economic outlook gfoa az alan e. maguire february 20, 2013
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Economic Outlook Economic Outlook
GFOA AZGFOA AZAlan E. MaguireAlan E. Maguire
February 20, 2013
Economic OutlookEconomic Outlook“Where are we going?”
• US Economy in the Global Economy
• Arizona Economy in the US Economy
• Pertinent Observations
Economic OutlookEconomic Outlook“Where are we going?”
• US Economy in the Global Economy
• Arizona Economy in the US Economy
• Pertinent Observations
US Economic OutlookUS Economic OutlookUS Economy in the Global Economy
The Current Context
The Outlook
Long-Term Trends
US Economic OutlookUS Economic Outlook The Current Context
• Current Conditions
• Gross Domestic Product Trends
• Employment Trends
• Current Challenges
US Economic OutlookUS Economic Outlook The Current Context
• Cyclical Recession Over Since Mid 2009
Relatively Short Recession in GDP Terms, but Deep
• US Financial Crisis Has Been Contained
Some Nagging Issues to Clean-up – Fannie, Freddie, FHA
• So, ………….
US Economic OutlookUS Economic Outlook The Current Context
• Stagnant Growth for “Recovery” period
• Historical Recovery Drivers Missing
• Remnants of Double Whammy – Housing & Banking
Consumer Mortgage Debt / Other Debt Overhanging Housing Supply Battered Consumer Confidence International Issues
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US Economic OutlookUS GDP Quarterly Change 1970 - 2012
Recessions
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GDP
-8.0
-6.0
-4.0
-2.0
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US Economic OutlookUS GDP Quarterly Change 1970 - 2012
Recoveries
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GDP
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US Economic OutlookUS GDP Quarterly Change 1970 - 2012
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GDP
US Economic OutlookUS GDP Quarterly Change 2009 - 2012
GDP
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US Economic OutlookUS GDP Quarterly Change 2009 - 2012
GDP
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US Economic OutlookUS GDP Quarterly Change 2009 - 2012
GDP
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-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
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US Economic OutlookUS Employment % Change from Prior Year 1970 - 2011
Recoveries
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Employment
50
60
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100
110
120
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US Economic OutlookUS Employment % Change from Prior Year 1990 - 2010
To
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US Economic OutlookUS Economic Outlook The Outlook – Near Term
• Low, Slow, but Steady Growth: 1.5% to 2.5%
• Substantial Deterrents to Growth & Investment
International Issues – Especially EuropeCollapsing EU Fiscal SystemsWeak Demand – Scared Consumers & CEOs Continuing Uncertainty!
• Expectations of Rising US Taxes- “Fiscal Cliff”
US Economic OutlookUS Economic Outlook Longer Term Trends
• Worldwide Demand Issues
• Europe’s Issues – Currently In Recession!
• Japan’s Issues
High Debt and Pending LiquidationNow – Easy Money
• Asia’s Cultural / Governmental Challenges
• Stupid Government Risk!!
Economic OutlookEconomic Outlook“Where are we going?”
• US Economy in the Global Economy
• Arizona Economy in the US Economy
• Pertinent Observations
AZ Economic OutlookAZ Economic OutlookAZ Economy in the US Economy
The Current Context
The Outlook
Long-Term Trends
AZ Economic OutlookAZ Economic Outlook The Current Context
• Recent AZ Employment Trends
• Current Challenges
AZ Economic OutlookAZ Economic OutlookAZ Employment 2001 – 2012AZ Employment 2001 – 2012
(000’s)(000’s)
All Industries
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AZ Economic OutlookAZ Economic OutlookAZ Employment 2001 – 2012AZ Employment 2001 – 2012
(000’s)(000’s)
All Industries
Manufacturing
Construction
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AZ Economic OutlookAZ Economic OutlookAZ Employment 2001 – 2012AZ Employment 2001 – 2012
(000’s)(000’s)
All Industries
Manufacturing
Construction
*
AZ Economic OutlookAZ Economic OutlookAZ Employment 2001 – 2012AZ Employment 2001 – 2012
(000’s)(000’s)
All Industries
*
AZ Economic OutlookAZ Economic OutlookAZ Employment 2001 – 2012AZ Employment 2001 – 2012
(000’s)(000’s)
*
AZ Economic OutlookAZ Economic OutlookAZ Employment 2001 – 2012AZ Employment 2001 – 2012
(000’s)(000’s)
*
AZ Economic OutlookAZ Economic OutlookAZ Employment 2001 – 2012AZ Employment 2001 – 2012
(000’s)(000’s)
*
AZ Economic OutlookAZ Economic Outlook The Current AZ Context
• Still Challenging US Conditions
• Low, Slow, but Steady Growth: 1.5% to 2.5%
• But, ….
• Continuing Uncertainty – Nationally / Globally
• Positive AZ Trends
AZ Economic OutlookAZ Economic Outlook The Current AZ Context
• Returning to Government Fiscal Balance
• Above National Average Job Growth Rates
• Benefit of Building from a “Low Base”
Beware of the “Illusion of Recovery”
AZ Economic OutlookAZ Economic Outlook The Good AZ News
• Top 10 in Job Growth – From 49th!
