Resolved:Economic Recovery is Imminent

Pikes Peak Economics ClubSeptember 1, 2009

Fred Crowley for the Pro Argument

Isn’t a recession a period of diminished economic activity?

It’s more accurate to say that a recession—the way we use the word—is a period of diminishing activity rather than diminished activity. We identify a month when the economy reached a peak of activity and a later month when the economy reached a trough. The time in between is a recession, a period when economic activity is contracting. The following period is an expansion.

Source: NBER

El Paso County

Table 1: Business Conditions Index Components - All Values Indexed to Mar 2001 = 100

  COS Enplane-

ments

El Paso County SF

& TH Permits

U Of Mich Con Sent

Kansas City Fed Mfg

Index

El Paso Employ-

ment Rate

Colorado Springs 2% Sales & Use

Tax

El Paso County Car

Sales

El Paso County Fore-

closures

El Paso County

Employed

El Paso County

Real Wages

BCI

Mar-08 90.14 28.74 75.77 138.27 98.03 104.12 71.00 97.98 113.08 104.84 86.28

Apr-08 87.24 28.47 68.75 149.48 98.09 101.79 77.40 98.05 112.65 99.33 85.81

May-08 93.34 36.69 65.54 152.09 97.80 101.78 69.90 98.42 111.47 99.10 87.34

Jun-08 85.60 23.83 60.49 147.61 97.84 110.33 76.72 97.59 109.16 98.12 83.13

Jul-08 81.95 30.58 66.09 169.28 97.70 93.81 66.92 98.13 108.40 98.57 84.26

Aug-08 84.91 20.03 68.98 146.49 97.50 103.75 63.75 98.99 108.27 98.33 80.68

Sep-08 80.47 28.26 78.38 125.56 97.40 99.18 67.86 98.94 108.36 98.03 82.95

Oct-08 86.28 17.50 65.90 99.03 96.94 93.25 58.64 97.92 108.16 104.58 75.20

Nov-08 79.98 17.29 61.41 75.11 96.96 94.39 54.56 98.21 108.47 103.65 71.55

Dec-08 79.57 16.87 66.14 76.98 96.33 91.51 57.98 98.26 107.59 102.44 72.08

Jan-09 79.02 17.92 65.64 62.78 95.88 89.24 49.03 98.17 107.00 101.30 69.44

Feb-09 78.56 17.71 61.71 59.79 95.18 90.86 50.03 97.78 106.68 100.24 68.64

Mar-09 87.83 17.50 62.31 64.65 95.13 98.11 49.99 97.94 106.14 99.58 70.40

Apr-09 87.24 12.44 71.50 78.10 94.97 92.01 49.08 97.74 107.69 98.33 69.66

May-09 80.54 25.94 75.30 90.06 94.98 87.36 41.19 97.83 106.37 97.28 73.97

Jun-09 80.15 32.26 75.93 106.13 95.80 94.46 51.77 98.18 104.00 96.09 79.09

June 2009 Compared to:

May-09 -0.49% 24.39% 0.84% 17.84% 0.86% 8.12% 25.67% 0.36% -2.23% -1.22% 6.93%

Mar-09 -8.74% 84.34% 21.87% 64.16% 0.70% -3.73% 3.57% 0.25% -2.01% -3.50% 12.35%

Dec-08 0.73% 91.25% 14.81% 37.86% -0.56% 3.22% -10.72% -0.08% -3.34% -6.20% 9.73%

Jun-08 -6.37% 35.40% 25.53% -28.10% -2.09% -14.38% -32.52% 0.61% -4.73% -2.07% -4.86%

Real wages in El Paso County are estimated by the Forum for the period Jan '09 through Jun '09

Business Conditions IndexEl Paso County (March 2001 = 100)

60

70

80

90

100

110

120

Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09

Fo

rum

Bu

sin

ess

Co

nd

itio

ns

Ind

ex

Business Conditions Index 3 Month Moving Average

Source: UCCS Southern Colorado Economic Forum

NBER Key Indicators

• Non-Farm Employment – Coincident Economic Indicator (CEI)

• Aggregate domestic production (GDP) - Unreliable CEI

• Real Gross Domestic Income – Unreliable CEI• Real Personal Income Less Transfer Payments–

Lagging Indicator (CEI)• Real Wholesale/Retail Trade Sales – CEI• Industrial Production – CEI

