back to the future anirban basu, chief economist, abc october 27, 2010

Back to the Future

Anirban Basu, Chief Economist, ABC

October 27, 2010

Trading Places

15-Year & 30-Year Fixed Mortgage Rates January 1995 through September 2010

Source: Freddie Mac

Jan-95Jan-96

Jan-97Jan-98

Jan-99Jan-00

Jan-01Jan-02

Jan-03Jan-04

Jan-05Jan-06

Jan-07Jan-08

Jan-09Jan-10

3%

4%

5%

6%

7%

8%

9%

10%

15-yr

30-yr

Ra

te

U.S. New Home SalesJanuary 1999 through August 2010

Source: Economy.com, Census Bureau

Jan-99Jul-99

Jan-00Jul-00

Jan-01Jul-01

Jan-02Jul-02

Jan-03Jul-03

Jan-04Jul-04

Jan-05Jul-05

Jan-06Jul-06

Jan-07Jul-07

Jan-08Jul-08

Jan-09Jul-09

Jan-10Jul-10

0

200

400

600

800

1,000

1,200

1,400

1,600

Th

ou

sa

nd

s, S

AA

R

U.S. Housing StartsJanuary 1999 through September 2010

Source: Economy.com

Jan

-99

Au

g-9

9

Ma

r-0

0

Oct

-00

Ma

y-0

1

De

c-0

1

Jul-0

2

Fe

b-0

3

Se

p-0

3

Ap

r-0

4

No

v-0

4

Jun

-05

Jan

-06

Au

g-0

6

Ma

r-0

7

Oct

-07

Ma

y-0

8

De

c-0

8

Jul-0

9

Fe

b-1

0

Se

p-1

0

200

700

1,200

1,700

2,200

2,700

Tho

usan

ds,

SA

AR

Mortgage Banker’s Association Mortgage ApplicationsPurchase Index

January 2006 – September 17, 2010

Source: Economy.com

Jan-

06

Mar

-06

May

-06

Jul-0

6

Sep-0

6

Nov-0

6

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep-0

7

Nov-0

7

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-0

8

Nov-0

8

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-0

9

Nov-0

9

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep-1

0150

200

250

300

350

400

450

500

Source: Federal Reserve Board

Commercial Real Estate LoansJanuary 2001 through September 2010

Jan-

01

Jun-

01

Nov-0

1

Apr-0

2

Sep-0

2

Feb-0

3

Jul-0

3

Dec-0

3

May

-04

Oct-0

4

Mar

-05

Aug-0

5

Jan-

06

Jun-

06

Nov-0

6

Apr-0

7

Sep-0

7

Feb-0

8

Jul-0

8

Dec-0

8

May

-09

Oct-0

9

Mar

-10

-10%

-5%

0%

5%

10%

15%

20%

Year

to Y

ear %

Cha

nge

Source: The American Institute of Architects

Architecture Billings IndexDecember 2007 through September 2010

Dec-07

Feb-08

Apr-08

Jun-0

8

Aug-08

Oct

-08

Dec-08

Feb-09

Apr-09

Jun-0

9

Aug-09

Oct

-09

Dec-09

Feb-10

Apr-10

Jun-1

0

Aug-10

30

35

40

45

50

55

60

55.4

50.7

41.7

39.7

45.5

43.4

46.146.8

47.6

41.4

36.2

34.734.1

33.3

35.3

43.742.842.9

37.7

43.1

41.7

43.1

46.1

42.843.4

42.5

44.846.1

48.4

45.846.0

47.948.2

50.4

Source: ABC

ABC’s National Backlog AverageNovember 2008 through July 2010

Nov-08

Dec-08

Jan-0

9

Feb-09

Mar-0

9

Apr-09

May-

09

Jun-0

9

Jul-0

9

Aug-09

Sep-09

Oct

-09

Nov-09

Dec-09

Jan-1

0

Feb-10

Mar-1

0

Apr-10

May-

10

Jun-1

0

Jul-1

05

5.5

6

6.5

7

7.5

7.1

6.76.6

6.3

6.7

6.26.3

5.7

6.1

5.7

5.9

5.6

5.8

6.0

5.5

6.2

6.5

7.4

7.17.0

7.3

Mo

nth

s o

f B

ackl

