Economic Forecast - Chase Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS: Michigan’s GDP forecast is derived from the national forecast by …

Economic Forecast

OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:

Michigan’s GDP forecast is derived from the

national forecast by allocating output to each

of the 50 states based on employment

shares. So, forecast misses reflect surprises

in the aggregate forecast as well as

unexpected shifts in a state’s GDP share.

Michigan is reviving like the national

economy.

KEY MESSAGES:

Michigan’s economy is forecast to continue

to gradually accelerate into 2014 and 2015.

Note: GDP figures are based on quarterly values that are

interpolated from annual GDP estimates using quarterly

employment changes. Unbolded figures are reported actual

values and bold figures represent forecasts.

Sources: US Department of Commerce;

US Department of Labor.

April 3, 2014

Regional Perspectives: Michigan Economic Outlook

Commercial Banking 2

2007 2008 2009 2010 2011 2012 2013 2014 2015

United States

Real GDP

$ billions (fourth quarter) $14,996 $14,575 $14,540 $14,942 $15,242 $15,540 $15,933 $16,490 $17,109

% change over the four quarters 1.9% -2.8% -0.2% 2.8% 2.0% 2.0% 2.5% 3.5% 3.8%

Nonfarm employment

Job count (fourth quarter) 138,246,000 135,493,667 129,877,667 130,652,000 132,642,667 134,853,667 137,247,667 139,209,881 141,187,603

% change over the four quarters 0.9% -2.0% -4.1% 0.6% 1.5% 1.7% 1.8% 1.4% 1.4%

Average monthly change 101,667 -229,361 -468,000 64,528 165,889 184,250 199,500 163,518 163,518

Michigan

Real GDP

$ billions (fourth quarter) $359 $334 $320 $334 $344 $351 $358 $371 $385

% change over the four quarters -2.3% -7.2% -4.0% 4.4% 3.0% 2.0% 2.1% 3.5% 4.0%

Nonfarm employment

Job count (fourth quarter) 4,246,300 4,081,767 3,835,100 3,891,500 3,987,033 4,030,833 4,095,000 4,163,571 4,232,685

% change over the four quarters -1.2% -3.9% -6.0% 1.5% 2.5% 1.1% 1.6% 1.7% 1.7%

Average monthly change -4,133 -13,711 -20,556 4,700 7,961 3,650 5,347 5,714 5,759

The Economy’s Structure

PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES WHAT THE CHART SHOWS:

The figure compares the relative importance of

selected industries to the state’s economy with

the national footprint of each industry (state

and national figures reflect the value added of

each industry as a percent of aggregate state

or US nominal GDP, respectively).

Michigan’s outsized exposure to manufacturing

underscores its vulnerability to the

transformation of industry in this decade.

Away from the disproportionately large footprint

of the motor vehicle industry, the state’s

economy generally mirrors the composition of

the national economy.

KEY MESSAGES:

The state’s services businesses bring some

stability to its economy and now the revival in

the manufacturing industries is becoming a

positive force.

Source: US Department of Commerce. Updated through

2011.

April 3, 2014



0

2

4

6

8

10

12

14

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US industry mix

Michigan industry mix

Bankruptcies

RATIO OF BANKRUPTCY FILINGS TO THE 2007 Q4 NUMBER WHAT THE CHART SHOWS:

The figure illustrates trends in bankruptcy

filings by businesses and persons relative to

the number of filings in 2007 Q4, prior to the

recession.

Financial stress is back down to pre-

recession levels.

KEY MESSAGES:

Indicators of financial stress are a useful

coincident indication of economic distress.

From this perspective, economic pressures

are slowly receding.

Source: Administrative Office of the U.S. Courts; Updated

through December 2013.

April 3, 2014



0

1

2

3

4

5

0

1

2

3

4

5

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Business bankruptcy filingsNonbusiness bankruptcy filings

All US bankruptcy filings (shaded area)

FRB Chicago Business Survey

REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEX (2007 = 100) WHAT THE CHART SHOWS:

The figure shows GDP growth in Michigan

along with the Federal Reserve Bank of

Chicago’s survey of local conditions.

