Economic Forecast OUTPUT AND EMPLOYMENT WHAT THE TABLE SHOWS:

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2 June 3, Economic Forecast OUTPUT AND EMPLOYMENT United States Real GDP $ billions (fourth quarter) $,996 $,575 $,5 $,9 $5, $5,5 $5,9 $6,5 $7, % change over the four quarters.9% -.8% -.%.8%.%.%.6% 3.5% 3.8% Nonfarm employment Job count (fourth quarter) 38,6, 35,93,667 9,877,667 3,65, 3,6,667 3,853,667 37,7,667 39,69,88,679,6 % change over the four quarters.9% -.% -.%.6%.5%.7%.8%.8%.% Average monthly change,667-9,36-68, 6,58 65,889 8,5 8,5 8,5 8,5 Missouri Real GDP $ billions (fourth quarter) $ $9 $ $7 $9 $3 $8 $3 $ % change over the four quarters.% -.8% -.%.3%.9%.9%.%.9% 3.3% WHAT THE TABLE SHOWS: Missouri s GDP forecast is derived from the national forecast by allocating output to each of the 5 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. Missouri s recovery has slowed. Both the economy and jobs are expected to improve a bit in and 5. 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. Nonfarm employment Sources: US Department of Commerce; US Department of Labor. Job count (fourth quarter),8,6,769,367,66,567,66,333,67,6,75,67,77,33,776,79,8, % change over the four quarters.5% -.% -3.9%.%.%.%.5%.%.9% Average monthly change,36 -,686-8, ,739 3,7,7,3 Regional Perspectives: Missouri 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 June 3, The Economy s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES The figure compares the relative importance of selected industries to the state s economy 8 6 US industry mix Missouri industry mix 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). Missouri s fairly diverse economy is not as concentrated in real estate as many and that is a plus. Now the manufacturing revival is becoming an asset for the state. Missouri s economy is more diversified than the national economy. Source: US Department of Commerce. Updated through. Regional Perspectives: Missouri Economic Outlook Commercial Banking 3

4 June 3, Bankruptcies RATIO OF BANKRUPTCY FILINGS TO THE 7 Q NUMBER The figure illustrates trends in bankruptcy 5 5 filings by businesses and persons relative to Business bankruptcy filings Nonbusiness bankruptcy filings the number of filings in 7 Q, prior to the recession. Financial strains are back to normal levels. 3 All US bankruptcy filings (shaded area) 3 Indicators of financial stress are a useful coincident indication of economic distress. Financial stresses are beginning to wane. Source: Administrative Office of the U.S. Courts; Updated through March Regional Perspectives: Missouri Economic Outlook Commercial Banking

5 June 3, FRB KC Business Survey REAL GDP (% CHANGE MONTHS EARLIER) DIFFUSION INDEXES ( = NO CHANGE) 8 6 Missouri real GDP (left scale) - FRB-Kansas City's manufacturing survey (right scale) Forecast The figure traces real GDP growth in Missouri along with the Federal Reserve Bank of Kansas City s survey of local manufacturing conditions. Business conditions have perked up a llitle recently. Business is expected to quicken somewhat in coming quarters. Note: Survey data are unavailable prior to. Sources: Federal Reserve Bank of Kansas City; US Department of Commerce. Updated through May (surveys) and Q (GDP). Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage reporting no change in activity. Regional Perspectives: Missouri Economic Outlook Commercial Banking 5

6 June 3, Private Business Surveys REAL GDP (% CHANGE MONTHS EARLIER) DIFFUSION INDEXES (5 = NO CHANGE) Real GDP in the Midwest (left scale) Forecast -5 Business Barometer Index, Mid-America Purchasing -6 Managers (right scale) The figures shows the Business Barometer Index, based on the survey of purchasing managers, and real GDP growth in Missouri (a reading above 5 means the state s economy is growing, while less than 5 means the economy is shrinking). The index comprises seven business activity indicators, including production, new orders, order backlogs, inventories, employment, supplier deliveries, and prices paid. The index, which is a timely measure of the strength of the local economy, has rebounded recently. This index will be a useful leading indicator of the direction of the economy. Note: Business Barometer data are unavailable prior to 997. Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage reporting no change in activity. Sources: Institute of Supply Management; US Department of Commerce. Updated through April (survey) and Q (GDP). Regional Perspectives: Missouri Economic Outlook Commercial Banking 6

7 June 3, Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 7 Q LEVEL The figure tracks layoffs in Missouri and the.5.5 national level of claims. Weekly layoffs, both the state and national..75 Missouri US (solid area)..75 tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of 7, prior to the recession. Layoffs are well below pre-recession levels The low level of jobless claims points to a positive outlook for the state s job market... Source: US Department of Labor. Updated through May 7, (state) and May, (US)..75 Missouri accounts for.3% of auto manufacturing employment Regional Perspectives: Missouri Economic Outlook Commercial Banking 7

