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U.S. Economic Outlook

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U.S. Economic Outlook Mark Vitner, Managing Director & Senior Economist November 29, 2012 – PowerPoint PPT presentation

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Title: U.S. Economic Outlook


1
U.S. Economic Outlook
  • Mark Vitner, Managing Director Senior Economist
  • November 29, 2012

2
Economic Growth
We are more than three years into the economic
recovery and there is still a considerable amount
of uncertainty regarding sovereign debt issues in
Europe, the federal budget deficit and the
willingness of businesses and households to
commit to major capital purchases.
Source U.S. Department of Commerce and Wells
Fargo Securities, LLC
3
Financial Crises Are Becoming More Frequent
Treasury yields are currently near record low
levels. We believe QE and policy uncertainty are
the primary drivers of ultra-low interest rates.
Source IHS Global Insight and Wells Fargo
Securities, LLC
4
The Timing of The First Fed Rate Hike
The timing for the Feds first tightening move
has been pushed even further out. Long-term
growth estimates have also been scaled back.
Individual FOMC Member Forecasts
Consensus Fed Funds Rate Hike
Source Federal Reserve Board and Wells Fargo
Securities, LLC
4
5
Federal Reserve Balance Sheet
The massive expansion of the Feds balance sheet
has lifted asset prices and has also given the
economy a boost. But all magic comes with a price!
Source Federal Reserve Board and Wells Fargo
Securities, LLC
6
Output Gap
The Great Recession has produced an enormous
output gap that will take years to close.
Source Congressional Budget Office, U.S.
Department of Commerce and Wells Fargo
Securities, LLC
7
U.S. Budget Deficit
The federal budget deficit has come down somewhat
but remains at a historically high level.
Source U.S. Department of the Treasury and
Wells Fargo Securities, LLC
8
Labor Market
Unemployment is gradually trending down, although
much of the improvement has come from unusual
forces, including extraordinary seasonal factors
and sluggish labor force growth.
Source U.S. Department of Labor and Wells Fargo
Securities, LLC
9
Labor Market
Job losses exceeded every post-World War II
downturn, and the modest recovery to date has
been extremely disappointing.
Source U.S. Department of Labor and Wells Fargo
Securities, LLC
10
Consumer Related
This years improved stock market has helped
bolster consumer spending at a time when real
incomes are barely growing, and consumer
confidence remains historically low.
Consumer Confidence
Household Wealth
Source U.S. Department of Commerce, Conference
Board and Wells Fargo Securities, LLC
10
10
11
Consumer Confidence
Economic growth is unlikely to accelerate in a
meaningful way until consumers feel better about
current economic conditions than they do about
future economic prospects.
Confidence Gap
Consumer Confidence
Source Conference Board and Wells Fargo
Securities, LLC
11
12
Homebuilding
We believe housing starts have bottomed and will
increase modestly over the next few years.
Source U.S. Department of Commerce and Wells
Fargo Securities, LLC
13
Housing Starts
Apartment construction accounts for much of the
recent improvement in homebuilding. We believe
multifamily housing will account for a larger
proportion of future starts.
Multifamily Housing Starts
Single Multifamily Housing Starts
Source U.S. Department of Commerce and Wells
Fargo Securities, LLC
13
14
U.S. Mortgage Rates
Mortgage rates are at historic lows and are
likely to remain low for some time.
Source FHLMC and Wells Fargo Securities, LLC
15
Home Prices
Home prices have firmed recently as foreclosures
have become a smaller portion of overall sales.
Prices will likely fluctuate along a low
trajectory until more foreclosures clear through
the pipeline.
Source Federal Housing Finance Agency, National
Association of Realtors, SP Corp. and Wells
Fargo Securities, LLC
16
NAHB/Wells Fargo Housing Market Index
Homebuilder sentiment has risen significantly
over the past year, but it is still at a
relatively low level.
Source National Association of Home Builders and
Wells Fargo Securities, LLC
17
International Forecast
The European financial crisis is dragging global
economic growth lower, but we believe growth
should pick up by 2014.
Source Congressional International Monetary Fund
and Wells Fargo Securities, LLC
18
Virginia
19
Virginia Employment Picture
Virginias labor market has seen a relatively
strong recovery. Nonfarm payrolls are less than
1.5 percent below their prerecession peak.
Source U.S. Department of Labor and Wells Fargo
Securities, LLC
20
Virginia Employment Picture
Education health services, leisure
hospitality and financial activities have led job
growth over the past year.
Source U.S. Department of Labor and Wells Fargo
Securities, LLC
21
Virginia Unemployment Rate
The unemployment rate in Virginia has declined
modestly over the past two years and remains well
below the U.S. rate.
Source U.S. Department of Labor and Wells Fargo
Securities, LLC
22
Metro-Level Employment
Source U.S. Department of Labor and Wells Fargo
Securities, LLC
23
Metro-Level Employment
Source U.S. Department of Labor and Wells Fargo
Securities, LLC
24
Personal Income
Personal income growth has picked back up in
recent quarters.
Source U.S. Department of Commerce and Wells
Fargo Securities, LLC
25
Population Growth
Population growth in Virginia is maintaining its
historic pace.
Source U.S. Department of Commerce and Wells
Fargo Securities, LLC
26
Issues to Watch
Credit Availability Financial Reform
European Debt Crisis
Fiscal Cliff Uncertainty
Deleveraging
China Economic Slowdown
Fiscal Monetary Policy
Geopolitical Tensions
Energy/Commodity Price Swings
27
Our Forecast
28
Appendix
29
Wells Fargo Economics Group Publications
A Sampling of Our Recent Special, Regional
Industry Commentary
To view any of our past research please
visit http//www.wellsfargo.com/ economics To
join any of our research distribution lists
please visit http//www.wellsfargo.com/ economics
email
Recent Special Commentary
30
Wells Fargo Securities, LLC Economics Group
Global Head of Research and Economics
Economists
  • Diane Schumaker-Krieg
    .diane.schumaker_at_wellsfargo.com
  • Global Head of Research Economics
  • Azhar Iqbal, Econometricianazhar.iqbal
    _at_wellsfargo.com
  • Tim Quinlan, Economist ..tim.quinlan_at_
    wellsfargo.com
  • Michael A. Brown, Economist
    michael.a.brown_at_wellsfargo.com