Business conditions continue to improve,

according to the Federal Reserve Bank of

Chicago’s survey.

KEY MESSAGES:

Business conditions are forecast to continue

to strengthen this year.

Sources: Federal Reserve Bank of Chicago; US Department

of Commerce. Updated through October 2013 (surveys) and

2013 Q4 (GDP).

Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage

reporting no change in activity.

April 3, 2014



50

75

100

125

150

-8

-6

-4

-2

0

2

4

6

8

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Michigan real GDP (left scale)FRB Chicago's manufacturing survey (right scale)

Forecast

Private Business Surveys

REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEXES (50 = NO CHANGE) WHAT THE CHART SHOWS:

The figures shows the Business Barometer

Index, based on the survey of purchasing

managers, and real GDP growth in Illinois (a

reading above 50 means the state’s

economy is growing, while less than 50

means the economy is shrinking). The index

comprises seven business activity

indicators, including production, new orders,

order backlogs, inventories, employment,

supplier deliveries, and prices paid.

The index is has rebounded recently.

KEY MESSAGES:

Diffusion indexes, like those based on

responses from purchasing managers, are a

timely indicator of activity in the state and

these may be moderating.

Note: Business Barometer data unavailable prior to 1997.

Sources: Institute of Supply Management; US Department

of Commerce. Updated through February 2014 (survey) and

2013 Q4 (GDP).



April 3, 2014



10

20

30

40

50

60

70

80

90

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Real GDP in the Midwest (left scale)

Business Barometer Index, Mid-America Purchasing Managers (right scale)

Forecast

Private Business Surveys

REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEXES (50 = NO CHANGE) WHAT THE CHART SHOWS:

The figure features the business conditions

index in Southeast Michigan, based on a

survey of purchasing managers and

Michigan’s real GDP trends.

Purchasing managers are signaling slightly

slower growth.

KEY MESSAGES:

Still, business activity is forecast to

strengthen gradually in coming years.

Note: Purchasing Managers data unavailable prior to 2004.

Sources: Institute of Supply Management; US Department

of Commerce. Updated through February 2014 (survey) and

2013 Q4 (GDP).



April 3, 2014



30

40

50

60

70

-8

-6

-4

-2

0

2

4

6

8

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Michigan real GDP (left scale)

Southeast Michigan Purchasing Managers Index (right scale)

Forecast

Initial Jobless Claims

RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 2007 Q4 LEVEL WHAT THE CHART SHOWS:

The figure tracks layoffs in Michigan and the

national level of claims.

Weekly layoffs, both the state and national

tallies, are illustrated in the figure as a ratio

to the level of layoffs in the fourth quarter of

2007, prior to the recession.

Layoffs in Michigan have plunged to levels

that are far below pre-recession levels, in

part, owing to the smaller size of the labor

force compared with the last decade’s level.

KEY MESSAGES:

The turnaround in the motor vehicle industry

and the drop in the real trade-weighted value

of the dollar versus most trading partners

are driving the Wolverine State’s recovery.

Source: US Department of Labor. Updated through

February 18, 2014 (state) and February 25, 2014 (US).

April 3, 2014



0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2007 2008 2009 2010 2011 2012 2013 2014

MichiganUS (solid area)

Michigan accounts for 33.5% of US auto manufacturing employment

Economic Growth

REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) WHAT THE CHART SHOWS:

Real GDP growth in Michigan (the line in the

figure) is superimposed on top of US real

GDP growth (bars in the figure).

Michigan’s growth is pacing the nation’s,

even if it has moderated somewhat.

KEY MESSAGES:

Michigan’s economy is projected to speed

up further in the coming year.


2012 (state) and 2013 Q4 (US). Quarterly estimates for

states after 2012 are interpolated from employment figures,

based on the historical correlation of state and national

employment changes.

April 3, 2014



-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

MichiganUS

Forecast

Economic Output

REAL GDP LEVEL (RATIO TO 2000 Q4) WHAT THE CHART SHOWS:

The figure illustrates the evolution of real

GDP of the state and the overall US

economy since the fourth quarter of 2000,

the peak of the previous business cycle—

that is, at any point in time the lines trace the

ratio of real GDP to its level in 2000 Q4.

