State of the U.S.

Economy
@NickatFP
August 14, 2015

Overview
Employment

Housing Market

Money

(3)

The Return to Employment

(23) Construction Activity Grinding Forth

(34) The Disinflationary Environment

(4)

Job Openings Abound

(24) A Long Road Ahead For Housing Starts

(35) Surging Healthcare Costs

(5)

But the Jobs Growth Data is Conflicting

(25) Which Means Meager Home Sales

(36) Interest Rates: Lower For Longer

(6)

The Industrial Employment Imbalance

(26) House Price Growth Decelerating

(37) Plenty of Money, Not Enough Velocity

(7)

Shifting to a Services Economy

(27) House Prices Still Around 2005 Levels

(8)

The Part-Time Employment Puzzle

(28) Renter Nation

(9)

The Unemployed

(10) Few Claiming Unemployment Insurance

(11) Jobless Claims Leading the Economy
(12) The Bigger Unemployment Picture
(13) Dispersion Across States
(14) Extended Vacations and Early Retirement
(15) Wages and Working Hours

Business Activity
(29) Industrial Production Slowing
(30) Manufacturing and Trade Sales Slipping
(31) Soft Data Trailing Hard Data
(32) Trends in Retail

(38) Ballooning Fed Balance Sheet

Gross Domestic Product

(39) Consumption Rolls Onward
(40) Private Investment Crawling Back
(41) The Government Drag
(42) Improving Trade Balance, Until Recently
(43) Putting it All Together

(33) Where the Retail Money Goes

The American Consumer

(16) The Consumers Wallet
(17) Expanding Household Net Worth
(18) Home Mortgages Down, Credit Up
(19) Credit Rising on the Back of Student Loans
(20) Federal Government, Neighborhood Lender
(21) Consumer Optimism Has Returned
(22) Empty Roads Finding Traffic

@NickatFP

August 14, 2015

The Return to Employment

The Economy Has Emerged From The Recession
With Slow But Steady Job Gains
800k
600k

Monthly Growth in
Nonfarm Payrolls

Remarkably Steady Actually, Essentially the Most

Stable Employment Growth Has Ever Been
400k

2011-2015 Average: 205k

350k

400k

300k

200k

250k

0k

200k

-200k

150k

-400k

100k

-600k

50k

-800k

Rolling 24-Month StDev in Monthly Nonfarm

Employment Change

0k
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Which Eventually Led to Surpassing the Prior Peak

Employment Level in Late 2014
160M
150M
140M
130M
120M
110M
100M
90M
80M
70M
60M
50M

2007
Peak

'49 '54 '59 '64 '69 '74 '79 '84 '89 '94 '99 '04 '09 '14

Supporting a Recovery in Real GDP, Albeit at a

Gradual Pace
8%
6%

Total Employed

Y/Y Nonfarm
Employment Growth

Y/Y Real
GDP Growth

@NickatFP

August 14, 2015

10.5%

4%

7.0%

2%

3.5%

0%

0.0%

-2%

-3.5%

-4%
'49 '54 '59 '64 '69 '74 '79 '84 '89 '94 '99 '04 '09 '14

14.0%

-7.0%
'49 '54 '59 '64 '69 '74 '79 '84 '89 '94 '99 '04 '09 '14

Sources: U.S. Bureau of Labor Statistics - Employment Situation, U.S. Bureau of Economic Analysis - GDP

Job Openings Abound

The Number of Job Openings Have Been Reaching
New All-Time Highs

Causing Unemployed Workers per Job Opening to

Fall Below 1.6, Near Pre-Crisis Lows

6.0M

Hires

5.5M

5.0M

4.5M

4.0M
3

3.5M

Job Openings

3.0M

2.5M
2.0M

Unemployed Workers per Job Opening

0
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Job Separations Have Also Been Rising, Driven by a

Growing Number of Quits

The Quits Ratio Has Improved to 1.5, Signaling

Worker Choice and a Tighter Labor Market

3.5M

2.0

Quits

3.0M

1.8

2.5M

1.6

2.0M

1.4

1.5M

Layoffs and Discharges

1.0M

Ratio of Quits to Layoffs and Discharges

1.2
1.0

Other Separations

0.5M
0.0M

0.8
0.6

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Labor Statistics - JOLTS

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
4

But the Jobs Growth Data is Conflicting

Subtracting Monthly Separations from Hires Yields
the Labor Turnover for the Month
6M

Labor Turnover Data Typically Agrees With the

Nonfarm Payrolls Report
0.6M

Hires

Net Labor Turnover per JOLTS

0.4M

5M

Separations

4M

0.2M
0.0M

3M

-0.2M
2M

1.0M

-0.4M

1M

Monthly Net Labor Turnover

Nonfarm Payrolls Added

per Employment
Situation Release

-0.6M

0M

-0.8M

-1M

-1.0M

y = 0.9744x - 0.8767
R = 0.955

0.5M
JOLTS
0.0M
-0.5M
NFP
-1.0M
-1.0M-0.5M 0.0M 0.5M 1.0M

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

But NFP Has Been Deviating Higher, And Something

Will Have to Give

June Was the First Month in 2015 That the NFP First
Release Was Not Revised Down

350k
300k
250k
200k
150k
100k
50k
0k
-50k
-100k
-150k
-200k
-250k
-300k
-350k

450k
400k
350k

NFP Higher

NFP on First
Release

300k

Revised NFP

NFP Down
Revisions

250k
200k
150k

JOLTS Higher
Rolling 12-Month
Difference
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

@NickatFP

August 14, 2015

100k
50k
0k
'13

Sources: U.S. Bureau of Labor Statistics Employment Situation, U.S. Bureau of Labor Statistics - JOLTS

'14

'15
5

The Industrial Employment Imbalance

Not All Industries Have Recovered To Their Pre-Crisis Employment Levels, Particularly Goods Industries
4M

