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DR. RAJEEV DHAWAN DIRECTOR

Post Shutdown: What to Expect?. DR. RAJEEV DHAWAN DIRECTOR. Presented at the CoreNet Global Summit at MGM Grand Hotel in Las Vegas, Nevada • October 21, 2013. What Do You Do After a Big Battle?. The Fallout . I knew it was going to end . John McCain Arizona Senator (R).

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DR. RAJEEV DHAWAN DIRECTOR

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  1. Post Shutdown: What to Expect? DR. RAJEEV DHAWAN DIRECTOR Presented at the CoreNet Global Summit at MGM Grand Hotel in Las Vegas, Nevada • October 21, 2013

  2. What Do You Do After a Big Battle?

  3. The Fallout I knew it was going to end. John McCain Arizona Senator (R) I’m trying to forget it. Lisa Murkowski Alaska Senator (R) It has been the best two weeks for the Democratic Party in recent times because they were out of the spotlight and didn’t have to showcase their ideas. Lindsey Graham South Carolina Senator (R) Source: The New York Times – October 17, 2013

  4. The Fallout From the Compromise?

  5. Who Had Seen it Coming? “The only time you shut down the government is when you shut it down and refuse to open it until you accomplish what you want. We’ll fold like hotcakes.” Source: The New York Times – September 28, 2013 Tom Coburn Oklahoma Senator (R) “If it has to happen for the American people to get what’s best, defunding Obamacare, so be it. Our credit rating’s going to go down, but it went down before. Did the apocalypse come? Source: The New York Times – October 6, 2013

  6. How Did the House Vote to End the Shutdown? Source: The New York Times ─ October 20, 2013

  7. How Will the Congress Behave in Future?

  8. Groundhog Day Growth Prospects

  9. Roadmap to Analysis • How are the financial and labor markets impacted by this political dysfunction? • What does dysfunction do to key economic drivers: vehicle sales, housing starts and corporate confidence? • What happens to long-bond yields that then impact the housing market? • How’s the release valve aka ROW especially China and emerging markets doing?

  10. D.C. Discord and World Image We suffer from a huge image problem. From being world powerhouse No.1 military-wise, but also business-wise we are now a patient who suffers from various diseases, with doctors who can’t really treat him. Because…they debate whether he is sick or dead. Martin Richenhagen AGCO Chairman & CEO I was in the (U.K.) two week ago and it was the first week of the government being closed. I was talking to an individual. Tongue in cheek, this is what the person said: “Is this really what the leaders of the free world do?” Marty Flanagan Invesco President & CEO Source: The Atlanta Journal-Constitution– October 20, 2013

  11. Uncertainty and Financial Markets

  12. The Dog That Didn’t Bark S&P 500 Index Gold Price

  13. The Cat That Meowed 1 Month T-Bill Rate 3 Month T-Bill Rate 6 Month T-Bill Rate

  14. Economic Drivers and Crises

  15. Where Does the Economy Stand at Present?

  16. What is Selling the Autos? The car companies are marketing and that is inducing demand. Mario Gabelli Founder, GAMCO Source: Barron’s, January 21, 2013 Source: The New York Times─ April, May, June, July, August & September 2013

  17. What is a Housing Multiplier?

  18. The Un-American Consumer? Joe Blair and his wife sold their Vail-area home last fall for about $30,000 less than they'd paid for it in 2005. After several months of searching, they paid about $600,000 for a new home in the area in July. Despite trading up to a larger home to accommodate their three young children, the Blairs held on to their old furniture. Their one splurge, Mr. Blair said, was on new patio furniture he found at Home Depot for 60% off. If not for the sale, Mr. Blair said, "we'd be hitting the garage sales." Source: The Wall Street Journal– September 26, 2013

  19. Income and Consumption Disconnect

  20. Quality of Job Growth

  21. Labor Market Recovery

  22. Uncertainty and Labor Market Recovery Sylvain Leduc Zheng Liu Economists, Federal Reserve Bank of San Francisco .. heightened uncertainty about economic policy during the recovery made businesses more reluctant to hire workers. They reduce recruiting efforts by raising hiring standards,…..interview candidates multiple times and end up deciding to postpone hiring altogether. ..without policy uncertainty, the unemployment rate in late 2012 would have been close to 6.5%, instead of the reported 7.8%. Source: FRBSF Economic Letter ─ July 22, 2013

