Econ 102
Spring 2013
Macroeconomics
The Current Economy
Steven W. Rick
University of Wisconsin
Unemployment Insurance Claims
(Gauge of Labor Market Conditions)
Web: www.ows.doleta.gov/unemploy/claims_arch
Minor revisions
Economic
Indicator 1
Very timely “coincident” indicator of new filings for unemployment benefits (social
safety net) reported by state agencies around the country to the Labor
Department. Use a 4-week moving average to smooth out erratic weekly
numbers.
Large filing increases => dampen consumer spirits => slash in consumer spending =>
paring back of business investment spending => lower future economic
activity.
Unemployed workers may be eligible to qualify for unemployment benefits for up to
26 weeks in most states. During economic slowdowns, laws are passed to
extend the pay period another 13 weeks.
Recent graduates who enter the workforce but are unable to find work are ineligible to
receive benefit payments.
Every state offers jobless insurance programs which conform to federal rules.
Claims normally peak 2-3 months before the bottom of a recession and the beginning
of a recovery phase.
If claims > 400,000 for several weeks, then economy is slowing and close to a
recession => increase in the Household Survey unemployment rate.
If claims < 400,000, then the economy is entering a growth phase.
If claims < 350,000, then expect the Establishment Survey to show a jump in
payrolls.
Continuing claims > 3 million and climbing is a sign of a malfunctioning economy and
strained federal and state budgets (from the state financial support)
------------------------------------------------------------------------------------------------------------------------------------------------
Market Analysis:
Bonds: If D claims > 30,000 =>  DY/Y =>  DP/P =>  DBonds =>  iBonds
Stocks: If claims continuously  =>  DY/Y =>  profits =>  PStocks
Dollar: If claims continuously  =>  DY/Y =>  iBonds =>  dollar
Initial Jobless Claims
700,000
700,000
650,000
650,000
600,000
600,000
550,000
550,000
500,000
500,000
450,000
450,000
400,000
400,000
350,000
350,000
300,000
300,000
Recession
250,000
250,000
Jobless Claims
200,000
200,000
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Continuing Jobless Claims
7,000,000
7,000,000
Recession
Jobless Claims
6,500,000
6,500,000
6,000,000
6,000,000
5,500,000
5,500,000
5,000,000
5,000,000
4,500,000
4,500,000
4,000,000
4,000,000
3,500,000
3,500,000
3,000,000
3,000,000
2,500,000
2,500,000
2,000,000
2,000,000
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Recent Economic Trends
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
The longest, deepest, and broadest recession since the
Great Depression has passed it nadir and the economy
is now expanding, but deflation remains a possibility.
Debt deflation, deleveraging and the credit reckoning
process continues.
The labor market has stabilized but job creation is both
a necessary and sufficient condition for a selfsustaining recover.
U.S. fiscal budget concerns could lower the value of
the dollar and raise interest rates.
The Federal Reserve will maintain its massive
injection of reserves into the banking system to keep
interest rates low for the next two years.
Government intervention into the economy has proved
to be less than effective and may have many
unintended consequences.
Public debt will continue to rise as private debt
continues to fall.
Home prices will rise in 2013 as the housing market
recovers.
Loan credit quality will continue to improve through
2013 and lending underwriting standards will begin to
loosen.
Threats to economic recovery include high home
foreclosures, low consumer confidence, weak state
budgets, slow job creation, and rising interest rates.
Quarterly % Change in U.S. Economic Output
(Real GDP - Chainweighted 2005$)
Maximum Sustainable
Growth Rate = 3%
7%
6%
5.1%
5%
4%
3%
4.2%
3.2%
2.7%
1.8%
2%
2.1%
1%
3.1%
3.0%
2.6%
2.3%2.2% 2.4%
1.7%
1.6%
4.1%
4.0%
3.6%
3.3%
3.0%
2.7%2.6%
2.5%
1.4%
1.3%
2.0%
1.3%
2.5%2.5%2.5%2.5%
2.0%
1.3%
0.5%
0.1%
0.1%
0%
-1% 04:1
05:1
06:1
07:1
-2%
08:1
-0.3%
09:1
Recession Factors:
-4%
-6%
-7%
-8%
-9%
11:01
-1.8%
-3%
-5%
10:1
-3.7%
Falling Potential Growth Rate
•3.5% to 2.5%
•Less investment spending
•Lower leverage in post-credit era
•Suppressed demand
•Negative demographic trends
•Lower total factory productivity growth
-5.2%
•Loose monetary policy
•Poor regulation
•Lax bank supervision
•Opaque derivatives
•Shadow banking system
•Lax investor diligence
•Poor governance
•Misaligned incentives
•fraud
12:01
13:01
Below trend growth
•Falling stimulus spending
•Less inventory rebuilding
•Slowing Euro-Zone
•Financial crisis
•Deleveraging households
•Rising savings rates
-8.9%
-10%
Source: Department of Commerce.