Change in Employment by Industry Since January 2007

Education and
Health Services

3M

Professional
Services
Leisure and
Hospitality

2M

Transportation
Retail Trade
Other Services
Mining & Logging
Utilities
Wholesale Trade
Government
Info Services
Financial Activities

1M

0M

-1M

Construction
Manufacturing
-2M

-3M
'07

@NickatFP

'08

'09

August 14, 2015

'10

'11

'12

Sources: U.S. Bureau of Labor Statistics - Employment Situation

'13

'14

'15
6

Shifting to a Services Economy

But Manufacturing, Construction, and Mining Employment Share Were Trending Down Since Before the GFC
100%

90%

80%

18.3% Government

6.9%
6.6%

60%

7.5%

50%

5.1%
2.8%

40%

30%

4.0%

Other Services

2.6%

70%

15.5%

Leisure and Hospitality

10.7%

Education and Health Services

15.6%
Professional Services

Financial Activities
Info Services
0.8%
3.6%
Transportation
10.9%

4.8%

13.9%

Retail Trade
0.4%

Wholesale Trade

5.7%
2.0%
3.4%
11.0%

20%

23.9% Manufacturing

4.2%

10%

8.7%
5.4%

0%
'72

'74

@NickatFP

Construction
Mining & Logging
0.9%
'76

'78

'80

August 14, 2015

'82

'84

'86

0.6%
'88

'90

'92

'94

Sources: U.S. Bureau of Labor Statistics - Employment Situation

'96

'98

'00

'02

'04

'06

'08

'10

'12

4.5%
'14
7

The Part-Time Employment Puzzle

The Recession Provoked an Unprecedented Drop in
Full-Time and Spike in Part-Time Employment
8M

Leading the Part-Time Share of Employed Persons

to Peak at 20.0% in 2010
21%

Rolling 12-Month Change in Employment

6M

In 1994, the BLS questionnaire

began asking all employees how
many hours they worked rather
than just Full-time or Part-time

20%

Full-Time

4M

19%

2M

18%

0M
17%

Part-Time

-2M

Part-Time Share of Total Employed

16%

-4M

15%

-6M
-8M

14%
'69

'74

'79

'84

'89

'94

'99

'04

'09

'14

However, Part-Time Employment is Now Once Again

Becoming a Preference Rather Than a Mandate
60%
55%
50%

'69

'74

'79

'84

'89

'94

'99

'04

'09

'14

Full-Time Employment is Still 286k Below its Late

2007 Level, But is Nearing Recovery
6M

Employed Part-Time for Economic Reasons as a

Share of Employed Part-Time for Noneconomic
Reasons

4M

Change in Employment Since Total Employment

Peaked In Nov 2007

2M

45%

0M

40%

-2M

35%

-4M

30%

-6M

25%

-8M

20%

-10M

15%

Part-Time

Full-Time

-12M
'69

'74

@NickatFP

'79

'84

'89

August 14, 2015

'94

'99

'04

'09

'14

Sources: U.S. Bureau of Labor Statistics - Employment Situation

'07

'08

'09

'10

'11

'12

'13

'14

'15
8

The Unemployed
The Unemployment Rate is Back at a Healthy 5.3%,
But the Broader U-6 Rate Has Room to Improve

The Underemployment Spread, at 5.1%, Captures the

Discouraged and Marginally Attached Workforce

18%

7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%

Broader
Unemployment
Rate (U-6)

16%
14%
12%
10%

Unemployment Rate (U-3)

8%
6%
4%
2%
0%
'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

U-6 Unemployment Rate less

U-3 Unemployment Rate

'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

Unemployment Has Decreased Across Age Groups,

Although Among Youths is Still Above Average

And Unemployment in All Education Brackets Has

More or Less Returned to Form

35%

18%

30%
25%
20%

16 to 17
18 to 19
20 to 24
25 to 34
35 to 44
45 to 54
55+

Unemployment Rates by Age Group

Unemployment Rates by Educational Attainment

16%
14%
12%
Less Than a High School Diploma

10%
8%

15%

6%

10%

4%

5%

2%

0%

0%
'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Labor Statistics - Employment Situation

Bachelors Degree and Higher

'92

'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14
9

Few Claiming Unemployment Insurance

Weekly Initial Jobless Claims, a Timely Leading
Indicator, Have Stabilized Below 300k

Fewer Are Filing Claims Now Than at Nearly Any

Point in History

700k
650k
600k
550k
500k
450k
400k
350k
300k
250k
200k

700k
650k
600k
550k
500k
450k
400k
350k
300k
250k
200k

Weekly Initial Claims

Not Seasonally
Adjusted

Seasonally Adjusted
'07

'08

'09

'10

'11

'12

'13

'14

'15

Weekly Initial Jobless Claims,

4-Week Moving Average (sa)

'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

The Number of Unemployment Insurance Recipients,

or Continuing Claims, is Also Close to Lows

And the Insured Unemployment Rate Has Decreased

To Only 1.7%

7M

7%

Unemployment Insurance Recipients

6M

6%

5M

5%

4M

4%

3M

3%

2M

2%

1M

Unemployment Insurance Recipients as

a Share of Total Covered Employment

1%
'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

@NickatFP

August 14, 2015

'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

Sources: U.S. Department of Labor Unemployment Insurance Weekly Claims

10

Jobless Claims Leading the Economy

A Falling Number of Jobless Claims Coincides With
Accelerating Employment Growth

And a Corresponding Decline in the Unemployment

Rate

700k
650k
600k
550k
500k
450k
400k
350k
300k
250k
200k

700k
650k
600k
550k
500k
450k
400k
350k
300k
250k
200k

Jobless
Claims
4W MA

Rolling 12M Change in

Nonfarm Employment

-8M
-6M
-4M
-2M
0M
2M
4M
6M

'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

Jobless
Claims
4W MA

Housing Starts,
Annual Rate

Unemployment Rate
(U-3)

