Garrett County Total NonAgricultural Employment First Quarter 1996 through First Quarter 2003

1
Bubbles, Bonds, and Barrels The U.S. Economy
Meets Resistance
On Behalf of the Maryland GFOA
By Anirban Basu Sage Policy Group, Inc. October
22, 2004
2
Consumer ConfidenceAugust 2001 through September
2004
Between March 2002 and March 2003, Consumer
Confidence declined 45.
Source Economy.com, The Conference Board
3
Retail Food Services SalesJanuary 2001 through
September 2004
Auto sales up 4.2 in September 04 on a m/m basis
Source Dismal.com
4
U.S. New Home SalesJanuary 1999 through August
2004
Source Economy.com, Census Bureau
5
U.S. Housing Price Appreciation1999Q1 through
2004Q2
Since 2000, a typical homeowner has experienced
an increase of approximately 64,200 in the
value of their home
Source Office of Federal Housing Enterprise
Oversight
6
Current Hot Metro Housing MarketsAnnual Existing
Single-Family Home Price Appreciation 2004Q1
Source National Association of Realtors
7
New Housing Permit GrowthMaryland vs. United
States2001Q1-2004Q2
Source U.S. Census Bureau
8
Housing Price Appreciation of Single-Family
HomesMaryland vs. United States 1999Q1- 2004Q2
Over the past year, Maryland ranked sixth in
home price appreciation, ranking after areas
such as Rhode Island (4th), California (3rd),
and District of Columbia (5th).
Source Office of Federal Housing Enterprise
Oversight
9
Nonresidential Fixed Investment1990Q1 through
2004Q2
Source Bureau of Economic Analysis
10
U.S. Export Growth vs. Value of U.S.
DollarJanuary 2001 through July 2004
Source Bureau of Economic Analysis Federal
Reserve Board
Index of the U.S. dollar compared to all major
currencies traded with the U.S.
11
Gross Domestic Product1990Q1 through 2004Q2
2004Q2 3.3
Source Bureau of Economic Analysis
12
Corporate Profits1999Q1 through 2004Q1
2004Q1 32
Corporate Profits With Inventory Valuation and
Capital Consumption Adjustment
Source Bureau of Economic Analysis
13
Commercial and Industrial Loans, U.S. Commercial
BanksJanuary 1999 through August 2004
Source Federal Reserve Board
14
Net Change in U.S. JobsJanuary 2000 through
September 2004
9/04 96,000
Between March 2001 and July 2002, the nation lost
nearly 2.4 million jobs.
Over the last 12 months the U.S. added 1.7
million jobs
Between January 2000 and February 2001, 2,051,000
jobs were created.
Source Economy.com, Bureau of Labor Statistics
15
National Nonfarm Employmentby Industry Sector
GroupsSeptember 2004 v. September 2003Absolute
Change
1,711k All Told
Bush Scorecard Private Sector -1.634
million Public Sector 813,000 Total -821,000
Source Economy.com, Bureau of Labor Statistics
16
Maryland Nonfarm Employmentby Industry Sector
GroupsAugust 2004 v. August 2003Absolute Change
MD Total 51.3K 2.1 US Total 1,686K 1.3
Source Bureau of Labor Statistics
17
Unemployment Rates, U.S. StatesAugust 2004

Source Bureau of Labor Statistics
U.S. unemployment rate 5.4
18
National Association for Business Economics
(NABE) Forecasts (Sept.)
Source NABE
These forecasts are based on expected oil prices
of 40 a barrel in 2004 and 35 a barrel in 2005
19
Forecasts are Subject to Change
20
NYMEX Crude Oil Prices in U.S. DollarsJanuary
2001 through October 2004
October 12 54 a barrel
Source Energy Information Administration
21
Future of Oil Prices?

• Merrill Lynchs chief energy strategist forecasts
  oil prices to lower to around 33 a barrel. His
  reasoning? Buyers are nervously stock-piling
  supplies for rainy days
• Earl Sweet of BMO Financial Group says there has
  been a rebuild of oil inventories and expects
  prices to range from33-38 a barrel in 2005.
• The director of energy at the Center for
  Strategic and International Studies, Robert Ebel,
  believes oil will remain above 40 a barrel in
  2005.