The economic recovery continues, but is disappointing and is vulnerable to external shocks. GDP is above its prerecession 2007 peak. Final sales of domestic product – GDP minus change in inventories – grew 1.9% annualized.
Inventories added 0.8% to growth as firms increased the pace of inventory accumulation. Stronger aggregate
demand will lead to job growth, rising confidence and further spending (a self-sustaining expansion).
A “balance sheet recession” is the process whereby households and companies pay down debts rather than embark on
new spending. The lack of demand for loans is due to the debt-strapped private sector.
Economic growth during 2002-08 relied too much on consumption spending and house buying, both financed by
foreign savings channeled through an undercapitalized financial system. Today’s sluggishness stems from pre-crisis
excesses and the misshaped economy it created. Recoveries from debt-driven busts always take years as households
repair balance sheets.
3rd Quarter 2012 GDP
Spending = C + I + G + X – M
% of total = (70.6) (14.0) (18.5) (13.4) (-16.4)
Growth rate = (1.6) (6.6)
(3.9)
(1.9) (-0.6)
Contribution = (1.1) + (0.8) + (0.8) + (0.3) + (0.1) = 3.1%
(1+0.031)1/4 -1 = 0.0077 = 0.77%
Business Fixed Investment
(Nonresidential Structures)
40
28
24
30
22
19
18
16
20
0
11
10
8
7
2
0 0 Q1
-10
2
0
0 2 Q1
0 3 Q 1 - 1-024 Q 1
-2
-4
-6
9
8
5 4
1 2
0 1Q 1
30
21
13
13
10
40
35
0 5Q
-1
2
1
0 6 Q1
1
0 8 Q1
0 9 Q1
-4
-8
10 Q 1
-2
11Q 1
12 Q 1 - 1
0
-10
- 10
- 11
-20
10
1
0 7Q 1
20
13
11
9
-20
- 17
- 2-02 0
-23
-30
-27
-29
- 3-13 1
-33
-30
-28
-40
-40
-50
-50
Annualized Quarter Growth Rate
% Change From Quarter One Year Ago
“Investment is based on expectations that are subject to sudden and violent change” Keynes. Since most investment
is irreversible, uncertainty increases the value of waiting for new information, and thus retards the current rate of
investment.
Business investment spending has declined recently due to uncertainty relating to the European debt crisis and the
upcoming fiscal cliff but firms still have lots of cash to invest and hire.
Business Fixed Investment
(Equipment and Software)
30
20
30
18
18
15
1314
12
13
11
4
-10
0 0 Q1
9
9
2
1 2
0
11
8
10
18
15
1212
3
2 2 2
5 4
6
4
8
9
0
0 1Q
-11
0 2 Q- 1
1
-3
-5
0 3 Q1
-7
0 4 Q1
-3
0 5Q 1
0 6 Q1
0 7Q 1
0 8 Q1
-2
0 9 Q1
-8
-9
11Q 1
0
12 Q 1
-3
- 10
- 14
10 Q 1
-10
- 13
-20
-30
10
5 5
4
3
20
11
-20
-30
-28
-29
-40
-40
Annualized Quarter Growth Rate
% Change From Quarter One Year Ago
Business spending on equipment and software have been very strong, leading to strong labor productivity growth
over the last few years. As the “fiscal cliff” draws closer, the incentive to defer hiring and investment grows, putting
downward pressure on economic growth.