10%
8%
7%
6%
5%
4%
3%

Nor Has Jobless Claims as a Share of the Population

With Real Annual GDP Growth
0.0M
0.5M

0.45%
0.40%
0.35%

Jobless Claims 4W MA as % of
Civilian Noninstitutional Population
Real Year Over Year
GDP Growth

0.30%
1.5M
2.0M
2.5M

August 14, 2015

-6%
-4%
-2%
0%
2%

0.25%

4%

0.20%

6%

0.15%

8%

0.10%

@NickatFP

11%
9%

1.0M

'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

12%

'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

But Has Not Been as Connected in Recent Years

With Housing Starts
700k
650k
600k
550k
500k
450k
400k
350k
300k
250k
200k

Jobless
Claims
4W MA

10%
'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

Sources: U.S. Department of Labor Unemployment Insurance Weekly Claims, U.S. Bureau of Labor Statistics Employment Situation,
U.S. Census Bureau New Residential Construction, U.S. Bureau of Economic Analysis - GDP

11

The Bigger Unemployment Picture

The Number of People Filing Initial and Continuing Jobless Claims Each Week is ~30.6% of the Total Unemployed

Not in Labor Force

93.6M
37.4%

Employed
148.7M
94.7%

Have Not or Cannot

File for
Unemployment
Benefits
5.8M
69.4%

Civilian
Noninstitutional
Population
250.7M
100%

Labor Force
157.0M
62.6%

Initial
0.3M Claims 3.2%
Continuing
Unemployment
Claims
2.3M
27.4%
Unemployed
8.3M
5.3%

@NickatFP

August 14, 2015

Sources: U.S. Department of Labor Unemployment Insurance Weekly Claims, U.S. Bureau of Labor Statistics Employment Situation

12

Dispersion Across States

Unemployment in Most States is Well Below Its Recession Peak and is Only Higher Than a Year Ago in 5 States
15%

State Unemployment Rates

The unemployment rate in Detroit,

Michigan peaked at 17.2% in 2009

14%
13%
12%

15%
14%

Recession Peak (2005-2015)

June 2014

13%
12%

June 2015

11%

10%

10%

9%

9%

8%

8%

7%

7%

6%

6%

5%

5%

4%

4%

3%

3%

2%

2%

1%

1%

0%

0%
Nebraska
North Dakota
Utah
Vermont
Iowa
New Hampshire
South Dakota
Minnesota
Montana
Hawaii
Idaho
Wyoming
Texas
Colorado
Kansas
Oklahoma
Massachussets
Wisconsin
Delaware
Maine
Indiana
Virginia
Kentucky
Maryland
Ohio
Washington
National
Pennsylvania
Florida
Michigan
New York
Oregon
Arkansas
Connecticut
D.C.
Tennessee
Missouri
North Carolina
Arizona
Illinois
Rhode Island
Alabama
Georgia
New Jersey
California
Lousiana
New Mexico
Mississippi
South Carolina
Alaska
Nevada
West Virginia

11%

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Labor Statistics Regional and State Employment and Unemployment

13

Extended Vacations and Early Retirement

While The Composition of the Unemployed
Continues to Shorten in Duration,

The Average Duration of Unemployment is Still

Significantly Elevated by Historical Standards

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

45

27 Weeks and Longer

Average Number of Weeks the

Unemployed Have Been So

40
35
30

5 to 14 Weeks

Historical Average

25
20
15
10

Less Than 5 Weeks

5
0

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

Causing Discouraged Workers To Give Up Searching

for Employment and Just Leave the Labor Force

This Isnt Just a Demographic Shift, as Prime Aged

Workers and Youth Have Both Reduced Participation

68%

95%

Labor Force Participation Rate

66%

Labor Force Participation Rates

75%

64%

Aged 25 to 54

85%

Aged 20 to 24

65%

All Citizens

62%
55%
60%

Aged 16 to 19

45%

58%

35%

56%

Aged 55+

25%
'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Labor Statistics - Employment Situation

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13
14

Wages and Working Hours

Hourly Earnings Growth Has Been Positive and
Relatively Stable
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%

Yet Only in the Recent Disinflationary Environment

Have Real Hourly Earnings Picked Up
8%

Year Over Year Change in

Average Hourly Earnings

6%

Year Over Year Change in Average Hourly

Earnings Less Year Over Year Change in CPI

4%

Private Sector Production and

Nonsupervisory Employees

All Private Sector Employees

2%
0%
-2%

Private Sector Production and

Nonsupervisory Employees

-4%
-6%

All Private Sector Employees

-8%
'65

'70

'75

'80

'85

'90

'95

'00

'05

'10

'15

'65

'70

'75

'80

'85

'90

'95

'00

'05

'10

'15

The Average Hourly Workweek Has Been Decreasing For Decades But Has Stabilized Around 34 Hours
39

Average Weekly Hours Worked

38
37
36

Private Sector Production and

Nonsupervisory Employees

35

All Private
Sector Employees

34
33
32
'65

@NickatFP

'70

'75
August 14, 2015

'80

'85

'90

Sources: U.S. Bureau of Labor Statistics - Employment Situation

'95

'00

'05

'10

'15
15

The Consumers Wallet

Americans Collective Disposable Personal Income
Rose to $13.35 Trillion in June

Which is Up 3.4% From a Year Ago, a Steady Pace

Similar to That of the Past Several Years

$13.5T

20%

$13.0T

15%

Disposable Personal Income

$12.5T

Disposable Personal Income

Year Over Year Change
Personal Outlays
Year Over Year Change

(Personal Income Less Taxes)

