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Whats Going on in the Flathead 7th Annual Flathead Outlook January 2009 Center for Business Informat

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Economic Impact of Announced Layoffs. Only possible to discern loss to economy, ... Stimulus Package: if provides rate of return. Low interest rate environment ... – PowerPoint PPT presentation

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Title: Whats Going on in the Flathead 7th Annual Flathead Outlook January 2009 Center for Business Informat


1
Whats Going on in the Flathead? 7th Annual
Flathead Outlook January 2009 Center for
Business Information and Research Flathead Valley
Community College
2
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3
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4
What People Think Matters
  • Household Confidence Vital for Healthy Economy
  • We spend and save according to
  • Our current disposable income
  • Our household wealth
  • Expected future income
  • Smoothes spending out during bad years
  • Expectations per inflation

5
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6
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7
For the Period Dec 07 to Dec 08
  • Assessment of current financial situation
  • Down 18
  • Anticipation of financial situation next 12
    months
  • Down 6
  • Assessment of Montana business conditions next 12
    months
  • Down 35
  • Assessment of Montana business conditions next 5
    years
  • Down 22
  • Next 12 months good time to buy car, appliance,
    house?
  • Down 18

8
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9
Flathead Unemployment 7.3 preliminary
  • Lagging indicator
  • Relative to….
  • Montana 4.9
  • Gallatin 4.6
  • Missoula 4.9
  • Big Horn 8.0
  • Glacier 8.9
  • Lake 7.5
  • Lincoln 10.0
  • Sanders 11.7
  • Mineral 7.4

10
Price trend, all items
11
Price trend, All Items, less food and energy
12
Flathead Unemployment Insurance Claims
  • Doubled CY 2007 to CY 2008
  • 6,465 in 2007
  • 12,796 in 2008
  • Emergency Unemployment Insurance Claims
  • Began July 08 ends July 09
  • 4-13 additional weeks
  • 928 claims in 2008
  • Does Not Capture All Harm
  • Independents without reported wages for first 4
    of last 5 quarters ineligible
  • 2006
  • proprietor employment 30 of total
  • proprietor wages 25 total wages and salaries

13
NBER Declaration of National Recession
  • Recession diminishing economic activity
  • Unemployment as indicator lags activity
  • Unemployment insurance too much noise
  • Does everything have to be in decline?

14
National Recession
  • Started December 2007
  • Recession declared one year later December 11,
    2008 by NBER
  • Why the Lag?
  • If difficult for the nation, even more
    problematic at the local level

15
Confusing Data Usually the Case
  • Real GDP Real GDI
  • 2007Q4 Down 2007Q4 Down
  • 2008Q1 Up 2008Q1 Down
  • 2008Q2 Up 2008Q2 Up to peak
  • 2008Q3 Down 2008Q3 Down

16
Using Rear View Mirror for Flathead
  • 05 06 07
  • Avg wage/job 28,949 30,531 31,904
  • w/s employment 40,736 42,838 44,623
  • w/s (000s ) 1, 179.3 1,307.9 1,423.6
  • Unemployment 4.3 3.6 3.5

17
Economic Impact of Announced Layoffs
  • Only possible to discern loss to economy, not NET
    effect
  • Top 20 Employers
  • 8 employment trend is downward
  • 9 employment trend is steady
  • 3 employment trend is positive
  • Top 20 represent 7 of 20 possible NAICS sectors

18
Layoff Impact-Jobs
  • Direct Impact 615 manufacturing jobs
  • Indirect impact jeopardizes additional 1,428
  • Whos Most Affected?
  • Health Social Services 158
  • Professional/Scientific/Tech 144
  • Accommodation Food 135
  • Retail Trade 125
  • Transportation Warehousing 94
  • Other manufacturers 86

19
Layoff Impact-Sales
  • Direct Impact 484 million
  • Indirect impact additional 228 million
  • Whos Most Affected? (000,000s )
  • Utilities 41
  • Other manufacturers 40
  • Real Estate rental 19
  • Transportation Warehousing 13
  • Ag, For, Fish Hunting 13
  • Professional/Scientific/Tech 12
  • Health Social Services 12

20
Layoff Impact-Labor Income
  • Direct Impact 79 million
  • Indirect Impact additional 62 million
  • Whos Affected? (000,000s )
  • Utilities 8
  • Health Social Services 6
  • Professional/Scientific/Tech 6
  • Wholesale 4
  • Transportation Warehousing 4
  • Retail 4

21
Can Declining Wealth Affect Spending?
  • 1990-2000 avg growth rate for real net worth for
    American hh was 5.3 per year
  • Primarily houses and stocks
  • Savings rates declined to 2 from 8 of
    disposable income
  • Disposable income could be virtually all consumed
  • Wealth accumulation took care of itself via
    stocks and real estate
  • 2000-2007 real net worth rose 2.29
  • With stocks and housing both falling households
    now focus on wealth preservation and risk
    avoidance
  • Go from wealth enhancement to wealth preservation
    by reducing consumption, increasing saving

22
Wealth Effect as a Driver of Consumption
  • Controversial at Best
  • For every decline in wealth
  • Spending decreases by .04 or .05
  • Estimate 52 million as driver
  • Household Wealth only
  • 403(b) now 201(b) for most
  • Delayed retirements
  • Adds to labor imbalances
  • Bad for slowdown
  • Good for recovery

23
Wealth Effect-Housing
  • Possible decline of 431 jobs
  • Health Social Services 104
  • Retail 89
  • Accommodation Food 61
  • Possible decrease of 44 million in Sales
  • Real Estate and Rental 9 million
  • Health Social Services 8 million
  • Retail 6 million
  • Possible decline of 13 million Labor Income
  • Health Social Services 4 million
  • Retail 2 million
  • Accommodation Food 2 million

24
To be a Cassandra or Not to be? Ending on a
positive note….
  • Well diversified economy
  • Educated labor force
  • Community college for training
  • Amenities galore real estate
  • Retail trade center for area
  • Agglomeration economy
  • As global economy rebounds, Montana benefits
  • Stimulus Package if provides rate of return
  • Low interest rate environment
  • Energy dividend at the pump
  • Entrepreneurial spirit itself markets do rebound
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