DR. WILLIAM DUNKELBERG Chief Economist NATIONAL FEDERATION OF INDEPENDENT BUSINESS ECONOMIC STRATEGIST
CHAIRMAN, LIBERTY BELL BANK, NEW JERSEY PROFESSOR OF ECONOMICS
CHAIR, GLOBAL INTERDEPENDENCE CENTER
CONSUMPTION SHARE OF GDP & CONSUMER SAVING CONSUMPTION SPENDING SAVING RATE
8
64
6
62
4
60
2
58
0 '0 8
66
'0 3
10
98
68
93
12
88
70
83
14
78
72
“EXCESS” DEBT: PAYING FOR THE “PARTY” 16000 14000
DEBT=.7GDP
ACTUAL
MAINTAINING DEBT/GDP RATIO IN 1999
12000 (000)
10000 8000 6000 4000 2000 0
90
93
96
99
'02
'05
'08
'11
TRADE DEFICIT -100 -200 -300
THE PARTY
-400 -500 -600 -700
Source: BEA
'0 8
'0 3
98
93
88
83
-800
78
BILLIONS OF CONSTANT DOLLARS
0
DELINQUENCY RATES (AT COMMERCIAL BANKS) CARDS RESIDENTIAL COMMERCIAL
C&I
13 12 11 10 PERCENT
9 8 7 6 5 4 3 2 1 91
93
95
97
99
'01
'03
'05
'07
'09
'11
INDEX OF CONSUMER SENTIMENT 110
90 80 70
QUARTERLY+AUG,SEPT
60
Source: University of Michigan
'0 8
'0 3
98
93
88
83
50
78
Index Value
100
GDP AND EMPLOYMENT GDP(left)
EMPLOYMENT(right)
14000
146000 144000
13000
142000 140000
12000
138000 11000
136000 134000
HUGE EMPLOYMENT GAP
10000
132000 9000
130000 '00
'03
'06
'09
Manufacturing employment was increasing up until 1979 and has been moving lower over the past 30 years
Manufacturing employment millions
20 18 0.8%
16 -1.6%
14 12 10 1940
'50
'60
'70
'80
'90
'00
'10
This translated into an almost 600 percent increase in manufacturing output over this time period
Manufacturing Index 2007=100
millions
120
120
100
100
output - left scale
80
80
60
60
40
40
20
20 employment - right scale
0
0 1940
'50
'60
'70
'80
'90
'00
'10
What took 1,000 workers to produce in 1950 takes 177 workers today
Manufacturing sector: Number of workers needed to do the work of 1,000 workers in 1950 Number of workers
1,000 900 800 700 600 500 400 300 200 100 0
1,000 813 627 485 362 243
1950
1960
1970
1980
1990
2000
177 2010
Manufacturing employment losses have occurred across numerous countries – among 20 big economies, 22 million jobs were lost Percent change in manufacturing employment: 1995-2002 percent
25 20 15 10 5 0 -5 -10 -15 -20 -25
We are producing more in our farm sector than at any time in our history
Real gross value added: farm business Billions of chained 2005 dollars
120 100 80 60 40 20 0 1947
'57
'67
'77
'87
'97
'07
And we are accomplished this remarkable feat with less than 2.0% of our employment devoted to farming Share of total employment percent
90 80
services
70 60 50 40 30
manufacturing
20 10 0
agriculture
1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
This difference has led to China having the largest trade deficit with the U.S.
Trade balance (customs value) billions of dollars
100 0 China
-100 -200 -300
Mexico Japan
-400
Germany Canada Korea UK
-500 -600
rest of trade deficit
-700 -800 -900 1975
'80
'85
'90
'95
'00
'05
'10
While China has increased its share of imports to the U.S., the Pacific Rim as a whole has had a declining share since the mid-90s Share of U.S. imports percent
45 40
Pacific Rim
35 30
Pacific Rim excluding China
25 20 15 10
China
5 0 1974
'78
'82
'86
'90
'94
'98
'02
'06
'10
Manufacturing jobs have been rising beginning in 2010
Manufacturing employment percent
5 0 -5 Percent change from a year earlier
-10 -15 Quarterly change (saar)
-20 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
SMALL BUSINESS OPTIMISM INDEX AND COMPONENTS
SMALL BUSINESS OPTIMISM INDEX (QUARTERLY, 1986 = 100) MANUFACTURING
115 110 105 100 95 90 85 80 76
79
82
85
88
91
94
97
'00
'03
'06
'09
EXPECTATIONS FOR GENERAL BUSINESS CONDITIONS IN 6 MONTHS (PCT “BETTER” - PCT “WORSE”)
MANUFACTURING
90
50 30 10 -10 -30
'09
'06
'03
'00
97
94
91
88
82
79
85
SEASONALLY ADJUSTED
-50
76
Percent of Firms
70
OUTLOOK FOR BUSINESS EXPANSION (PCT “NOW IS A GOOD TIME”)
MANUFACTURING
30 25 20 15 10 5
(SEASONALLY ADJUSTED)
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0
76
Percent of Firms
35
REPORTED CHANGE IN PAST SALES (last 3 months vs prior 3)
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
50 40 30 20 10 0 -10 -20 -30 -40 -50 [% "HIGHER" - % "LOWER", SEAS. ADJ.]