$12.0T

10%

$11.5T

5%

$11.0T

Personal Outlays

0%

$10.5T
$10.0T

-5%
'09

'10

'11

'12

'13

'14

'15

'60

'65

'70

'75

'80

'85

'90

'95

'00

'05

'10

The Personal Savings Rate, Currently at 4.8%, is

Below Average But Above Pre-Crisis Levels

Low Interest Rates Have Reduced Consumers Debt

Service, Freeing Up Room For Consumption

18%

13.5%

16%

Personal Savings as a Share of

Disposable Personal Income

14%

'15

Household Debt Service Payments as a

Share of Disposable Personal Income

13.0%
12.5%

12%

12.0%

10%

11.5%

8%

11.0%

6%

Historical Average

4%

Historical Average

10.5%
10.0%

2%
0%

9.5%
'60

'65

@NickatFP

'70

'75

'80

'85

August 14, 2015

'90

'95

'00

'05

'10

'15

Sources: U.S. Bureau of Economic Analysis Personal Income and Outlays

'80

'85

'90

'95

'00

'05

'10

'15
16

Expanding Household Net Worth

Total Household Net Worth Reached $84.9 Trillion in the First Quarter of 2015
$100T

Other Assets
Equity in
Noncorporate
Business

NET WORTH
$80T

Mutual Fund
Shares

$60T

Financial
Assets

Pension Fund
Reserves

Corporate
Equities
Credit Market
Instruments
Deposits

$40T

$20T

Real Estate

Home Mortgages
Consumer Credit
Other Liabilities

-$20T
'52

'57

@NickatFP

'62

'67

August 14, 2015

'72

'77

'82

'87

'92

'97

'02

Sources: U.S. Federal Reserve Z.1 Financial Accounts of the United States Flow of Funds

'07

Liabilities

$0T

Nonfinancial
Assets

Durable Goods,
Equipment, & IP

'12
17

Home Mortgages Down, Credit Up

Household Net Worth Increased 5.7% Year Over Year
in the First Quarter
20%

Year Over Year Change in Household Net Worth

15%

Financial Assets as a Share of Total Assets Were at

70.0%, Near Record Highs
72%

Financial Assets

Nonfinancial Assets

40%

70%

38%

68%

36%

66%

34%

64%

32%

62%

30%

10%
5%
0%

Historical
Average

-5%
-10%
-15%
-20%

60%
'53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

28%
'52 '57 '62 '67 '72 '77 '82 '87 '92 '97 '02 '07 '12

Real Estate, the Largest Household Asset,

Represented 24.3% of Total Assets

Home Mortgages as a Share of Total Liabilities Has

Declined to 66.2% From a High of 75.0% in 2009

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

80%

Other Assets
Equity in Noncorporate Business
Pension Fund Reserves
Mutual Fund Shares

Corporate Equities
Credit Market Instruments

Home Mortgages

70%
60%

Home Mortgages
Historical Average

50%
40%

Deposits

Consumer Credit

30%
Durable Goods, Equipment, & IP

20%
10%

Real Estate

Other Liabilities

0%
'52 '57 '62 '67 '72 '77 '82 '87 '92 '97 '02 '07 '12

@NickatFP

August 14, 2015

'52 '57 '62 '67 '72 '77 '82 '87 '92 '97 '02 '07 '12

Sources: U.S. Federal Reserve Z.1 Financial Accounts of the United States Flow of Funds

18

Credit Rising on the Back of Student Loans

Consumer Credit Outstanding Has Been Increasing by About 6% Year Over Year Since 2012
30%
25%

Revolving

20%

Total

15%

Total Credit
Historical Average

Nonrevolving

10%
5%
0%
-5%
-10%
'50

'55

'60

'65

'70

'75

Total Consumer Credit Outstanding Grew to Over

$3.4 Trillion in June

'80

'85

$1.0T

$3.0T

$0.8T

$2.5T

$0.6T

$2.0T

$0.4T

$1.5T

$0.2T

$1.0T

$0.0T

Revolving

$0.0T

'95

'00

'05

'10

'15

But Post-Crisis Credit Growth Has Come Entirely

From Student and Auto Loans

$3.5T

$0.5T

'90

Change in Consumer Credit

Outstanding Since January 2008
Nonrevolving
Total

-$0.2T

Revolving

-$0.4T
'50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15

@NickatFP

August 14, 2015

Sources: U.S. Federal Reserve Consumer Credit

'08

'09

'10

'11

'12

'13

'14

'15
19

Federal Government, Neighborhood Lender

The Federal Government Has Been the Enabler of Effectively All of the Post-Crisis Credit Expansion
$3.5T

Pools of
Securitized Assets
Nonfinancial
Business
Nonprofit and
Education
Institutions
Federal
Government

Consumer Credit Holders

30%

$3.0T

25%

Federal Government
Share of Consumer
Credit

20%

$2.5T

15%
10%

Credit Unions

5%

$2.0T

0%
'77

$0.8T

$1.5T

'82

'87

'92

'97

'02

'07

'12

Finance
Companies

Change in Consumer
Credit Held Since
January 2008

$0.6T
$0.4T

Federal
Government

$0.2T

$1.0T

$0.0T
-$0.2T

$0.5T

Depository
Institutions

All Others

-$0.4T
'08

'09

'10

'11

'12

'13

'14

'15

$0.0T
'44

'49

@NickatFP

'54

'59

August 14, 2015

'64

'69

'74

'79

Sources: U.S. Federal Reserve Consumer Credit

'84

'89

'94

'99

'04

'09

'14
20

Consumer Optimism Has Returned

Both Major Indexes of Consumer Confidence Are at
Healthy Levels

Restaurant Spending is Rising, and Restaurant

Operators Maintain a Positive Outlook

120

160

104

140

103

100

120

102

8%

90

100

101

6%

80

80

100

4%

60

99

Conference Board
Consumer Confidence

110

70

University of Michigan
Consumer Sentiment

60
50
40
'97

'99

'01

'03

'05

'07

'09

'11

'13

40

98

20

97

96

'15

12%

National Restaurant Association

Restaurant Performance Index, 3M MA

10%

2%
Retail Sales
Food Services and
Drinking Places,
Y/Y Change, 3M MA

0%
-2%
-4%

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Consumers Are Back to Buying Autos, Which Have Benefitted From Low Rates and Longer Financing Terms
20M
18M
16M
14M
12M