Chief Economist
  • John Silvia
    .......................
    john.silvia_at_wellsfargo.com

Economic Analysts
Senior Economists
  • Mark Vitner, Senior Economist..... .
    .mark.vitner_at_wellsfargo.com
  • Jay Bryson, Global Economist .....jay.b
    ryson_at_wellsfargo.com
  • Eugenio Aleman, Senior Economist
    .eugenio.j.aleman_at_wellsfargo.com
  • Sam Bullard, Senior Economist .sam.bulla
    rd_at_wellsfargo.com
  • Anika Khan, Senior Economist .
    . anika.khan_at_wellsfargo.com

Sarah Watt, Economic Analyst
.sarah.watt_at_wellsfargo.com Kaylyn Swankoski,
Economic Analyst kaylyn.swankoski_at_we
llsfargo.com Zachary Griffiths, Economic
Analyst zachary.griffiths_at_well
sfargo.com Sara Silverman, Economic Analyst
sara.silverman_at_wellsfargo.co
m
Administrative Assistants
  • Peg Gavin, Executive Assistant.

    peg.gavin_at_wellsfargo.com
  • Cyndi Flowe, Administrative Assistant
    cyndi.h.flowe_at_wellsfargo.com

Wells Fargo Securities Economics Group
publications are produced by Wells Fargo
Securities, LLC, a U.S broker-dealer registered
with the U.S. Securities and Exchange Commission,
the Financial Industry Regulatory Authority, and
the Securities Investor Protection Corp. Wells
Fargo Securities, LLC, distributes these
publications directly and through subsidiaries
including, but not limited to, Wells Fargo
Company, Wells Fargo Bank N.A, Wells Fargo
Advisors, LLC, and Wells Fargo Securities
International Limited. The information and
opinions herein are for general information use
only. Wells Fargo Securities, LLC does not
guarantee their accuracy or completeness, nor
does Wells Fargo Securities, LLC assume any
liability for any loss that may result from the
reliance by any person upon any such information
or opinions. Such information and opinions are
subject to change without notice, are for general
information only and are not intended as an offer
or solicitation with respect to the purchase or
sales of any security or as personalized
investment advice. Wells Fargo Securities, LLC
is a separate legal entity and distinct from
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FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE
VALUE Important Information for Non-U.S.
Recipients For recipients in the EEA, this report
is distributed by Wells Fargo Securities
International Limited (WFSIL). WFSIL is a U.K.
incorporated investment firm authorized and
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The content of this report has been approved by
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30
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