76
Percent of Firms
MANUFACTURING
EARNINGS TRENDS: %”HIGHER” - %”LOWER” PAST QUARTER VS PRIOR QUARTER MANUFACTURING 15
-5 -15 -25 -35 -45
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-55 76
Percent of Firms
5
EXPECTED REAL SALES MANUFACTURING
70 60 40 30 20 10 0 -10 -20 -30
[% "HIGHER" - % "LOWER", SEAS. ADJ.]
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-40
76
Percent of Firms
50
CREDIT MARKETS CREDIT AVAILABILITY AND CREDIT COSTS
SMALL BUSINESS CREDIT PROBLEMS (% HARDER TO GET - % EASIER) MANUFACTURING 25 20 15 10 5 0 -5
'0 0 '0 3 '0 6 '0 9
97
94
91
88
85
82
79
-10
76
Percent of Firms
30
REGULAR BORROWING ACTIVITY (AT LEAST ONCE A QUARTER)
MANUFACTURING 55 50 45 40 35 30
'0 6 '0 9
'0 0 '0 3
94 97
88 91
82 85
25
76 79
Percent of Firms
60
LOAN DEMANDS WEAKEN THROUGH THE RECESSION PERCENT OF ALL FIRMS NOT WANTING A LOAN
55 50 45
MANUFACTURING
40 35
'1 1
'0 8
'0 5
'0 2
99
96
30
93
Percent of Firms
RECESSION STARTS
SINGLE MOST IMPORTANT PROBLEM FACING OWNERS INFLATION
45
CREDIT
35
MANUFACTURING
30 25 20 15 10 5
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
0
76
Percent of Firms
40
PRICES AND WAGES
PAST & PLANNED PRICE CHANGES LOWER
80
higher
60
PLAN HIGHER
MANUFACTURING
50 40 30 plans
20 10
'0
6 '0
3 '0
0 '0
97
94
91
88
85
82
79
9
lower
0 76
Percent of Firms
70
HIGHER
ACTUAL PRICE INCREASES SEASONALLY ADJUSTED MANUFACTURING
80
40 20
-40
'0 0 '0 3 '0 6 '0 9
97
94
91
88
85
82
-20
79
0
76
Percent of Firms
60
CHANGES IN PRICES AND LABOR COMPENSATION RAISED COMPENSATION
RAISED PRICES
50
30 20 10
-20 -30 -40
'1 1
'0 8
'0 5
'0 2
99
96
93
90
-10
87
0 84
Percent of Firms
40
MANUFACTURING SEASONALLY ADJUSTED NET % OF FIRMS
EMPLOYMENT AND JOB CREATION
UNFILLED JOB OPENINGS % WITH AT LEAST ONE UNFILLED OPENING MANUFACTURING
55
Percent of Firms
50 45 40 35 30 25 20 15
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
76
10 5
JOB CREATION PLANS % PLAN INCREASE - % PLAN DECREASE MANUFACTURING 40
20 10 0 -10
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-20 76
Percent of Firms
30
MOST IMPORTANT PROBLEMS LABOR COST
35
MANUFACTURING
25 20 15 10 5
'09
'06
'03
'00
97
94
91
88
85
82
79
0 76
Percent of Firms
30
LABOR QUALITY
'0 9
'0 6
'0 3
'0 0
97
94
88
85
82
91
MANUFACTURING
2 1.5 1 0.5 0 -0.5 -1 -1.5 -2 -2.5 -3 -3.5 -4
79
NUMBER OF WORKERS
AVERAGE CHANGE IN EMPLOYMENT PER FIRM
PLANNED & ACTUAL LABOR COMPENSATION CHANGES ( NET PERCENT OF FIRMS) INCREASED
PLAN TO INCREASE
50
30 20 10
'1 0
'0 7
'0 4
99
96
93
90
'0 2
-10
MANUFACTURING 87
0 84
Percent of Firms
40
CAPITAL EXPENDITURES AND INVENTORY INVESTMENT
ACTUAL CAPITAL OUTLAYS % SPENDING
85
%SPEND + LEASE
Percent of Firms
80 75 70 65 60 55 50 45
LEASING ADDED MANUFACTURING
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
'7 9
40
PLANNED CAPITAL OUTLAYS (NEXT SIX MONTHS) MANUFACTURING 60 50 45 40 35 30 25 20
'1 0
'0 7
'0 4
'0 1
98
95
92
89
86
83
80
15
77
Percent of Firms
55
ACTUAL CHANGE IN INVENTORY (% INCREASING - % REDUCING)
MANUFACTURING 20 10 0 -10 ??
-20 -30
'09
'03 '06
'00
97
94
91
SEASONALLY ADJUSTED
88
85
-40
INVENTORY SATISFACTION (% “TOO LOW” - % “TOO HIGH”) MANUFACTURING 10
0 -5 -10 -15
SEASONALLY ADJUSTED
'0 9
'0 6
'0 3
'0 0
97
94
91
88
85
82
79
-20
76
Percent of Firms
5
INVENTORY INVESTMENT PLANS [% PLAN INCREASE – % PLAN DECREASE]
MANUFACTURING 25 15 10 5 0 -5 -10
'0 0 '0 3 '0 6 '0 9
97
94
88
85
82
79
91
SEASONALLY ADJUSTED
-15
76
Percent of Firms
20
MOST IMPORTANT PROBLEMS 50
REGULATIONS
WEAK SALES
INSURANCE
MANUFACTURING
35 30 25 20 15 10 5
'0 0 '0 3 '0 6 '0 9
94 97
88 91
82 85
0
76 79
Percent of Firms
45 40
TAXES
TRICKLE DOWN