Light Vehicle Sales, Annual Rate, 3M MA

10M
8M
'76

'78

@NickatFP

'80

'82

'84

August 14, 2015

'86

'88

'90

'92

'94

'96

'98

'00

'02

'04

'06

'08

'10

Sources: The Conference Board Consumer Confidence, The University of Michigan Consumer Sentiment, National Restaurant Association,
U.S. Census Bureau Monthly Sales for Retail and Food Services, U.S. Bureau of Economic Analysis Light Weight Vehicle Sales

'12

'14
21

Empty Roads Finding Traffic

It Wasnt Until January of This Year That Road Traffic
Surpassed its Prior Peak

Post-Crisis Auto Travel Growth Had Been Relatively

Stagnant Until Speeding Up in 2014 and 2015

3.5T

6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%

Vehicle Miles Driven on All Roads and Streets,

2007 Peak
Rolling 12-Month Total

3.0T
2.5T

3.10T
3.08T
3.06T
3.04T
3.02T
3.00T
2.98T
2.96T
2.94T
2.92T

2.0T
1.5T

2007 Peak

'07 '08 '09 '10 '11 '12 '13 '14 '15

1.0T
'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

Vehicle Miles Driven, Year Over Year Change

3-Month Moving Average

'07

'08

'09

'10

'11

'12

'13

'14

'15

If Oil Prices Dont Materially Increase From Current

Levels, Gas Prices Should Come Down Further

However, Road Travel Was Trending Lower on a per

Capita Basis Since Before the Recession Began

$130

14k

WTI/Brent Average $ per Barrel

$120
$110
$100
$90
$80
$70
$60

Gasoline Price per Gallon,

All Formulations Regular

$50
$40
'11

@NickatFP

'12

'13

August 14, 2015

'14

'15

$4.2
$4.0
$3.8
$3.6
$3.4
$3.2
$3.0
$2.8
$2.6
$2.4
$2.2
$2.0
$1.8

13k
12k

Vehicle Miles Driven,

Rolling 12-Month Total, per
Civilian Noninstitutional
Population

2005 Peak

11k
10k
9k
8k
'71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

Sources: U.S. Department of Transportation Traffic Volume Trends, U.S. Energy Information Administration Petroleum and Other Liquids

22

Construction Activity Grinding Forth

Total Construction Spending is Still Well Below PreCrisis Levels
$1,300B

20%

Construction Spending,
Annual Rate

$1,200B

But Has Been Growing Since 2011, And Accelerating

Further in 2015
Construction Spending, Annual Rate,
Year Over Year Change

15%

$1,100B

10%

Total

$1,000B

Total

5%

$900B

0%

$800B

-5%

$700B

-10%

$600B

-15%

$500B

-20%
'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

Private Nonresidential Spending is Back Near PreCrisis Pace, While Private Residential Has Far to Go
$700B

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

But, After Slumping in 2014, Residential Spending is

Growing Again
40%

Construction Spending,
Annual Rate

$600B

'94

Construction Spending, Annual Rate,

Year Over Year Change

30%
20%

$500B

Private
Nonresidential

Private Residential

$400B

10%
0%
-10%

$300B
$200B

Public

-30%

$100B

Public

Private
Nonresidential

-20%

Private Residential

-40%
'94

'96

@NickatFP

'98

'00

'02

August 14, 2015

'04

'06

'08

'10

'12

'14

Sources: U.S. Census Bureau Construction Spending

'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14
23

A Long Road Ahead For Housing Starts

On an Annual Basis, Housing Starts Have
Decelerated But Are Still Up Year Over Year
80%

Housing Starts,
Annual Rate

60%

At a Rate Similar to Private Residential Construction

Spending
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%

Year Over Year Change

40%
20%
0%
-20%
-40%

Year Over Year Change,

6-Month Moving Average

-60%
'60

'65

'70

'75

'80

'85

'90

'95

'00

'05

'10

'15

Private Residential Construction Spending,

Annual Rate, Year Over Year Change

Housing Starts, Annual Rate,

Year Over Year Change,
6-Month Moving Average
'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

Multi-Unit Home Starts Tend to be More Volatile and

Are Now Growing Slower Than Single-Family Units

Despite Post-Recession Expansion, Housing Starts

Remain Far Below Their Pre-Crisis Level

100%

2.4M

Housing Starts, Annual Rate, Y/Y Change, 6M MA

80%

Housing Starts, Annual Rate

2.0M

60%

Total

40%

Total

Multi-Unit
1.6M

20%

1.2M

0%
-20%
-40%

SingleFamily

0.8M

SingleFamily

0.4M

-60%

Multi-Unit

-80%

0.0M
'60

'65

@NickatFP

'70

'75

'80

'85

August 14, 2015

'90

'95

'00

'05

'10

'15

'60

'65

'70

'75

Sources: U.S. Census Bureau Construction Spending, U.S. Census Bureau New Residential Construction

'80

'85

'90

'95

'00

'05

'10

'15
24

Which Means Meager Home Sales

Housing Sales Peaked at an Annual Rate of 8.5
Million in 2004, But Today Remain Below 6 Million

While Existing Sales Have Declined Further

Nominally, New Sales Are Relatively More Depressed

9M

8M

Home Sales, Annual Rate

8M

7M

7M

6M

6M

Home Sales, Annual Rate

Existing

1.2M

5M

5M

Existing

4M

0.9M

4M
0.6M

3M

3M
2M

2M

1M

1M

New

0M

New

0M
'99

'01

'03

'05

'07

'09

'11

'13

'15

'01

'03

'05

'07

'09

'11

'13

'15

After a Growth Slump in 2014, Both New and

Existing Home Sales Are Once Again Accelerating

96%

50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%

18%

Share of Homes Sold

94%

16%

92%

14%

90%

12%
10%

Existing

86%

8%

84%

New

82%

6%
4%

'99

'01

@NickatFP

'03

'05

'07

August 14, 2015

'09

'11

'13

'15

0.3M
0.0M

'99

House Prices Sunk in 2007 and 2008, Slowing New

Builds Contribution to the Market

88%

1.5M

Home Sales, Annual Rate,

Year Over Year Change
Existing

New
'99

'01

'03

'05

Sources: U.S. Census Bureau New Residential Sales, National Association of Realtors Existing-Home Sales