5
Real Personal Consumption
Expenditures
Annualized
Quarter Growth Rate
(Durable
Goods)
50
40
50
% Change From Quarter One Year Ago
3 8 .1
40
30
30
2 4 .5
2 0 .9
20
1717
.6.9
16 . 5
12 . 3
10
4 .2
3 .0
1. 2
- 0 .2
0
0 0 Q1
0 1Q 1
0 2 Q1
- 4 .5
-10
10 . 5
8 .7
1. 3
5. 7
5. 8
4 .3
3 .8
2 .6
7. 1 7. 0
4 .9
15 . 3
12 . 1
6 .5
1. 6
5. 2
5 .5
1. 7
5. 5
2 .3
0 4 Q1
0 5Q 1
0 6 Q1
0 7Q 1
0 8 Q1
- 2 .9
5. 4
10 Q 1
11Q 1
- 2 .3
12 Q 1
- 6 .1
0
-10
- 9 .6
- 12 . 3
- 9 .8
10
- 0 .2
0 9 Q1
- 2 .0
- 5. 2
- 7. 0
8 .7
7. 2 7. 3
1. 3
0 .3
0 3 Q1
20
13 . 9
11. 5
-20
-20
- 2 5. 4
-30
-30
Weak fundamentals are restricting sales:
Few new jobs, low income growth, high unemployment, low and volatile wealth, limited access to credit, deleveraging
and low confidence consistent with a deep recession.
Factors supporting consumer spending:
Private sector job growth, consumer are fixing their budgets, falling debt payments through debt reduction and
refinancing, consumers who have stopped making mortgage payments but not yet defaulted have extra cash.
Residential Investment
40
40
30
30
2 3 .2
2 2 .0
2 0 .6
20
11.
1. 2
10
10
5. 7
3 .2
0
-10
17 . 2
15 . 9
1. 8 2 . 2
0 .3
9 .4
6 .3
3 .9
2 .3
11. 3
14 . 2
9 .6
7. 5
1. 2
3 . 7 4 .3
8 .4
4 .1
4 .2
1. 4
1. 4
0 .1
0 0 Q1
0 1Q 1
0 2 Q1
- 2 .7
- 3 .4
0 3 Q1
0 4 Q1
0 5Q 1
0 6 Q1
0 7Q 1
0 8 Q1
0 9 Q1
- 4 .2
10 Q 1
-30
11Q
- 1. 41
12 Q 1
10
0
- 4 .8
- 6 .9
-10
- 11. 5
- 12 . 0
-20
20
12 . 0
- 17 . 0 - 16 . 4
- 19 . 6
- 2 1. 2
- 2 4 .1
- 14 . 5
-20
- 19 . 9
- 2 2 .2
8 .5
- 2 -92. 3
-30
- 2 8 .6
- 3 3 .2
- 3 5. 1
-40
-40
Annualized Quarter Growth Rate
% Change From Quarter One Year Ago
-50
Housing Market Strengths:
30-year mortgage interest rate < 3.5% (thanks to Federal Reserve)
Falling/low home prices => record levels of affordability
Private sector job growth
Public and private foreclosure mitigation efforts.
Housing Market Risks:
•  foreclosure sales =>  PH
•Buyers expectations of future lower home prices => lower demand
•Double dip recession => housing crash
-50
6
US Payroll Employment
Thousands
Monthly Changes SA
600
600
500
500
400
400
300
300
200
200
100
100
0
0
-100 99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
-100
-200
-200
-300
-300
-400
-400
-500
-500
-600
Recession
-600
-700
Payroll
-700
-800
150,000 Target
-800
-900
-900
(Percent)
Unemployment Rate
18
18
17
17
16
16
15
15
14
14
13
13
12
12
11
11
10
10
9
9
8
8
7
7
6
6
5
5
4
3
2
1
Recession
Unemployment
4
Underemployment (U-6)
Full Employment (NAIRU)
2
0
3
1
0
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: Department of Labor.
Consumer Price Index
1970 to Present
Annual Percentage
Change
14
13
13.3
12.5
12.3
12
11
10
9.0
8.7
9
8
6.9
7
6
8.9
6.7
2.5% Target
6.1
5.6
4.9
5
4
3.83.84.0
3.8
3.33.4
4.7
4.44.4
3
1.71.6
2
4.1
3.33.5
2.5
2.4
1.9
1.6
3.4
2.6
3.3
3.12.9
2.72.72.5
3.0
2.8
1.4
1.7
1.1
1
0
-1
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
06 -0.1
08
10
12
Expect lower inflation in 2013 due to a lack of broad pricing power and the subdued economic recovery.
