NAWLA 110TH ANNUAL MEETING The Economy Where we are

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NAWLA 110TH ANNUAL MEETINGThe Economy Where
we are Where Were Going

• Presented by
• John W. Mitchell
• Economist Western Region
• U.S. Bancorp

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A Different Cycle

• John W. Mitchell
• Economist Western Region
• U.S. Bancorp
• June 10, 2002
• Colorado Springs, Colorado

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Residential Building Permits(,000 SAAR)
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Auto and Truck Sales(Millions, SAAR)
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Existing Home Sales March 2000-2002 (Millions,
SAAR)
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Equipment and Software Investment
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Net Worth Change-Households and Non-Profits
(000,000,000)
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Homeowners Equity 1996-2001
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OFHEO House AppreciationDecember, 2001
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Real GDP Peak to Trough
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Real GDP-Last Three Quarters Q3
Q4 Q1
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Policy Response

• Monetary Policy -11 cuts 6.5 to1.75
• Fiscal Policy-tax cuts and spending increases
  amidst recession, automatic stabilizers, war and
  election

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INFLATION

• CPI April 1.6 Core 2.5
• In 2001, 2.8 CPI down from 3.4
• Not short term problem rate expected to increase
  slowly
• Unit Labor Costs declining

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INTEREST RATES 2001-2002
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Recession is History

• Employment Rising
• Industrial Production Up for Four Months
• Consumer Confidence Up
• Leading Indicators Rising
• Coincident Up Since November
• Inventory Reduction Ending
• Stimulus Bill Signed March 9th

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Monthly Payroll Employment Change March
2001-April 2002
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Leading Indicators2002-2002 Monthly Change
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Early June Prospects

• GDP 2-3 in 2002
• Inflation Pressures muted
• Feds next move up-timing uncertain
• What happens after the inventory kick?
• Housing, Motor Vehicles and Debt Service Burdens
  are concerns

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Household Debt Service Burden

• 1986 4th Quarter 14.38
• 1993 4th 11.84
• 1994 4th 12.25
• 1995 4th 12.92 2001 4th
  14.3
• 1996 4th 13.28
• 1997 4th 13.39
• 1998 4th 13.42
• 1999 4th 13.8
• 2000 4th 14.13

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The New Environment

• More Defense and Security Spending
• Changed -Preferences and Practices
• Productivitys Pattern-Up in Recession
• Appears that there will be TPA allowing the next
  round of trade barrier reductions
• Anti-Business sentiment-what will the regulatory
  response be?

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Worries And Lessons

• Additional Attacks
• What do the numbers mean?
• Anti-Business Backlash
• Oil, India-Pakistan, Middle East
• The dollar?
• We must not forget the resiliency and flexibility
  of the US economy.

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Housing- It Just Keeps On Going!

• Expected to Remain close to 2001 levels
• May Consensus at 1.62 million units
• To March Permits up .8
• Mild Winter resulted in strength in NH, ND, IA,
  NE
• Demographics, Deregulation, Falling Transactions
  Costs Bode well

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Thanks For Your Attention