'07

'09

'11

'13

'15
25

House Price Growth Decelerating

House Prices Are Still Rising, But The Pace is Leveling Out
50%

S&P Case-Shiller House Prices Indices, Year Over Year Change

40%

Denver
San Francisco
Dallas
Miami
Seattle
Portland
Las Vegas
Tampa
Los Angeles
Atlanta
Composite 20-City
Charlotte
San Diego
Detroit
Phoenix
Minneapolis
New York
Chicago
Boston
Cleveland
Washington D.C.

30%

20%

10%

0%

-10%

-20%

-30%

-40%
'06

@NickatFP

'07

'08

August 14, 2015

'09

'10

'11

'12

Sources: S&P Dow Jones S&P/Case-Shiller Home Prices Indices

'13

'14

'15
26

House Prices Still Below Pre-Crisis Levels

House Prices Remain Around the Level They Were in 2005
300

S&P Case-Shiller House Prices (2000=100)

250

Los Angeles
San Francisco
Washington D.C.
San Diego
Miami
Seattle
Portland
Boston
Composite 20-City
New York
Tampa
Denver
Phoenix
Dallas
Minneapolis
Las Vegas
Charlotte
Chicago
Atlanta
Cleveland
Detroit

200

150

100

50
'00

'01

@NickatFP

'02

'03

'04

August 14, 2015

'05

'06

'07

'08

'09

'10

Sources: S&P Dow Jones S&P/Case-Shiller Home Prices Indices

'11

'12

'13

'14

'15
27

Renter Nation
The Homeownership Rate Has Not Stopped Falling Since the Housing Bubble Popped in 2005
75%

Owner-Occupied Housing Units as a Share of Total Occupied Housing Units

73%

71%

Midwest

69%

South
67%

National
Historical Average

65%

National
63%

West
61%

59%

Northeast

57%

55%
'65

@NickatFP

'70

'75

August 14, 2015

'80

'85

Sources: U.S. Census Bureau Homeownership Rate

'90

'95

'00

'05

'10

'15
28

Industrial Production Slowing

Total Production From the Industrial Sector Has
Decelerated Since the End of 2014

The Total IP Index Has Rebounded From the

Recession and is at 107.5% of its 2007 Average

60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%

110
100
90
80
70
60
50
40
30
20
10
0

Year Over Year Change in

Total Industrial Production
Historical Average

'19

'29

'39

'49

'59

'69

'79

'89

'99

'09

Capacity Utilization Had Been Rising Since Mid-2009

But Reversed at the Start of the Year
92%

Industrial Sector Capacity Utilization Rate

88%

Historical Average

84%

Total Industrial
Production (2007=100)

'19

'29

'39

'49

'59

'69

'79

'89

'99

'09

Slowing in the Industrial Sector Bodes Poorly for

Employment Growth
15%

Year Over Year Change

in Nonfarm Employment

10%

6%
4%

5%

2%

0%

0%

-5%

-2%

80%
76%
72%

Year Over Year

Change in Total
Industrial Production

-10%

68%
64%

-15%
'67

'72

@NickatFP

'77

'82

'87

August 14, 2015

'92

'97

'02

'07

'12

'67

'72

'77

'82

'87

'92

'97

Sources: U.S. Federal Reserve Industrial Production and Capacity Utilization, U.S. Bureau of Labor Statistics Employment Situation

-4%
-6%
'02

'07

'12
29

Manufacturing and Trade Sales Slipping

Total Manufacturing and Trade Sales Had Recovered
by 2011, But Have Fallen Since Mid-2014

Manufacturing and Wholesales Both Turned

Negative Year Over Year at the Start of 2015

$1.4T

25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%

Manufacturing and Trade

Monthly Sales

$1.2T
$1.0T
$0.8T

Retail

$0.6T

Wholesale

$0.4T
$0.2T

Manufacturing

$0.0T
'92

'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

Year Over Year Change in

Manufacturing and Trade Sales

Wholesale

Retail

Manufacturing
'93

'95

'97

'99

'01

'03

'05

'07

'09

Inventories Have Continued to Grow Despite a

Decline in Sales

Since 2011, Inventories Had Been Slowly

Accumulating

25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%

1.8

Year Over Year Change in Total Manufacturing

and Trade Inventories and Sales

1.7

'13

'15

Manufacturing and Trade

Inventories-to-Sales Ratio

Retail

1.6

'11

Manufacturing

1.5
1.4

Inventories

Total

1.3

Sales

Wholesale

1.2
1.1

'93

'95

@NickatFP

'97

'99

'01

'03

August 14, 2015

'05

'07

'09

'11

'13

'15

'92

'94

Sources: U.S. Census Bureau Manufacturing and Trade Inventories and Sales

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14
30

Soft Data Conflicting With Hard Data

Contra the Hard Data, Business Surveys Continue to
Indicate an Expansionary Environment

Including New Orders, Which Government Data

Suggest Should be Contracting

70

80

ISM Business Surveys Composite Indexes

65

70

Non-Manufacturing NMI

60

ISM Business Surveys New Orders

60

55
50

50

Manufacturing PMI

45

Manufacturing

40

Non-Manufacturing

40
30

35
30

20
'08

'09

'10

'11

'12

'13

'14

'15

'08

'09

'10

'11

'12

'13

'14

The Current Deviation is Unusual, and the Soft and

Hard Data Will Have to Converge Eventually

Sinking Retail Sales Would Create Downward

Pressure On Equity Markets

80

10%

70

ISM Manufacturing Survey

New Orders

60
50
40
30

Manufacturers New Orders,

Year Over Year Change

20
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

@NickatFP

August 14, 2015

35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%

Retail Sales ex-Autos ex-Gas, Y/Y Change

8%
6%
4%
2%
0%
-2%
-4%
-6%

S&P 500,
Year Over
Year Change

'15

60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%

'93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15

Sources: Institute for Supply Management Reports on Business, U.S. Census Bureau Monthly Sales for Retail and Food Services, CBOE

