Economic Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:

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2 Economic Forecast OUTPUT AND EMPLOYMENT United States Real GDP $ billions (fourth quarter) $1,996 $1,7 $1, $1,9 $1, $1, $1,97 $16,6 % change over the four quarters 1.9% -.8% -.%.8%.%.%.% 3.% Nonfarm employment Job count (fourth quarter) 137,93, 13,13,333 19,6,667 13,83,667 13,86,667 13,6, ,79, 138,88,19 % change over the four quarters.9% -.% -.%.6% 1.% 1.6% 1.7% 1.1% Average monthly change 99,7-3,7-68,889 63,83 166, , , ,333 Real GDP $ billions (fourth quarter) $367 $36 $369 $379 $383 $387 $39 $7 % change over the four quarters.6% -.3%.9%.8% 1.1% 1.1% 1.8% 3.% Nonfarm employment Job count (fourth quarter) 3,771,33 3,7,867 3,6,367 3,68,33 3,7,33 3,73,967 3,78,73 3,819,663 % change over the four quarters.8% -.8% -3.% 1.1% 1.% 1.1% 1.% 1.% Average monthly change,67 -,7-1, 3,17 3,633 3,9 3,3 3,78 WHAT THE TABLE SHOWS: s GDP forecast is derived from the national forecast by allocating output to each of the states based on employment shares. So, forecast misses reflect surprises in the aggregate forecast as well as unexpected shifts in a state s GDP share. s recovery is tracking along with the national recovery. s economy is forecast to grow a little faster than it has into 1, despite headwinds related to the sequestration. Note: GDP figures are based on quarterly values that are interpolated from annual GDP estimates using quarterly employment changes. Unbolded figures are reported actual values and bold figures represent forecasts. Sources: US Department of Commerce; US Department of Labor. Regional Perspectives: Economic Outlook Commercial Banking

3 Agriculture Mining Utilities Construction Durable manufacturing Nondudrable manufacturing Wholesale trade Retail trade Transportation Information Finance and insurance Real estate Professional and technical services Management of companies Administrative and waste management services Educational services Health care and social assistance Arts, entertainment, and recreation Hotel and food service Other services Government December 6, 13 The Economy s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES The figure compares the relative importance US industry mix industry mix of selected industries to the state s economy with the national footprint of each industry (state and national figures reflect the value added of each industry as a percent of aggregate state or US nominal GDP, respectively). Professional and business services as well as the government sector contribute a disproportionate amount to the state s GDP. The important service sector is an asset for the state. Source: US Department of Commerce. Updated through 11. Regional Perspectives: Economic Outlook Commercial Banking 3

4 Bankruptcies RATIO OF BANKRUPTCY FILINGS TO THE 7 Q NUMBER The figure illustrates trends in bankruptcy 6 6 filings by businesses and persons relative to the number of filings in 7 Q, prior to the Business bankruptcy filings Nonbusiness bankruptcy filings recession. Bankruptcy filings have fallen back to normal. All US bankruptcy filings (shaded area) 3 3 Indicators of financial stress are a useful coincident indication of economic distress. Bankruptcy filings are tracking the same course as in the previous recession and are running slightly below the national average. 1 1 Source: Administrative Office of the U.S. Courts; Updated through September Regional Perspectives: Economic Outlook Commercial Banking

5 FRB Richmond Business Survey REAL GDP (% CHANGE 1 MONTHS EARLIER) DIFFUSION INDEXES ( = NO CHANGE) real GDP (left scale) FRB-Richmond manufacturing survey (right scale) Forecast The figure features GDP growth in and the Federal Reserve Bank of Richmond s manufacturing survey. The index readings represent the one-month percent change and are volatile. Indicators of future activity point to improvement. Sources: Federal Reserve Bank of Richmond; US Department of Commerce. Updated through November 13 (surveys) and 13 Q3 (GDP). Regional Perspectives: Economic Outlook Commercial Banking

6 Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 7 Q LEVEL The figure tracks layoffs in and the.. national level of claims. Weekly layoffs, both the state and national.. US (solid area).. tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of 7, prior to the recession. The layoff pace is almost back to pre recession levels Layoffs, because they are reported so promptly, are a useful indicator of changing economic trends The declining level of layoffs signals that the economy is on the mend Source: US Department of Labor. Updated through November 16, 13 (state) and November 3, 13 (US). Regional Perspectives: Economic Outlook Commercial Banking 6

7 Economic Growth REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) US Forecast Real GDP growth in (the line in the figure) is superimposed on top of US real GDP growth (bars in the figure). s economy has picked up a little speed from its 11 slowdown. s economy is expected to speed up in coming years. Source: US Department of Commerce. Updated through 1 (state) and 13 Q3 (US). Quarterly estimates for states after 1 are interpolated from employment figures, based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 7