  23. What Creates Jobs? 2003-2007 Job Growth: 132K/Month 12% Golden 90’s Job Growth: 240K/Month 6% -15% +9.3% 2008-2009 Job Loss: 400K/Month 2010-12 Jobs: 137K/Month

  24. Job Growth and Tech Investment Employment growth (Job additions) Harold Vasquez Research Specialist Economic Forecasting Center Georgia State University Rajeev DhawanProfessor & Director Economic Forecasting Center Georgia State University TECH: 1% TECH 0.059%  EMP: • The improvements in CEO’s perceptions about the future increases TECH investment spending. • TECH investment significantly increases employment growth via durable goods ORDERS channel. ORDERS: 1% ORDERS  0.45%  TECH CEO: 1% CEO  0.034%  TECH 1% CEO  0.11%  ORDERS Source: U.S. Employment Growth and Tech Investment: A New Link By Rajeev Dhawan & Harold Vasquez, 2010

  25. Confidence, Investment and Revenue Growth

  26. Economic Drivers and Crises

  27. Corporate Demand is Sending Mixed Signals Most important to the U.S., enterprise business is up 9% and commercial grew at 12%. Those are good numbers. Areas of concern: Asia-Pacific/Japan, which has been our fastest-growing region, actually went down 3%. John Chambers Cisco CEO And emerging markets a quarter ago were growing at 13% for us, (but) they only grew 8% this quarter. But the top five only grew 1%. Source: USA Today– August 19, 2013

  28. Confidence, Investment and Revenue Growth (‘000 Jobs) (%, Y-O-Y) Dow30 Revenue Growth and Job Gains Q1 Growth -3.0%

  29. Corporate Revenues Domestic in Scope Global in Reach (%, Y-O-Y) (%, Y-O-Y)

  30. Don’t Judge a Book by its Cover Richer North Europe Poorer South Europe

  31. Germany’s Top Trading Partners in 2010 Source: German Federal Statistical Office

  32. Who is Europe’s Poorest? Source: The Wall Street Journal ─ April 10 &11, 2013

  33. Stanley Fischer on China’s Importance The Chinese economy of today is twice the size it was 10 years ago. When its growth declines to 7 percent, 7.5, it’s adding more to global demand than it did when it was growing at 10 percent 10 years ago, because 7.5 percent of a big pie has been growing. So it’s still a very, very important contributor. Source: Business Week Bloomberg − August 22, 2013 Stanley Fischer Former Bank of Israel Governor Source: Time – June 17, 2013

  34. Why the Fed Did Not Taper? I don’t recall stating that we would do any particular thing in this meeting. We can’t let market expectations dictate our policy actions. Ben Bernanke Chairman, Federal Reserve Source: The New York Times ─ September 28, 2013

  35. Global Stock Markets at a Glance

  36. The Great Divide Source: Beyond.com survey of 6,361 job seekers and veteran HR professionals in April and May

  37. Job Growth to Reach 7% Rate by End of 2013? Scenario A: Labor Force PR is 63.4% Scenario B: Labor Force PR is 62.4% Source: Federal Reserve Bank of Atlanta Website: Jobs Calculator, August 2013

  38. Are Oil Prices Rising or Falling?

  39. Future Growth Prospects (Base Scenario) 2014 annual GDP growth is only 1.6%

  40. Home Price Recovery

  41. Home Price Appreciation EFC Aug. 13 Forecast EFC Oct. 13 Forecast Source: Zillow.com– August, 2013

  42. Threats to Growth in 2014 and Beyond Repeated budget/debt-ceiling negotiations can affect foreign lenders confidence in our treasury bonds that can also wreck the stock market, thereby tanking both corporate and consumer confidence. China fails to jumpstart its growth making recovery prospects for emerging economies dim. Mideast erupts in flames (Syria/Iran) that causes Brent crude price to touch $150/barrel. Federal Reserve botches tapering in 2015 i.e. it is too quick, causing mortgage rates to shoot to 7.0% which abruptly cools the housing market (prices, resales & starts). Emerging Food price inflation (oil prices are still too high) in developing countries causes them to do populist actions.

  43. Bill Murray Warns… 20 years ago we had Johnny Cash, Bob Hope and Steve Jobs. Now we have no Cash, no Hope and no Jobs. Please, don’t let Kevin Bacon die.

  44. Special Thanks to the Center’s Executive Sponsors Carl R. Zwerner Chair of Family Owned Businesses Sponsors

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