31

Trends in Retail
In December, For the First Time Ever, Americans
Spent More Dining Out Than on Groceries

For Many Items, People Are Increasingly Preferring

to Shop From Home

$55B

10%

$45B

9%

$40B

Retail Sales Monthly

$50B
$45B
$40B

$35B

8%

Food & Beverage Stores Grocery Stores Only

$30B

Online Shopping Share

of Total Retail Sales

7%

$35B

$25B

6%

$30B

$20B

5%

$25B

Food Services &

Drinking Places

$20B

Retail Sales Monthly Online Shopping

4%

$15B

3%
'92

'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

$15B
$10B
$5B

'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14

Organic Food Has Gained Favor as More Shoppers Become Health Conscious
$40B
$35B
$30B
$25B
$20B

Condiments
Annual Organic Food Sales
Meat, Fish, Poultry
Snack Foods
Breads and Grains
Packaged Foods
Beverages
Dairy
Fruits and Vegetables

$15B
$10B
$5B
$0B
'05

@NickatFP

'06
August 14, 2015

'07

'08

'09

'10

'11

'12

Sources: U.S. Census Bureau Monthly Sales for Retail and Food Services, U.S. Department of Agriculture Organic Market Overview

'13

'14
32

Where the Retail Money Goes

Autos Continue to Make Up the Greatest Share of Retail Sales and are Little Changed Over the Past Two Decades
100%

10.5% Food Services and Drinking Places

90%

4.0%

Online Shopping

2.6%

Miscellaneous Retailers

11.7%
9.1%

80%

2.2%
12.1% General Merchandise

70%

60%

2.4%

Sporting Goods, Hobby, Books, and Music

5.9%

Clothing and Clothing Accessories

7.8%

Gas

4.5%

Health and Personal Care

12.6%
1.7%
4.8%
8.6%

50%

5.9%

18.5% Food & Beverage Stores

40%

12.7%
30%

20%

10%

Building Materials and Equipment

6.6%
2.1%
2.6%

Electronic and Appliances

Furniture

6.2%
1.9%
1.9%

20.4% Autos & Auto Parts

20.8%

0%
'92

'93

@NickatFP

'94

'95

'96

August 14, 2015

'97

'98

'99

'00

'01

'02

'03

'04

'05

Sources: U.S. Census Bureau Monthly Sales for Retail and Food Services

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15
33

The Disinflationary Environment

Both the Consumer Price Index and the Feds Preferred Personal Consumption Expenditure Price Index Are Flat
16%

Year Over Year Change in Price Inflation Indexes

14%

12%

10%

8%
*Core Measures Exclude
Food and Energy

6%

4%

2%

Core CPI
Core PCE

0%

PCE
CPI

-2%

-4%
'58

'61

@NickatFP

'64

'67

'70

August 14, 2015

'73

'76

'79

'82

'85

'88

'91

'94

'97

'00

'03

'06

'09

Sources: U.S. Bureau of Labor Statistics Consumer Price Index, U.S. Bureau of Economic Analysis Personal Income and Outlays

'12

'15
34

Surging Healthcare Costs

Medical Care Costs Have Risen at a Faster Rate Than Other Price Index Components
500

Consumer Price Index Levels of Components (1982-1984=100)

Medical Care
Services

450

400

Medical Care
Commodities

350

Transportation
Services
Shelter
All Food
Core CPI
CPI
Energy
Commodities
All Energy
Energy
Services

300

250

200

Used Vehicles
New Vehicles
Apparel

150

100

50
'82

'84

@NickatFP

'86

'88

'90

August 14, 2015

'92

'94

'96

'98

'00

'02

Sources: U.S. Bureau of Labor Statistics Consumer Price Index

'04

'06

'08

'10

'12

'14
35

Interest Rates: Lower For Longer

Interest Rates are at Historical Lows and Have Been There Since the Fed Moved to ZIRP in 2008
20%
18%

Effective Federal Funds Rate

16%
14%
12%

10-Year Treasury Yield

10%
8%
6%
4%
2%
0%
'62

'64

'66

'68

'70

'72

'74

'76

'78

'80

'82

'84

'86

'88

'90

'92

'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

The Slope of the Yield Curve Has Increased on Both

the Short and Long End Since the Start of the Year

Market-Implied Inflation Expectations Are Just Under

2% For The Next 10 Years

3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
-2.0%
-2.5%

3.5%

Treasury Yield Spreads

10y-2y

Treasury Nominal Yields Less TIPS Yields

5y5y Forward

3.0%
2.5%

10y

2.0%

30y-10y

Did not issue 30y Treasuries

from Feb 2002 to Feb 2006

5y

1.5%
1.0%

'77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10 '13

@NickatFP

August 14, 2015

Sources: U.S. Federal Reserve Selected Interest Rates

'10

'11

'12

'13

'14

'15
36

Plenty of Money, Not Enough Velocity

Money Stock Has Been Expanding at a Healthy Rate
25%

Money Supply, Year Over Year Growth

20%
15%

M1

10%

M2

5%
0%
-5%
-10%
'82

'84

'86

'88

'90

'92

'94

'96

'98

'00

'02

'04

'06

'08

'10

'12

'14

But Sparse Demand Has Kept Money Velocity Declining, Explaining the Lack of Inflation Despite Supply Growth
12

Velocity of Money Stock

10

M1
8
6
The Fisher Equation
Money Supply * Velocity (# of times money changes hands) =
Price Level * Volume of Transactions

