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3
-50
-25
0
25
50
-6
-4
-2
0
2
4
6
70 75 80 85 90 95 00 05 10
Profits Surge and Jobs Will Follow…
Sources: BLS, BEA
Profit growth,
lagged 3 qtrs (R)
Job growth (L)
% change yr ago
4
-3
-2
-1
0
1
2
3
4
5
6
7
00 01 02 03 04 05 06 07 08 09 10 11
Federal funds rate
Appropriate funds rate
Monetary Policy Remains Supportive…
Sources: Federal Reserve, Moody’s Analytics
$600 bil in additional QE
through June
5
-3
-2
-1
0
1
2
3
08 09 10 11 12
Obama-GOP tax deal Recovery act
Other stimulus Cash for clunkers
Tax rebate checks Total stimulus
…And Fiscal Policy Is Only a Small Drag
Source: Moody’s Analytics
Contribution to real GDP growth, %
6
0
1
2
3
$3.50 $3.75 $4.00 $4.25 $4.50 $4.75 $5.00
Average gas price in 2011 (x-axis)Forecast
Consumers Will Respond to Higher Gas Prices
Sources: EIA, BEA, Moody’s Analytics
Real spending excluding gasoline, % change, 2011
7
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
07 08 09 10 11F 12F 13F 14F
Moody's Analytics baseline
Slower recovery scenario
Second recession
CBO estimate of
potential GDP
It Will Take Time to Close the Output Gap
Real GDP, $ tril, SAAR
Sources: BEA, CBO, Moody’s Analytics
8
-5
-4
-3
-2
-1
0
1
2
3
4
05 06 07 08 09 10 11
Headline Core
Price Gains Need to Be Kept In Perspective
CPI, deviation from 10-yr average, % change yr-ago, ppt
Sources: BLS, Moody’s Analytics
9
2
4
6
8
10
12
14
08 09 10 11
Germany Portugal
Italy Ireland
Greece Spain
U.K.
Sources: Bloomberg, Moody’s Analytics
10-yr sovereign yields
Europe’s Debt Problems Simmer…
10
-6
-4
-2
0
2
4
6
8
10
06 07 08 09 10 11
Total CPI
Core CPI
…And Emerging Markets Threaten to Overheat
Source: National Bureau of Statistics China
Chinese consumer price inflation, % change yr ago
11
14
16
18
20
22
24
26
80 85 90 95 00 05 10
Structural
deficit
Sources: BEA, Moody’s Analytics
Federal expenditures
Policymakers Must Close This Gap
Expenditures and revenues as a % of GDP with no policy changes
Federal revenues
13
States in Recession
Status as of March 2011 data
Source: Moody’s Analytics
Recovery
Recession
Expansion
At Risk
14
Metro Areas in Recession
Status as of March 2011 data
Source: Moody’s Analytics
Recovery
Recession
Expansion
At Risk
15
-6
-4
-2
0
2
4
6
Mar-09 Sep-09 Mar-10 Sep-10 Mar-11
U.S.PennsylvaniaNew YorkNew JerseyMassachusetts
New Jersey’s Labor Market Weakness Is Stark
Real avg. hourly earnings, total private, % change yr ago, NSA
Sources: BLS, Moody’s Analytics
16
75
80
85
90
95
100
105
110
07 08 09 10 11
NYC securities brokerages
Boston securities brokerages
Wilmington banks
Hartford insurance
High-Paying Finance Growing Quickly Again
Employment indexed to peak
Sources: BLS, Moody’s Analytics
Bridgeport securities brokerages
17
-30
-25
-20
-15
-10
-5
0
Edison NYC condo
NYC Long Island
D.C. Boston Boston condo
Philly
Peak to 2010Q4 2010Q4 to trough
Biggest Declines to Come in New York City Area
Sources: Fiserv, Moody’s Analytics
Case Shiller Home Price Index, % change
18
0 2 4 6 8 10 12
Boston
New York City
Rochester, NY
Bridgeport
U.S.
Philadelphia
Baltimore
Hartford
Buffalo
Boston Most Highly Exposed to Japanese Trade
Sources: Census Bureau, International Trade Administration
Exports to Japan as % of total exports, latest year available
19
0 10 20 30 40
New Jersey
New York
Connecticut
All states
Pennsylvania
Vermont
Maine
Maryland
Delaware
Massachusetts
District of Columbia
On Average, Northeast in Better Fiscal Position
Source: Center on Budget and Policy Priorities
Projected 2012 budget gap as % of fiscal 2011 budget
*NH has no projection
20
10 12 14 16 18
HagerstownWorcesterBethesdaPeabody
Washington, D.C.Poughkeepsie
NorwichBaltimore
New HavenSpringfield, MA
ProvidenceUtica
Atlantic CityNassau-Suffolk
Boston
Dec-07
Dec-11
Cash Will Be Freed Up Most in D.C., Boston Areas
Sources: Moody’s Analytics, Equifax
Debt-service-ratio, %
21
25 35 45 55 65
Mid-Atlantic
New England
South Atlantic
West North Central
Pacific
East North Central
Mountain
East South Central
West South Central
Assoc. degree or higher, %, 2009
Share of jobs requiring assoc. degree or higher in 2015
Large Skill Gaps Will Emerge…
Sources: Census Bureau, Moody’s Analytics
% of population 25 and older
22
…But There Will Be Differences Across States
Avg. unemployment rate in 2015-2020 compared with 2003-2007
Sources: BLS, Moody’s Analytics
Lower rate
Negligible change
Higher rate
23
0.0 0.5 1.0 1.5 2.0
Washington D.C.Bethesda
WilmingtonEdison
RockinghamCamden
BostonPhiladelphiaLong Island
PeabodyCambridge
New York CityNewark
2000s
1990s
Washington, Philly Area Attract More People
Source: Census Bureau
Population growth
www.economy.comUnited States
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Suite 500
West Chester, PA 19380
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Canary Wharf
London E14 5FA
+44.20.7772.5454
Australia
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Sydney, NSW, 2000
Australia
+61.2.9270.8111
25
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