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ECONOMIC OUTLOOK: ARE HAPPIER DAYS HERE?
Dr. Mike Walden
Reynolds Distinguished Professor
North Carolina State University
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USEFUL TO THINK OF ECONOMIC ISSUES IN TWO PARTS
1. SHORT-RUN “CYCLICAL” ISSUE RELATED TO THE RECESSION AND RECOVERY
2. LONG-RUN “STRUCTURAL” ISSUES RELATED TO OUR ECONOMIC PATH FOR NEXT 50 TO 75 YEARS
15
AND SOME OPTIMISM FROM IMPROVED HOME SALES AND CONSTRUCTION (sales are of existing units and permits for planned units)
26
THE “BITE” FROM GAS PRICES HAS BEEN INCREASING – BUT NOT YET A RECORD (GAS SPENDING AS A % OF TOTAL SPENDING)
29
FUNDAMENTAL ISSUE – OIL DEMAND INCREASING FASTER THAN OIL SUPPLY (WORLD CONDITIONS, MILLIONS OF BARRELS PER DAY)
30
COULD RISING GAS PRICES DERAIL THE RECOVERY?
EVERY 10 CENT RISE IN GAS PRICE REDUCES GDP GROWTH RATE BY 0.2%
GAS PRICE ABOVE $5/GALLON WOULD STALL THE RECOVERY
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NATIONAL FORECASTS
200,000 – 250,000 JOBS CREATED PER MONTH
2.0% TO 2.5% GDP GROWTH RT
CONSUMERS SPENDING MORE
DELEVERAGING ALMOST COMPLETE
WILDCARD – ENERGY PRICES AND POTENTIAL MIDEAST CONFLICT
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KEY ECONOMIC POLICY ISSUES
DEBATE OVER LONG RUN FISCAL PLAN * tax rates * “tax expenditures” * entitlements * defense
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GOVERNMENT CYCLICAL POLICY QUESTIONS
For monetary policy: - creating another “bubble”? - creating more inflation? - exit strategy?
For fiscal policy: - more stimulus needed? - long run fiscal plan needed? - or austerity needed?
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FIVE BIG STRUCTURAL ISSUES
GLOBALIZATION AND SKILLS
DEMOGRAPHY AND PUBLIC SPENDING
EFFICIENT PUBLIC REVENUE COLLECTION
INFRASTRUCTURE UPGRADING
ENERGY TRANSITION
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Metro NC Job Gains Since Bottom of Recession (seasonally-adjusted)
Charlotte 7.2% Raleigh-Cary 6.4% Burlington 5.4% Durham-CH 5.1% Asheville 4.6% Greensboro-HP 3.7% Rocky Mount 3.6%
Fayetteville 3.6% Hickory 2.6% Jacksonville 2.5% Goldsboro 2.1% Winston-Salem 1.6% Greenville 1.3%
Wilmington 0.0%
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NC ECONOMIC FORECAST FOR 2013
BETTER GROWTH
80,000 – 90,000 JOBS CREATED
8.2% JOBLESS RATE BY YEAR’S END
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LONGER-RUN NORTH CAROLINA GROWTH PROSPECTS
MANUFACTURING REVIVAL
CONSTRUCTION SURGE
EDUCATION “BUMPER CROP”
RETIREE INFLUX
400,000 NET NEW JOBS BY 2017
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How has the recession affected your organization?
Q4 2008 Q2 2009 Q1 2012 Q1 2013-10%
0%
10%
20%
30%
40%
50%
60%
44%
56%
39%
52%50%
39%
49%
31%
6% 5%12%
17%
Negatively Not Much Positively
Has the current economic environment negatively affected your plans for growth over the next 12 months?
Q4 2008 Q2 2009 Q1 2012 Q1 20130%
10%
20%
30%
40%
50%
60%
70%
80%
55.6%
75.0%
49.5%53.3%
44.4%
25.0%
50.5% 46.7%
YESNO
Which answer most closely matches your current perception of the economic environment over the next 12 months?
Packing it up
Environment is declining and expect my organization to contract
Environment will stay the same and I do not expect to improve or decline
Environment is improving and I expect my organization to do well
0% 20% 40% 60% 80%
1.1%
7.9%
24.7%
66.3%
0.0%
7.0%
23.9%
69.0%
Q1 2013 Q1 2012
Do you have plans to increase or reduce your workforce in the next 12 months?
0%
20%
40%
60%35.8%
58.9%
5.3%
39.7%58.9%
14.0%
Q1 2012 Q1 2013
If you could change one thing locally- other than general economic conditions – to help your organization thrive, what would it be?