Notes Flashcards
Unemployent Insurance rates
Labor market is heading in ________ direction
right direction
*fewer firing, more hiring
What is a necessary condition for a strong labor market?
hiring
Private sector __________, Public sector ___________
Private sector hiring
Public sector firing
Public sector firing
- 2 trilllion federal defecit
- cant use debt bond
of jobless claism consistent with stable unemployment rate
350,000
Firms remain wary of hiring new workers despite strong profitability, because they have strong concerns over:
- Weak recovery
- Los consumer confidence
- Euro-zone debt crisis
- U.S. fiscal policy uncertainty
Number of continous unemployment claims
3.3 million
Maximum sustainable growth rate
3% (quarterly)
Reason why we are not recovering quickly
Deleveraging
-people/firms paying down debt
*arent spending money elsewhere
Anualized houses sold in July
- 47 million
(372. 5 x 12)
- up 2.3%m/m, up 10% y/y
*Sales moving in right direction
Median home price
$187,300
Months supply of homes
6.4 months
Total supply
Months sold
2.4 million / 372.5 thousand
Demand side factor of housing market
- Low mortage interest rate (increase), but tight credit (decrease)
- Rising consumer confidence
- Modest job and income growth
- Expect home prices to fall again in 2013 as foreclosed properties come
Supply side factors of housing market
- Large inventory of discounted foreclosed home (shadow)
- prices down - Falling inventory of homes
- Falling distressed home sales
Prices always go up on homes?
Sin of extrapolation
-future looks like the past
July Retail Sales
Retail sales rose 0.8% m/m, 4.1%y/y (3.8% excluding autos)
(9.6% annualized)
This strong of sales is unsustaiable - made up for June
Retail sales: debt payments
Debt payments are down and the pace of deleveraging is gradually slowing, which increases available cash
Factors reducing demand in retail sales
- Few new jobs
- Low income / wage growth 3.5% y/y
- High unemployment
- Low confidence (fiscal cliff budget debate and Euro-zone crisis)
Factors supporting consumer demand
- Reduced Social security withholdings
- rising home and stock prices (wealth effect)
- Private sector job growth
- Pent-up demand
- Falling debt payments
- Increased credit availability
Personal income in July
rose 0.3% m/m, 3.6% y/y
wage income rose 0.2% m/m, 2.4% y/y
lower interest rates
lower interest income
high profits for companies
higher dividends and proprietor’s income
Rental income is _______
rising, there are less homeowners
Normal spending
rose 0.4% m/m, 3.3% y/y
Real spending
rose 0.4% m/m (adjusted for inflation)
PCE deflator
0.0% m/m, 1.3% y/y
(personal consumption expenditure)
PCE core
0.0% m/m, rose 1.6% y/y
everything you buy except oil and food
-lower inflation is benefitting us
lower debt burdens free up income for spending
more borrowing = raising cash flows
Savings rate
Savings / Disposable personal income = 4.2%
- consumers lowered their savings rate and is a constraint on spending rowth
Spending growth will be dependent on ___________
income growth
GDP SAAR
- 7%
- 7%/4 - quarterly growth
GDP notes
Recovery continues but remains tenuous
Growth < 3% prevents any improvement in labor market
Inventories subtracted 0.23% from GDP growth
Year over Year GDP growth
constrained by:
up 2.3%
Constrained by: Deleveraging households
Spike in commodity prices
Soverign debt problems in Europe
U.S political uncertainty
GDP =
Change in inventories + Final Sales
Inflation numbers
0.6% m/m, 1.7% y/y
Core inflation
0.1% m/m, 1.9% y/y
FED mandate <2%
Expect lower inflation in 2012 due to:
- lack of broad pricing power
- subdued economic recovery
Lower inflation will boost _______________
real disposable income growth rates
Businesses are likely to slash___________________________________
prices (deflation) because inventories are lean
Unemployment surveys
Establishment survey - ask business about payroll
Household survey - 60,000
August unemployment =
8.1% down from 8.3%
12.5m
154.6m
Labor force participation rate =
63.5%
*66% in dec. 2007
**went down, meaning more discouraged workers
July to August Unemployment figures
Change in labor force = -369K
Change in Employment = -119K
Change in unemployment = -250K
Key employment facts:
32 million jobs created each year
30 million jobs destroyed each year
= +2 million jobs
*Joseph schumpter “creative destruction”
Frictional employment
Structural employment
dynamic economy
Structural factors that raise unemployment rate
Minimum wage rate
labor union wage contracts
efficiency wages
August New Home Sales
373,000 SAAR
-0.3% m/m; 28% y/y
New home sales in 2013 expectation
Expect 470,000 new home sales in 2013
Demand side drivers of new home sales
Rising job growth, tight credit, rising confidence, underwater potential trade-up buyers (loan more than value of house - cant buy new home)
also, more affordable homes
Supply-side drivers of new home sales
Low priced foreclosed homes are substituting for new home sales
Low inventory
Inventory of new homes =
141,000 (record below and below long run average)
Housing backlag is falling fast due to low housing starts
Months supply of new homes
current = 4.5 months
*6 months is 45 year average
Median new home sales price =
267,900 (16%m/m; 17%y/y)
Productivity =
2%
Labor force growth rate =
1%
Rule of 70 - US
Output (Y/N) will double in 70/2 = 35 years
Standard of living is a function of ____________
labor productivity
The average person can buy more goods if ___________________________
the average worker can produce more
If economy doesnt grow, unemployment will rise _______
2.3%
If economy grows 3.3%, ______________
Unemployment rate will not change
Average worker hours
34.5 hours
Average hourly earnings
$23.29 up 1.7% y/y
Payroll increased ____________________
96,000 in august, still below the 200,000
Labor utilization measure
= 58.3%
Underemployment ratio
= 14.5%