8 June 3, Economic Growth REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) Missouri US Forecast Real GDP growth in Missouri (the line in the figure) is superimposed on top of US real GDP growth (bars in the figure). Missouri s economy grew more slowly than the national economy for the past 5 years and the same theme is present in the recovery. Missouri s recovery has been lagging the national recovery. Missouri s growth is expected to pick up speed a bit in coming years. Source: US Department of Commerce. Updated through (state) and Q (US). Quarterly estimates for states after are interpolated from employment figures (through April ), based on the historical correlation of state and national employment changes. Regional Perspectives: Missouri Economic Outlook Commercial Banking 8

9 June 3, Economic Output REAL GDP LEVEL (RATIO TO Q)..35 Forecast.3.5. US Missouri The figure illustrates the evolution of real 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. Missouri s economy has been steady, if a bit slow since the mid-s. The state s economy has been affected, like others, by the disruptions in the industrial sector. Source: US Department of Commerce. Updated through (state) and Q (US). Quarterly estimates for states after are interpolated from employment figures (through April ), based on the historical correlation of state and national employment changes. Regional Perspectives: Missouri Economic Outlook Commercial Banking 9

10 June 3, Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM MONTHS EARLIER) Employment in Missouri, compared with the nation. 3 Missouri US Forecast 3 Missouri s job trends parallel the nation s but the slowdown in was a bit more noticeable in Missouri than for the nation. Job growth has been picking up. Employment is forecast to continue to grow - - at a moderate pace. - - Source: US Department of Labor. Updated through April (state) and April (US) Regional Perspectives: Missouri Economic Outlook Commercial Banking

11 June 3, Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE Q LEVEL) The figure illustrates the evolution of employment in the state compared with the.7.7 nation since Q, the peak of the.6.5. US.6.5. previous business cycle. The lines trace out the ratio of employment at the time to employment in Q. Employment remains well below the 7.3 Forecast.3 cycle peak..... Missouri s economy is likely to improve.. gradually in and Missouri Source: US Department of Labor. Updated through April (state) and April (US) Regional Perspectives: Missouri Economic Outlook Commercial Banking

12 June 3, Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO Q LEVEL) Job trends in local communities within the Forecast US forecast US St. Joseph Columbia Springfield Joplin Kansas City, MO-KS state. Missouri s slow economic performance masks a wide disparity of activity across the state. Economies of some communities are faring better than others. Missouri s economy has lagged the national economy but some local economies remain.. Jefferson City strong St. Louis Kansas City Source: US Department of Labor. Updated through April (state) and April (US) Missouri forecast Missouri Regional Perspectives: Missouri Economic Outlook Commercial Banking

13 June 3, Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) Unemployment rate trends in Missouri, compared with the national average. Missouri s unemployment rate is falling Missouri Forecast faster than the national unemployment rate. 8 US (shaded) 8 The unemployment rate is the single best indicator of the relative economic 6 6 performance of a region. Missouri s falling unemployment rate is a good sign that the economy is in recovery mode. Source: US Department of Labor. Updated through April (state) and April (US) Regional Perspectives: Missouri Economic Outlook Commercial Banking 3

14 June 3, Relative House Prices RATIO OF THE STATE S HOUSE PRICES TO THE NATIONAL AVERAGE (995 Q =.) 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 995. 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. The state s house prices lagged the boom in the national market in this decade. Prices are back in normal alignment with others, however, as speculative excesses elsewhere are history KEY MESSAGE: The gap between the state s real estate market and the national housing market has narrowed some, as inflated housing conditions have corrected. Source: FHFA. Updated through 3 Q. Regional Perspectives: Missouri Economic Outlook Commercial Banking

15 June 3, Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 995 Q LEVEL) The figure tracks the cumulative percentage. US. deviation in house prices since 995 in selected local markets and compares those with the national average US St. Louis Kansas City Springfield St. Joseph Joplin Columbia House prices are rising at a moderate pace. Real estate trends have been steady for most of this decade amid the national housing bubble. Source: FHFA. Updated through 3 Q Regional Perspectives: Missouri Economic Outlook Commercial Banking 5

16 June 3, New Home Building HOUSING STARTS (RATIO TO THE JULY 99 LEVEL) New home building activity compared with 3 US Missouri 3 the national building pace. Housing activity is shown as a ratio to the 99 level to enable proportionate comparisons with national activity. Home building is up slightly. Forecast Although Missouri did not suffer a bubble in house values, the credit crunch has taken a toll on the home building business nonetheless. Source: Census Department. Updated through March (state) and April (US) Regional Perspectives: Missouri Economic Outlook Commercial Banking 6

17 June 3, Office Markets PERCENT OF OFFICE SPACE THAT IS VACANT Conditions in local office markets, compared 5 Kansas City metropolitan area St. Louis metropolitan area 5 with the nation. Vacancy rates have stabilized at a high level. Commercial real estate conditions remain 5 5 challenging. Source: CB Richard Ellis (formerly CB Commercial Property Information Systems), Office Vacancy Index of the United States. Updated through Q. 5 All metropolitan areas (shaded area) Regional Perspectives: Missouri Economic Outlook Commercial Banking 7

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