og

July 09 - July 10: +19.7%

Nonresidential Construction Put-in-PlaceJune 2006 through August 2010

Source: U.S. Census Bureau

Jun-

06

Aug-0

6

Oct-06

Dec-0

6

Feb-0

7

Apr-0

7

Jun-

07

Aug-0

7

Oct-07

Dec-0

7

Feb-0

8

Apr-0

8

Jun-

08

Aug-0

8

Oct-08

Dec-0

8

Feb-0

9

Apr-0

9

Jun-

09

Aug-0

9

Oct-09

Dec-0

9

Feb-1

0

Apr-1

0

Jun-

10

Aug-1

0500

550

600

650

700

750

SAA

R ($

billi

ons)

Oct. 2008: $719.0 billionAug. 2010: $562.7 billion

-21.7%

National Nonresidential Construction Spending by Subsector August 2010 v. August 2009


Lodging

Manufacturing

Office

Commercial

Religious

Educational

Power

Health care

Communication

Public safety

Transportation

Amusement and recreation

Highway and street

Water supply

Sewage and waste disposal

Conservation and development

-70 -60 -50 -40 -30 -20 -10 0 10 20

-52.0

-35.4

-31.4-21.3

-16.2

-14.4

-11.7

-9.9

-8.3

-7.8

-4.7

-3.7

1.1

7.4

18.1

18.3

12-month %Change

National Nonresidential Construction Spending by Subsector 2007 through 2010


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000 Manufacturing

Conservation and development

Water supply

Sewage and waste disposal

Highway and street

Power

Communication

Transportation

Amusement and recreation

Public safety

Religious

Educational

Health care

Commercial

Office

Lodging

Co

nst

ruct

ion

Sp

end

ing

($m

illi

on

s)

2007 2010F20092008

-14.7%

-7.8%

+8.9%

+19.1%

Inputs to Construction PPIJanuary 2001- September 2010

Source: Bureau of Labor Statistics

Jan-

01

Jun-

01

Nov-0

1

Apr-0

2

Sep-0

2

Feb-0

3

Jul-0

3

Dec-0

3

May

-04

Oct

-04

Mar

-05

Aug-0

5

Jan-

06

Jun-

06

Nov-0

6

Apr-0

7

Sep-0

7

Feb-0

8

Jul-0

8

Dec-0

8

May

-09

Oct

-09

Mar

-10

Aug-1

0-10%

-5%

0%

5%

10%

15%

12

-mo

nth

% C

ha

ng

e

Key Commodity PricesJanuary 2001- September 2010

Source: BLS: EIA

-40-30-20-10

01020304050 Iron & Steel PPI

12-m

on

th %

Ch

ang

e

-20

-10

0

10

20

30

40 Softwood Lumber PPI

12-m

on

th %

Ch

ang

e

-4-202468

1012 Concrete Products PPI

12-m

on

th %

Ch

ang

e

Jan

-01

Jul-

01

Jan

-02

Jul-

02

Jan

-03

Jul-

03

Jan

-04

Jul-

04

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

$10$25$40$55$70$85

$100$115$130$145 NYMEX Crude Oil

Do

llar

s p

er B

arre

l

Baltimore-Towson MSA Annual Nonresidential Construction Value

2005-2014*

Source: McGraw Hill

2008Q3: -0.5%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

*Forecast: July 2010 through 2014

Baltimore Market View3rd Quarter 2010

Source: CB Richard Ellis

2008Q3: -0.5%Indicator Office IndustrialRetail

(2nd Quarter)

Inventory (SF) 63,247,311 152,037,196 68,825,300

Overall Vacancy Rate (%) 17.5% 12.7% 6.8%

Quarter Net Absorption (SF)

30,633 NA 114,760

YTD Net Absorption (SF) 65,978 -140,264 466,097

Under Construction (SF)