100,000 + jobs added since 2010
• Retail Spending Rising (Autos, Durables)
AZ Retail Sales Up – Slow & Steady
Outlook Hopeful, but Concerned
• Arizona Gradual Recovery Underway
# 3 in 2012
The Good AZ News
• Blue Chip Economic Forecast
Calendar 2012 over 2011 % Growth
PI Retail Employ Pop Housing
5.8 6.3 2.4 1.3 26.1
Calendar 2013 over 2012 % Growth
PI Retail Employ Pop Housing
6.4 5.6 2.8 1.4 30.3
AZ Economic OutlookAZ Economic Outlook
AZ Economic OutlookAZ Economic Outlook The AZ Outlook
• Substantial Drags and Risks Still Exist
• Historic Drivers Are Weak
• Future Not Like Historical Patterns
AZ Economic OutlookAZ Economic Outlook The AZ Outlook
• Expect Slow, but Positive Growth
Existing Capacity Available for Growth-- Without Capital Spending-- With Little New Hiring
• Still Strong Fundamentals in Arizona
Positive Business and Social Climates
We Are Not California!!!
AZ Economic OutlookAZ Economic Outlook AZ Long Term Trends
• More Integrated Economically
Not just the “Five C’s” anymore
• More Integrated (Dependent) on US / Global Economy
• Same Core Challenges as US
Labor Force - Skills IssuesGlobal Demand Constraints
Economic OutlookEconomic Outlook“Where are we going?”
• US Economy in the Global Economy
• Arizona Economy in the US Economy
• Pertinent Observations
Pertinent Observations
Global Economic Challenges
US Economic Challenges
The Real “Prime Directive”
Economic Drivers
US Economic Solutions
Pertinent Observations Global Economic Challenges
Probability of European Decline
• European Employment Crisis
Employment is 3.5 million lower than 2008
Current trend 4.5 mm more lost next 4 years
31.5 % of working age population not employed
Pertinent Observations Global Economic Challenges
Asian Challenges
• Chinese Totalitarianism
Lightening Transition to Modern Economy
Intellectual Intergity
• Indian Democracy
Urbanization and Infrastructure Needs
“The British Raj”
Pertinent Observations US Economic Challenges
America’s Challenges
• Demographic Trends
• Loss of Mid-skill Employment
• Labor Force Skills Gap
• Massive and Growing Federal Fiscal Crisis
• “American Competitiveness”
US Economic Challenges
Troubling Trends
• Slower Income Growth
• Longer Periods of Unemployment
• Smaller Proportion of “Employed” to “Not Employed”
• Growing Culture of “Entitlement” -- Dependency
Pertinent Observations
The Real “Prime Directive”
Increasing Household Incomes
Investment Increases Productivity
Higher Productivity Increases Incomes
Rising Incomes and Standards of Living
Rising Incomes Drive Consumer Spending
Consumer Spending Drives Economic Growth
Pertinent Observations
The Real “Prime Directive”
Increasing Household Incomes
Investment Increases Productivity
Higher Productivity Increases Incomes
Rising Incomes and Standards of Living
Rising Incomes Drive Consumer Spending
Consumer Spending Drives Economic Growth
Pertinent Observations
Energy!
The Real “Prime Directive”
Increasing “The Pie”
Customers Drive Consumer Spending
Consumer Spending Drives Job Creation
Job Creation Drives Economic Growth & Investment
Investment Increases Productivity
Pertinent Observations
Pertinent Observations Economic Drivers
Business Investment
Greater Human Productivity
Higher Disposable Incomes and Consumer Spending
Population Growth
Energy!
Pertinent Observations Economic Drivers
Job Creation Lures Population Growth
Population Growth Drives Production and Demand
Demand Drives Further Expansion and Employment
Employment Lures Population Growth
Arizona’s Story
Pertinent Observations US Economic Solutions
America’s Strengths
• Strong, Agile Markets
• Tradition of Productivity AND Economic Focus
• Fully Developed Infrastructure (But Aging)
• Finest Higher Education System (Largely Misguided)
• Highest Caliber “Rule of Law” (May Be At Risk)
*
Pertinent Observations US Economic Solutions
1. Rediscover Free Enterprise
2. Reinvigorate American Competitiveness
3. Reinvigorate Individual Responsibility
4. Drastically Reduce Federal Spending
Pertinent Observations US Economic Solutions
1. Rediscover Free Enterprise
2. Reinvigorate American Competitiveness
3. Reinvigorate Individual Responsibility
4. Drastically Reduce Federal SpendingEnergy!
Natural Gas
Closing Thoughts
• American “Exceptionalism”
Existentially Committed Immigrants
Economic Obsession – de Tocqueville
• American Economic Engine
Transformed the World 3 Times
Continues to Lead Worldwide Innovation
Drives the Global Economy
Pertinent Observations
Endangered!!
Closing Thoughts
Arizona’s Prospects•American “Exceptionalism” Squared
•Open, Upwardly Mobile Social Structure
•Strengthening Economic Foundation
•Tradition of Leadership
•And, “It Ain’t Broke” So “Stop Trying to Fix It!”
Pertinent Observations
Economic Outlook Economic Outlook Alan E. MaguireAlan E. Maguire
Questions?
February 21, 2013
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