Michigan’ economy stagnated in the last

decade. It suffered badly during the

recession, but has recovered about two-

thirds of the output lost.

KEY MESSAGES:

Michigan’s economy is slowly reviving.


2012 (state) and 2013 Q4 (US). Quarterly estimates for

states after 2012 are interpolated from employment figures,

based on the historical correlation of state and national

employment changes.

April 3, 2014



0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US

Michigan

Forecast

Employment Growth

NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM 12 MONTHS EARLIER) WHAT THE CHART SHOWS:

Job growth in the state, compared with the

national employment trends.

Echoing the recovery in the state’s GDP,

employment is growing as well, although a

little more slowly in the past year than

earlier.

KEY MESSAGES:

Michigan’s economy at least has turned the

corner and is leaving a difficult decade

behind.

Job growth is forecast to remain steady and

moderate.


February 2014 (state) and February 2014 (US).

April 3, 2014



-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

MichiganUS

Forecast

Employment in Relative Terms

NONFARM PAYROLL EMPLOYMENT (RATIO TO THE 2000 Q4 LEVEL) WHAT THE CHART SHOWS:

The figure illustrates the evolution of

employment in the state compared with the

nation since 2000 Q4, the peak of the

previous business cycle. The lines trace out

the ratio of employment at the time to

employment in 2000 Q4.

Michigan lost 392,000 jobs since the latest

recession began in December 2007.

The state’s payroll count has contracted

almost 20% in the last decade, but so far

has retraced ¼ of that.

KEY MESSAGES:

Michigan is slowly on the mend.


February 2014 (state) and February 2014 (US).

April 3, 2014



0.80

0.85

0.90

0.95

1.00

1.05

1.10

0.80

0.85

0.90

0.95

1.00

1.05

1.10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US

Michigan

Forecast

Employment in Absolute Terms

NONFARM PAYROLL EMPLOYMENT (THOUSANDS) WHAT THE CHART SHOWS:

The figure trades job trends in Michigan.

Michigan’s business community has

replaced or recovered about 40 percent of

the jobs that were lost during the 2007-09

recession.

KEY MESSAGES:

Economic activity in Michigan has been

recovering gradually, reflecting support from

its manufacturing businesses.


December 2013 (state) and February 2014 (US).

April 3, 2014



127,500

130,000

132,500

135,000

137,500

140,000

3,800

3,850

3,900

3,950

4,000

4,050

4,100

4,150

4,200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US (right scale)Michigan (left scale) Forecast

Intrastate Employment

NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2000 Q4 LEVEL) WHAT THE CHART SHOWS:

Job trends in local communities within the

state.

Auto-exposed communities close to Detroit

are struggling far more than the

economically-more-diversified communities

in the central and southwestern regions of

the state.

Southwest and Western Michigan have been

more successful in weathering the

transformation of the manufacturing industry.

With the exception of Battle Creek and Flint,

employment is expanding.

KEY MESSAGES:

Michigan’s economic fortunes still ride on

the fortunes of the motor vehicle industry so

that industry’s recovery is a good omen.



April 3, 2014



0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

2001 2003 2005 2007 2009 2011 2013 2015

US forecast

US

Ann Arbor

Holland-Grand Haven

Grand Rapids-Wyoming

Lansing-East Lansing

Muskegon-Norton Shores

Battle Creek

Kalamazoo-Portage

Saginaw

Warren-Troy-Farmington Hills

Niles-Benton Harbor

Jackson

Flint

Detroit-Warren-Livonia

Detroit-Livonia-Dearborn

Michigan forecast

Michigan

Forecast

Unemployment

UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) WHAT THE CHART SHOWS:

Unemployment rate trends in Michigan,

compared with the national average.

Michigan’s unemployment rate stayed

around 7 percent for most of the last

decade, despite the national recovery that

saw national unemployment rate fall to 4½

percent.

The state’s unemployment rate has plunged

to almost 8 percent from the 14 percent plus

peak in the recession.

KEY MESSAGES:

The unemployment rate is the single best

indicator of the relative economic

performance of a region.