1,110,641 (8 buildings out of

15 in Harford County)

409,024 144,842

Avg. Asking Dir. Lease Rate ($/SF/YR)

$22.33 $4.40 $22.03

Ferris Bueller’s Day Off


Net Change in U.S. Jobs, BLSJanuary 2001 through September 2010

Jan

-01

Ma

y-01

Se

p-0

1

Jan

-02

Ma

y-02

Se

p-0

2

Jan

-03

Ma

y-03

Se

p-0

3

Jan

-04

Ma

y-04

Se

p-0

4

Jan

-05

Ma

y-05

Se

p-0

5

Jan

-06

Ma

y-06

Se

p-0

6

Jan

-07

Ma

y-07

Se

p-0

7

Jan

-08

Ma

y-08

Se

p-0

8

Jan

-09

Ma

y-09

Se

p-0

9

Jan

-10

Ma

y-10

Se

p-1

0

-900

-700

-500

-300

-100

100

300

500

Th

ou

san

ds

9/10: -95k

Between September 2009 and September 2010, the nation gained 344 thousand jobs.


National Nonfarm Employmentby Industry Sector GroupsDecember 2007 v. September 2010

Manufacturing

Trade, Transportation, and Utilities

Construction

Professional and Business Services

Financial Activities

Leisure & Hospitality

Information

Other Services

Government

Mining and Logging

Education & Healthcare

-3500 -2500 -1500 -500 500 1500

-2056, -15.0%

-1924, -7.2%

-1887, -25.2%

-1317, -7.3%

-650, -7.9%

-366, -2.7%

-312, -10.3%

-150, -2.7%

-146, -0.7%

+6, +0.8%

+1052, +5.7%Chart Title

Thousands, SA

All told 7,750K Jobs Lost

Source: Wells Fargo

• U.S. Unemployment Rate: June 10’ =9.5%

Jobs Seekers Ratio by Industry2001 Recovery vs. 2009 Recovery

Construction

Manufacturing


Professional And Business Services

Education and Health Services

Leisure and Hospitality

0 5 10 15 20 25

20.1

6.8

5.2

2.7

2.7

4.5

10.9

5.4

3.2

1.9

0.8

2.4

2001 Recovery2009 Recovery

Ratio: Unemployed/ Job Openings

Source: Wells Fargo


Peak Unemployment Rate by Industry 2001 Recession vs. 2007 Recession

Construction

Manufacturing

Wholesale & Retail Trade

Transportation and Utlities


Education and Health Services

Professional And Business Services

0% 5% 10% 15% 20% 25% 30%

27.1%

13.0%

10.5%

11.3%

14.2%

6.7%

12.4%

14.0%

7.4%

6.9%

6.6%

10.0%

4.4%

9.1%

2001 Recession2007 Recession

Unemployment Rate (NSA)

National Construction Employment Monthly Net Change

February 2000 - September 2010

Source: Bureau of Labor StatisticsFeb

-00

Aug-0

0

Feb-0

1

Aug-0

1

Feb-0

2

Aug-0

2

Feb-0

3

Aug-0

3

Feb-0

4

Aug-0

4

Feb-0

5

Aug-0

5

Feb-0

6

Aug-0

6

Feb-0

7

Aug-0

7

Feb-0

8

Aug-0

8

Feb-0

9

Aug-0

9

Feb-1

0

Aug-1

0-200

-150

-100

-50

0

50

100

Mo

nth

ly N

et

Ch

an

ge

(th

ou

sa

nd

s)

Maryland Nonfarm Employmentby Industry Sector Groups (NSA)

September 2009 v. September 2010Absolute Change



Manufacturing

Other Services

Information

Construction, Mining and Logging

Educational & Health Services

Government


Professional & Business Services

-10,000 -5,000 0 5,000 10,000 15,000

-6,100

-6,100

-4,900

-4,400

-200

2,000

8,300

9,100

12,900

13,000Chart Title


MD Total: +23.6K; +0.9%

US Total: +344K; +0.3%

Baltimore-Towson MSA Nonfarm Employmentby Industry Sector Groups (NSA)