Source MSNBC AIADA CFO.com Purchasing.com
22
CPIAugust 2004
10.6
Source Bureau of Labor Statistics
23
Average Weekly Earnings vs. Consumer Price
IndexJanuary 2003 through August 2004
Source Bureau of Labor Statistics
24
Wal-Mart SalesSeptember 2003 through September
2004
Source Bank of Tokyo
25
U.S. Total Business InventoriesJanuary 2001
through July 2004
Total Inventories were up 6 in July compared
to the same time last year
Source Economy.com
26
Survey of Business ConfidenceJanuary 31, 2004
through October 8, 2004
Source Dismal.com
27
USB Index of Investor OptimismJanuary 2002 to
September 2004
Source Dismal.com
28
Dow Jones Industrial AverageJanuary 1992 through
October 2004
10/7 10,125.40
YTD Change -3.81
Source Dow Jones
29
Challenger Report, Announced LayoffsSeptember
2001 through September 2004
Source Economy.com
30
U.S. Trade DeficitJanuary 1999 through August
2004
Source U.S. Department of Commerce
31
Historical and Projected U.S. Budget
Balance2000-2010
Source Congressional Budget Office
Data for 2004-2010 are estimates
32
10-Year Treasury YieldJanuary 2000 through
September 2004
33
Forecasts 2005NABE vs. Sage Policy Group
34
Maryland v. US
35
Payroll Employment Growth by IndustryU.S. vs.
Maryland, Aug. 2004
Source Bureau of Labor Statistics
36
Initial Jobless Claims by IndustryU.S. vs.
Maryland, 2003
Source Bureau of Labor Statistics
37
Manufacturing Portion of Private
EmploymentMaryland vs. United States, 2004Q3
Source Bureau of Labor Statistics
38
Growth of Specific High-Wage IndustriesMaryland
vs. United States2004Q1 vs. 2001Q1
Source Bureau of Labor Statistics
39
Growth of Business Establishments in
Maryland1996Q1 through 2004Q1
Source Maryland Department of Labor, Licensing
and Regulation
40
Unemployment RatesMaryland vs. United
StatesJanuary 1988 through August 2004
U.S. 5.4
MD 4.3
Source Bureau of Labor Statistics
41
Unemployment Rates, Maryland CountiesAugust 2004
Source Bureau of Labor Statistics
42
Federal Procurement SpendingSuburban Maryland
vs. Northern Virginia
Source Consolidated Federal Funds Report
43
Office Space Under ConstructionSelect
Metropolitan Areas2004 Q2
Source Delta Associates
44
Length of Time for Office Space to be
LeasedSelect Metropolitan AreasJuly 2004
Source The Daily Record CoStar Group
45
Sage Policy Groups Maryland vs. U.S. Forecast
2005
46
Risk from Rising Interest RatesSeptember 2004
High Risk
Average Risk
Low Risk
The greatest risks are concentrated in areas that
combine a high debt-to-income ratio along with
another factor such as an overpriced housing
market or a high proportion of employment in the
auto industry or financial services.

Source Dismal.com
Alaska faces a low risk and Hawaii an average
risk
47
Top 10 States with Highest Proportion of
Employment in Manufacturing
Source Bureau of Labor Statistics
48
Outlook for State Tax RevenueFiscal 2005 Outlook
General Fund Taxes, y/y change
Less than 3
3 to 5
Greater than 5
Marylands tax revenue outlook is a growth of
3 to 5
Restrained retail trade and rising interest rates
will likely end the housing boom, limiting state
revenues from property taxes due to falling home
prices. However, hiring and income growth could
lead to revenue gains for most states.

Source Dismal.com
Alaskas tax change is projected to be greater
than 5, and Hawaiis less than 3
49
Summing Up

• The nations economy is set to slow.
• How much it will slow is largely a function of
  oil prices.
• Whatever oil prices turn out to be, Maryland will
  continue to outperform the U.S., but is unlikely
  to match Virginias rate of expansion.

50
Thank You

• You can always reach me at abasu_at_sagepolicy.com
• Youll be hearing a lot from us the balance of
  the year.
• Also, if you need me in a hurry, Im at
  410.522.7243 (410.522.SAGE)
• We want you to contact us when you need economic
  research policy analysis.