8 Economic Output REAL GDP LEVEL (RATIO TO Q) The figure illustrates the evolution of real 1. Forecast 1. GDP of the state and the overall US economy since the fourth quarter of, the peak of the previous business cycle that is, at any point in time the lines trace the ratio of real GDP to its level in Q has fared better than the national economy for the past decade and the state s economy merely stalled when the nation slipped into a recession US s economy is forecast to continue to pace the national economic recovery Source: US Department of Commerce. Updated through 1 (state) and 13 Q3 (US). Quarterly estimates for states after 1 are interpolated from employment figures, based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 8

9 Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM 1 MONTHS EARLIER) s employment trend, compared with US Forecast the nation s. Employment is growing at a respectable pace in. 3 3 s labor market is likely to continue to 1 1 expand. Source: US Department of Labor. Updated through October Regional Perspectives: Economic Outlook Commercial Banking 9

10 Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE Q LEVEL) Forecast US The figure illustrates the evolution of employment in the state compared with the nation since Q, the peak of the previous business cycle. The lines trace out the ratio of employment at the time to employment in Q. Businesses have replaced or recovered most of the jobs lost during the recession. The state s job market outlook is relatively rosy despite federal budget constraints related to the sequester. Source: US Department of Labor. Updated through October 13. Regional Perspectives: Economic Outlook Commercial Banking 1

11 Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO Q LEVEL) Employment trends in local communities Forecast US forecast US Northern Charlottesville Winchester Harrisonburg Blacksburg- Christiansburg-Radford Richmond Beach-Norfolk- Newport News Lynchburg Roanoke Danville forecast across the state. Lines are the cumulative percent change in employment since Q, the peak of the previous business expansion. Economic performance across the state exhibits a wide disparity of performance. Many of the local communities that were booming are again faring quite well. Source: US Department of Labor. Updated through April 13. Regional Perspectives: Economic Outlook Commercial Banking 11

12 Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) Trends in s unemployment rate, 1 1 Forecast 1 1 compared with the national average. The region s rise in unemployment nearly mirrors the national average, even though the level of unemployment remains below the national average. 8 US (shaded) 8 Unemployment crested around 7 percent and has fallen back under 6 percent. 6 6 The unemployment rate is the single best indicator of the relative economic performance of a region. Stable unemployment is a sign that the economy is expanding again Source: US Department of Labor. Updated through October 13. Regional Perspectives: Economic Outlook Commercial Banking 1

13 Relative House Prices RATIO OF THE STATE S HOUSE PRICES TO THE NATIONAL AVERAGE (199 Q = 1.) The figure tracks the relative price of houses in the state versus the nation that is, it reflects the ratio of the state price index to the national house price index, with that ratio set to unity in the summer of 199. A drop in the line means that house prices in the state lag the national trend. States that did not suffer from speculative conditions saw a decline in the relative price of houses in this last decade. House prices in mirrored national trends and then some. s housing markets are expensive, even though they have corrected some. Source: FHFA. Updated through 13 Q3. Regional Perspectives: Economic Outlook Commercial Banking 13

14 Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 199 Q LEVEL) The figure tracks the cumulative percentage.. deviation in house prices since 199 in selected local markets and compares those.. with the national average. Real estate values are beginning to hold. US Roanoke. steady, after coming down somewhat from the 7 peak. 1.7 Harrisonburg Kingsport 1.7 KEY MESSAGE: Lynchburg Charlottesville Blacksburg Northern remains anchored by the robust demand that comes from turnover in the nation s capital. Source: FHFA. Updated through 13 Q Regional Perspectives: Economic Outlook Commercial Banking 1

15 New Home Building HOUSING STARTS (RATIO TO THE JULY 199 LEVEL) The pace of new home building (housing.. starts) in, compared with the national trends. New home building is down to about ½ of 1. US Forecast 1. the peak level and that is relatively better than the national performance, where home building is running at ¼ the pace of the peak years Home building is creeping back up. s housing slowdown is more related.. to the recession than to inflated housing markets Source: Census Department. Updated through August 13. Regional Perspectives: Economic Outlook Commercial Banking 1

16 Office Markets PERCENT OF OFFICE SPACE THAT IS VACANT Trends in the commercial real estate markets. Office vacancy rates remain quite elevated Northern Norfolk from Northern down to Norfolk. Office vacancy trends mirror the health of 1 1 the state s economy and it is telling that office vacancies are not as troublesome as they were in the early s business cycle. 1 1 Note: Data not available for Northern prior to 8. All metropolitan areas (shaded area) Source: CB Richard Ellis (formerly CB Commercial Property Information Systems), Office Vacancy Index of the United States. Updated through 13 Q Regional Perspectives: Economic Outlook Commercial Banking 16

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