Industry (year/year, % change) -0.2 Total -2.1 Natural Resources & Mining 0.1 -0.4 -1.1 Construction Manufacturing Lower Eastern Shore Maryland -3.2 1.4 -2.0 Trade, Transportation, Utilities 2.4 0.6 Information -3.5 -3.2 Financial 1.9 -1.1 Professional & Business Services 0.2 -2.8 Education & Health 0.8 0.8 -2.0 Leisure & Hospitality Other Services 2.1 2.2 -0.1 Government 0.3 -0.7 -4.0 -2.0 0.0 2.0 4.0 Source: Bureau of Labor Statistics/Haver Analytics 16 Slow recovery in the labor market Source: Bureau of Labor Statistics/Haver Analytics 17 Wage growth remains very modest Source: Bureau of Labor Statistics/Haver Analytics 18 Housing market recovery stalled in 2014 Source: Maryland Association of Realtors/ Core Logic Information Solutions, Inc. 19 Housing market recovery stalled in 2014 Source: Maryland Association of Realtors/ Core Logic Information Solutions, Inc. 20
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