September 2009 v. September 2010Absolute Change


Other Services


Manufacturing


Information

Government




-16,000 -11,000 -6,000 -1,000 4,000 9,000 14,000

-5,700

-3,200

-2,900

-2,800

-1,200

-300

5,000

5,600

7,000

11,500Chart Title


Baltimore Total: +12.8K; +1.0%

MD Total: +23.6K; +0.9%

US Total: +344K; +0.3%

Baltimore-Towson MSA Construction EmploymentJanuary 2000 through September 2010


Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

12

-mo

nth

ne

t c

ha

ng

e (

00

0’s

)

Washington, DC MSA Nonfarm Employmentby Industry Sector Groups (NSA)September 2009 v. September 2010

Absolute Change


Information

Manufacturing

Other Services



Trade, Transportation & Utilities



Government

-10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000

-4,100

-3,500

-2,800

-1,300

-1,100

9,000

9,600

12,700

15,900

21,700Chart Title


DC MSA Total: +59.8K; +2.0%

US Total: +344K; +0.3%

Unemployment Rates, Largest 20 Metros(NSA)August 2010


Rank MSA UR Rank MSA UR

1Washington-Arlington-Alexandria, DC-VA-MD-WV 6.2 11 Chicago-Joliet-Naperville, IL-IN-WI 9.8

2Minneapolis-St. Paul-Bloomington, MN-WI 7.0 12 St. Louis, MO-IL 9.9

3 Boston-Cambridge-Quincy, MA-NH 7.6 13Atlanta-Sandy Springs-Marietta, GA 10.4

4 Baltimore-Towson, MD 8.2 14San Diego-Carlsbad-San Marcos, CA 10.6

5 Dallas-Fort Worth-Arlington, TX 8.4 14San Francisco-Oakland-Fremont, CA 10.6

6 Seattle-Tacoma-Bellevue, WA 8.5 16Los Angeles-Long Beach-Santa Ana, CA 12.1

7 Houston-Sugar Land-Baytown, TX 8.7 17Tampa-St. Petersburg-Clearwater, FL 12.6

8New York-Northern New Jersey-Long Island, NY-NJ-PA 8.8 18

Miami-Fort Lauderdale-Pompano Beach, FL 12.8

9 Phoenix-Mesa-Glendale, AZ 9.1 19 Detroit-Warren-Livonia, MI 14.4

10Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 9.4 20

Riverside-San Bernardino-Ontario, CA 14.8



Unemployment Rates, U.S. States (SA) September 2010

Rank State Rate Rank State Rate Rank State Rate

1 NORTH DAKOTA 3.7 18 ALASKA 7.8 34 TENNESSEE 9.4

2 SOUTH DAKOTA 4.4 18 LOUISIANA 7.8 36 NORTH CAROLINA 9.6

3 NEBRASKA 4.6 18 WISCONSIN 7.8 37 ARIZONA 9.7

4 NEW HAMPSHIRE 5.5 21 TEXAS 8.1 38DISTRICT OF COLUMBIA 9.8

5 VERMONT 5.8 22 COLORADO 8.2 38 MISSISSIPPI 9.8

6 HAWAII 6.3 22 NEW MEXICO 8.2 40 ILLINOIS 9.9

7 KANSAS 6.6 24 NEW YORK 8.3 41 GEORGIA 10.0

8 IOWA 6.8 25 DELAWARE 8.4 41 OHIO 10.0

8 VIRGINIA 6.8 25 MASSACHUSETTS 8.4 43 INDIANA 10.1

8 WYOMING 6.8 27 ALABAMA 8.9 43 KENTUCKY 10.1

11 OKLAHOMA 6.9 28 IDAHO 9.0 45 OREGON 10.6

12 MINNESOTA 7.0 28 PENNSYLVANIA 9.0 46 SOUTH CAROLINA 11.0

13 MONTANA 7.4 28 WASHINGTON 9.0 47 RHODE ISLAND 11.5

14 MARYLAND 7.5 31 CONNECTICUT 9.1 48 FLORIDA 11.9

14 UTAH 7.5 32 WEST VIRGINIA 9.2 49 CALIFORNIA 12.4

16 ARKANSAS 7.7 33 MISSOURI 9.3 50 MICHIGAN 13.0

16 MAINE 7.7 34 NEW JERSEY 9.4 51 NEVADA 14.4

Recent and Potential Stimulus Measures

• August: $26 billion to aid state payrolls with $10 billion for education and about $16 billion for Medicaid.