Source: NBER on 12/2007 start of recession

Monthly Change - Composite Index NBER Indicator Variables Monthly Change

-0.05

-0.04

-0.03

-0.02

-0.01

0

0.01

0.02

0.03

0.04

6/92

6/93

6/94

6/95

6/96

6/97

6/98

6/99

6/00

6/01

6/02

6/03

6/04

6/05

6/06

6/07

6/08

6/09M

onth

y C

han

ge

Source: FRED ii, Census, BEA

Monthly Change - Composite Index NBER Indicator Variables Monthly Change

-0.05

-0.04

-0.03

-0.02

-0.01

0

0.01

0.02

0.03

0.04

6/92

6/93

6/94

6/95

6/96

6/97

6/98

6/99

6/00

6/01

6/02

6/03

6/04

6/05

6/06

6/07

6/08

6/09M

onth

y C

han

ge

Source: FRED ii, Census, BEA

Conference Board Indicators

• Leading (LEI)

• Coincident (CEI)

• Lagging (LAG)

Conference BoardLeading Economic Indicators (7 of 10 are up)

1. Average weekly hours, manufacturing2. Average weekly initial claims for unemployment insurance3. Manufacturers' new orders, consumer goods and materials4. Index of supplier deliveries – vendor performance5. Manufacturers' new orders, nondefense capital goods6. Building permits, new private housing units7. Stock prices, 500 common stocks8. Money supply, M29. Interest rate spread, 10-year Treasury bonds less federal

funds10.Index of consumer expectations

Source: Conference Board

Initial Claims for Unemployment Insurance,4-Week Moving Average

Difference in 10-Year T-Bond and Fed Funds Rate

-10.00

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

1/10

/62

1/10

/64

1/10

/66

1/10

/68

1/10

/70

1/10

/72

1/10

/74

1/10

/76

1/10

/78

1/10

/80

1/10

/82

1/10

/84

1/10

/86

1/10

/88

1/10

/90

1/10

/92

1/10

/94

1/10

/96

1/10

/98

1/10

/00

1/10

/02

1/10

/04

1/10

/06

1/10

/08

Source: FRED ii

Conference BoardCoincident Economic Indicators (3 of 4 are up)

1. Non Agriculture Employment

2. Personal Income Less Transfer Payments

3. Industrial Production

4. Manufacturing and Trade Sales

Source: FRED ii

Industrial Production Index

Conference BoardLagging Economic Indicators (1 of 7 is up)

1. Average Duration of Unemployment

2. Inventory to Sales Ratio

3. Labor Cost per Unit of Output in Manufacturing

4. Average Prime Rate

5. Commercial and Industrial Loans

6. Consumer Installment Credit to Personal Income Ratio

7. Consumer Price Index for Services

Average Length of Unemployment

Source: FRED ii

Percent Change in Total Loans and Leases

Source: FRED ii

Conference Board Summary 1

Conference Board Summary 2

  Change Over Last Diffusion Index for

Indicator 6 Months 1 Month Most Recent Month

LEI 3.0% 0.6% 70.0

CEI 0.0% 0.0% 75.0

LAG -3.2% -0.3% 14.3

Source: Conference Board, August 20, 2009

Conference Board Summary 3Indicator Group

Improving No Change Worsening

LEI 6 1 3

CEI 3 0 1

LAG 1 1 5

Total 10 2 9

Conference Board Conclusion

“All in all, the behavior of the composite indexes suggests that the recession is bottoming out and that the economic

activity will likely begin to recover soon.”

Source: The Conference Board Leading Economic IndexTM (LEI) for the United States, August 20, 2009

Emerging International Trends• OECD (LEI)

• Trading Economics (GDP)

Leading Economic Indicator TrendsJan 2006 through June 2009 (Jan 2006=100)

80

90

100

110

120

130

140

Jan

-200

6

Ap

r-20

06

Jul-

2006

Oct

-200

6

Jan

-200

7

Ap

r-20

07

Jul-

2007

Oct

-200

7

Jan

-200

8

Ap

r-20

08

Jul-

2008

Oct

-200

8

Jan

-200

9

Ap

r-20

09

OECD Total US Major Five Asia Euro AreaSource: OECD

Source: Trading Economics

Source: Trading Economics

Source: Trading Economics

Source: Trading Economics

Source: Trading Economics

Source: Trading Economics

Summary

Aggregate Evidence for Independently Verifiable, Objective Data Points and

Trends All Support the Proposition that the Recession Is Over in Colorado

Springs, The United States and the Major Trading Partners of the United States.