Unemployment is forecast to continue to fall.



April 3, 2014



0

2

4

6

8

10

12

14

16

0

2

4

6

8

10

12

14

16

1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018

Michigan

US (shaded)

Forecast

Relative House Prices

RATIO OF THE STATE’S HOUSE PRICES TO THE NATIONAL AVERAGE (1995 Q2 = 1.0) WHAT THE CHART SHOWS:

The figure tracks the relative price of houses

in the state versus the nation—that is, it

reflects the ratio of the state price index to

the national house price index, with that ratio

set to unity in the summer of 1995. A drop

in the line means that house prices in the

state lag the national trend. States that did

not suffer from speculative conditions saw a

decline in the relative price of houses in this

last decade.

Michigan’s house prices have fallen 15

percent below the national average

compared with the norm prior to the previous

decade.

KEY MESSAGES:

Michigan’s real estate problems are the

result of its earlier economic struggles and

not real estate speculation.

Source: FHFA. Updated through 2013 Q4.

April 3, 2014



0.6

0.7

0.8

0.9

1.0

1.1

1.2

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Real Estate Markets

HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 1995 Q2 LEVEL) WHAT THE CHART SHOWS:

The figure tracks the cumulative percentage

deviation in house prices since 1995 in

selected local markets and compares those

with the national average.

Virtually all local real estate markets have

lagged national market trends since mid-

decade but prices are climbing in many

areas.

KEY MESSAGE:

Housing markets are more vulnerable the

closer the proximity to Detroit and the heart

of the motor vehicle industry.

Sources: FHFA; Standard & Poor’s. Updated through

2013 Q4.

0.75

1.00

1.25

1.50

1.75

2.00

0.75

1.00

1.25

1.50

1.75

2.00

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

US Holland

Ann Arbor Grand Rapids

Bay City Detroit

Flint Battle Creek

Jackson Kalamazoo

Lansing Monroe

Muskegon Niles-Benton Harbor

Saginaw Detroit (Case-Shiller)

April 3, 2014



New Home Building

HOUSING STARTS (RATIO TO THE JULY 1990 LEVEL) WHAT THE CHART SHOWS:

Home building in Michigan, compared with

the pace of national home construction.

The figure illustrates the level of activity

relative to July 1990.

Home building activity has yet to pick up

meaningfully.

KEY MESSAGES:

Housing activity is forecast to recover slowly.

Source: Census Department. Updated through January

2014.

April 3, 2014



0.0

0.5

1.0

1.5

2.0

0.0

0.5

1.0

1.5

2.0

2000 2002 2004 2006 2008 2010 2012 2014

USMichigan Forecast

Office Markets

PERCENT OF OFFICE SPACE THAT IS VACANT WHAT THE CHART SHOWS:

The state of the office market in Detroit and

that in the nation.

A large percentage of the office market

remains vacant but the office vacancy rate

now seems to be coming down gradually.

KEY MESSAGES:

Naturally, the struggling economy is taking a

toll on the commercial real estate market.

Pressures in Detroit’s depressed market

may be easing.

Source: CB Richard Ellis (formerly CB Commercial Property

Information Systems), Office Vacancy Index of the United

States. Updated through 2013 Q4.

April 3, 2014



0

5

10

15

20

25

30

35

0

5

10

15

20

25

30

35

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Detroit metropolitan area

All metropolitan areas (shaded area)

CONTACT:

James E. Glassman

Telephone: (212) 270-0778

[email protected]

© 2014 JPMorgan Chase & Co. All rights reserved. Chase, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide

(collectively, “JPMC”). The material contained herein is intended as a general market commentary. To the extent indices have been used in this commentary, please note that it is not possible to

invest directly in an index. Opinions expressed herein are those of James Glassman and may differ from those of other J.P. Morgan employees and affiliates. This information in no way constitutes

J.P. Morgan research and should not be treated as such. Further, the views expressed herein may differ from that contained in J.P. Morgan research reports. The above

summary/prices/quotes/statistics have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness.

Documents

Economic Forecast - Chase Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS: Michigan’s GDP forecast is derived from the national forecast by …