• September: Small Business Jobs Act: would create a $30 billion lending fund to help with spending and hiring, and provide $12 billion in tax cuts.

• September: Proposed House bill, Housing Opportunity and Mortgage Equity Act would enable many homeowners to cut their monthly mortgage payments by refinancing at lower mortgage rates or for longer fixed terms or both.

• September: QE2 Possibility: The Federal Reserve is considering new tactics for the purchase of long-term U.S. Treasury securities.• This in addition to the March 2009 measure by the Fed to buy $1.7 trillion worth

of Treasury and mortgage-backed securities over a six to nine month period.

Source: Center on Budget and Policy Priorities

Rank State % Rank State % Rank State %

1 Nevada 56.6% 18 Pennsylvania 16.3% 35 Montana 9.3%

2 New Jersey 37.4% 19 Utah 15.6% 36 California 9.1%

3 Illinois 36.1% 20 New York 15.5% 36 Kansas 9.1%

4 Arizona 35.3% 21 Maryland 15.0% 38 Kentucky 9.1%

5 Maine 32.1% 22 Mississippi 14.6% 39 South Dakota 9.0%

6 Vermont 31.1% 23 Washington 13.9% 40 Michigan 8.8%

7 North Carolina 30.5% 24 Rhode Island 13.2% 41 Massachusetts 8.5%

8 Connecticut 29.2% 25 Hawaii 12.9% 42 Alabama 8.2%

9 Oregon 29.0% 26 Texas 12.8% 42 Virginia 8.2%

10 Minnesota 26.4% 27 Oklahoma 12.4% 44 Wyoming 8.0%

11 Wisconsin 25.3% 28 Delaware 11.7% 45 New Mexico 6.0%

12 Georgia 24.3% 29 Ohio 11.6% 46 West Virginia 3.5%

13 New Hampshire 23.4% 30 Louisiana 11.1% 47 Idaho 3.3%

14 South Carolina 22.6% 31 Tennessee 10.0% 48 District of Columbia 1.7%

15 Florida 22.2% 32 Indiana 9.9%

16 Colorado 21.2% 33 Nebraska 9.7%

17 Iowa 18.6% 34 Missouri 9.3%

Projected State Budget Shortfalls for FY 2011As Percentage of FY 2010 Budget

• Alaska, Arkansas, and North Dakota are not anticipated to experience short falls in FY 2011.• Combined gaps of $260 billion for 2011 and 2012. The numbers suggest that when all is said

and done, states will have to deal with total budget shortfalls of some $260 billion for 2011 and 2012 combined.

Election WatchNational Overview: The Cook Political Report

Source: The Cook Political Report

2008Q3: -0.5%House of Representatives Races

Senate Races

Governor Races

• House: Republic net gain of at least 40 seats.• Turnover of 39 seats would tip majority to Republicans.

• Senate: Republican net gain of 7 to 9 seats.• Currently there are 57 D’s, 2 I’s, and 41 R’s.

• Governor: Republican net gain of 6 to 8 seats.• Currently there are 26 D’s and 24 R’s

Return to Oz

• Stimulus, stimulus, stimulus;

• This was the worst of it from a broader economic perspective;

• Recovery for office, retail and other construction components being stimulated indirectly is probably at least two years away (probably more);

• Unemployment will peak between 10.0 and 10.7 percent next year;

• Commodity prices beginning to surge;

• Too soon to tell if broader inflation will be problematic – deflation could be the bigger issue;

&• 2011????

back to the future anirban basu, chief economist, abc october 27, 2010

Documents