M1 Historical Average
M2

2
0
'82

'84

@NickatFP

'86

'88

August 14, 2015

'90

'92

'94

'96

'98

Sources: U.S. Federal Reserve Money Stock Measures

'00

'02

'04

'06

'08

'10

'12

'14
37

Ballooning Fed Balance Sheet

Several Rounds of Quantitative Easing Have Left the Fed Holding a $4.5 Trillion Balance Sheet
$5.0T

Federal Reserve Balances

Currency/Gold/FX

$4.5T

Other Assets
$4.0T

Mortgage-Backed
Securities

$3.5T

$3.0T

Federal Agency
Debt Securities

$2.5T

$2.0T

$1.5T

$1.0T

U.S. Treasuries

$0.5T

$0.0T
'03

'04

@NickatFP

'05

'06

August 14, 2015

'07

'08

'09

'10

'11

Sources: U.S. Federal Reserve Factors Affecting Reserve Balances

'12

'13

'14

'15
38

Consumption Rolls Onward

Consumption Has Contributed Positively to GDP Growth For 24 Consecutive Quarters
8%

13.4%

8.6%

Personal Consumption Expenditures Quarterly Contribution to GDP Growth

6%

4-Quarter Moving Average

4%
2%
0%
-2%
-4%
-6%
-8%
'48

'53

'58

'63

'68

'73

'78

'83

'88

'93

'98

'03

'08

'13

And Recovered Relatively Quickly From the

Recession

The Share of GDP That Consumption Represents is

Near Historical Highs

$14T

70%

$12T

68%

$10T

66%

PCE Share of GDP

$8T
64%
$6T

Real (2009-Chained) PCE

62%

$4T

Historical Average
Nominal PCE

$2T
$0T

60%
58%

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Economic Analysis - GDP

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13
39

Private Investment Crawling Back

Investment Has Bounced Back, But Not Nearly at the Rate It Decelerated
10%

14.1%

Gross Private Domestic Investment Quarterly Contribution to GDP Growth

8%
6%

4-Quarter Moving Average

4%
2%
0%
-2%
-4%
-6%
-8%
-10%

-11.6%

'48

'53

'58

'63

'68

'73

'78

'83

'88

'93

'98

'03

'08

'13

It Took 30 Quarters For Real Private Investment to

Return to its Prior Level

Unlike PCE, Investment Share of GDP Plummeted

During the Recession and is Still Below Average

$3.5T

22%

$3.0T

20%

$2.5T
18%

$2.0T
$1.5T

Investment Share
of GDP

Real (2009-Chained) Investment

16%

$1.0T

Nominal Investment

$0.5T
$0.0T

14%

Historical Average

12%
'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Economic Analysis - GDP

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13
40

The Government Drag

Government Consumption Has Been a Mostly Negative Contributor to GDP Growth Since Q4 2009
4%

Q4 50: 4.8%
Q1 51: 7.3%
Q2 51: 10.0%
Q3 51: 9.2%
Q4 51: 4.8%

3%

4.1%

Government Consumption Expenditures Quarterly Contribution to GDP Growth

4-Quarter Moving Average

2%
1%
0%
-1%
-2%
-3%
-4%
'48

'53

'58

'63

'68

'73

'78

'83

'88

'93

'98

'03

'08

Nominal Government Consumption Has Basically

Been Flat, While Real Consumption Has Sunk

Governments Share of GDP is Approaching

Historical Lows, and Still Rapidly Declining

$3.5T

25%
24%
23%
22%
21%
20%
19%
18%
17%
16%
15%

$3.0T

Real (2009-Chained)
Government Consumption

$2.5T
$2.0T
$1.5T

Nominal
Government
Consumption

$1.0T
$0.5T
$0.0T

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Economic Analysis - GDP

'13

Government Consumption Share of GDP

Historical Average

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13
41

Improving Trade Balance, Until Recently

Net Exports Were Briefly a Positive Contributor to GDP Growth Before Turning Back Negative in 2014
4%

Net Exports Quarterly Contribution to

GDP Growth

3%

4-Quarter Moving Average

2%
1%
0%
-1%
-2%
-3%
-4%
'48

'53

'58

'63

'68

'73

'78

The Annual Trade Deficit Has Lately Been Around

$0.5 Trillion
$0.1T
$0.0T
-$0.1T
-$0.2T
-$0.3T
-$0.4T
-$0.5T
-$0.6T
-$0.7T
-$0.8T
-$0.9T

'83

'88

'93

'98

'03

'08

'13

Annual Imports Have Been Greater Than Exports

Since 1976
3%
2%

Net Exports Share of GDP

1%

Nominal Net Exports

0%
-1%

Real (2009-Chained) Net Exports

-2%
-3%

Historical Average

-4%
-5%
-6%
'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Economic Analysis - GDP

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13
42

Putting It All Together

Real Gross Domestic Product Continues Gradually Chugging Along, For Now
10%

Contributions by GDP Component to the Quarterly Seasonally Adjusted Annual Rate of Growth

8%
6%
4%
2%
0%
-2%

Government Consumption Expenditures

Net Exports
Gross Private Domestic Investment
Personal Consumption Expenditures
Real GDP (SAAR)

-4%
-6%
-8%
-10%
'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

Real GDP Recovered Faster Than Employment,

Taking Only 14 Quarters To Reach Its Prior Peak

Year Over Year, Real GDP is Up 2.3%, a Positive Yet

Tepid Pace Compared to History

$18T

14%

$16T

12%

$14T

10%

$12T

8%

$10T
$8T

Real (2009 Chained) GDP

$6T

6%

Real GDP Y/Y Change

Historical Average

4%
2%

$4T

Nominal GDP

$2T
$0T

0%
-2%
-4%

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13

@NickatFP

August 14, 2015

Sources: U.S. Bureau of Economic Analysis - GDP

'48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13
43