Lower inflation will boost real disposable income growth rates.
The recent deceleration in inflation was a factor pushing the Federal Reserve to implement another round of
quantitative easing “QE-3” (print money to buy assets)
Inflation (CPI)
(year over year % growth)
6%
5%
4%
3%
2%
1%
0%
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
-1%
-2%
-3%
Headline
Core (excludes food and energy)
Lower input and headline prices point to slower underlying inflation in the months ahead.
Fed doesn’t need to head for the exit yet (raise interest rates).
Fed needs to talk tough on inflation to keep expectations anchored.
Bond markets are not pricing in higher inflation. (Nominal – TIPS rates)
Surging import prices could dislodge inflation expectations.
Business are starting to pass through some input costs to the consumer.
Normally inflation is a welcome sign of a strong economy, but most of the inflation is cost push and not demand pull
Dollar depreciated 6% over last year => lagged impact on import prices
8
13
Interest Rates and Recessions
1988-2012
10
10
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Recession
Baa
Fed Funds
10-yr Treas
The Federal Reserve has pushed down interest rates to discourage savings and boost consumer demand and to encourage
business borrowing, investment and employment. The Fed has forced the 10-year Treasury interest rate to the lowest in
history because of the incredibly weak economy. The low interest rate is a sign from the bond market that they expect years
of stagnation and deflation or are terrified of imminent danger.
Federal Reserve Policies:
1. Open market operations to increase banking system reserves and lower the fed funds interest rate to 0.0-0.25%.
2. QE (quantitative easing) creation of money to buy assets. This “credit easing” unclogs credit channels (ex. MBS) by
boosting liquidity and decreasing interest rates. Investors sell securities to the Fed and then invest proceeds in other
assets (portfolio rebalancing) which raises their prices. Lower interest rates increase borrowing and investment and
therefore economic growth. Rising stock prices increase consumption spending. Higher liquidity boosts foreign asset
prices, lowers the dollar’s value and increases exports. Lower interest rates decrease government borrowing costs and
the future taxation burden.
3. Intent – the Fed announced that is plans to keep short-term interest rates “exceptionally low for an extended period”.
According to the Expectations Theory of interest rates, this intent will bring down long-term interest rates.
4. Excess reserves interest rate is lowered to 0.25%.
5. Operation twist – selling short-term debt (less than 3 year maturity) to fund the purchase of long-term debt (greater
than 6 year maturity). This gives investors cash for long-term debt which should prompt them to invest more money in
other assets. Fed announced in the fall of 2011 they would sell $400 billion, and in June 2012 they would sell an
additional $267 billion. Operation twist ends at year end when short-term bonds are gone.
Federal Reserve Concerns:
Cost benefit analysis – do the uncertain risks of uncertain magnitude outweigh the benefits of doing more.
Diminishing returns – additional QE will have smaller effects on the real economy.
QE effects on the real economy - $600 billion of asset purchases => decline in long-term interest rates of 20 basis points.
This effect is equivalent to a 75 basis point reduction in the fed funds interest rate. This lowers the unemployment rate by
1.5 percentage point and raises economic growth by 0.3% versus the counterfactual.
Asset-Shortage Theory: U.S. Government bond yields are low because of a worldwide shortage of safe assets (MBSs and
PIIGS sovereign debt are no longer considered safe assets) and a glut of global savings (business parking surplus cash and
consumers savings more). Is the savings glut temporary? We could go from fretting about scarce assets to about scarce
capital and the accompanying rising interest rates.
Bond yields today are not a true “market price” since central banks are such big players in the market.
9
Asian central banks are helping to keep interest rates low as they recycle their foreign exchange reserves into government
bonds.
Median Existing Home Prices
(Nominal Annual Home Price Increases)
20%
14.0%
13.5%
15%
13.0%
11.1%
10.1%
10.0%
10%
8.4%
7.9%
7.4%
6.7%
6.4%
5.8% 6.2%
7.2%
5.0%
5%
7.9%
7.6% 8.0%
6.6%
6.0%
5.1%
4.7% 4.9%
4.3%
4.1%
3.2%
3.1%
2.4%
2.3%
1.8%
1.5%
1.5%
1.0%
0%
-1.0%
-2.0%
-5%
-5.0%
-6.7%
First time since Great Depression
-10%
-13.2%
-15%
75 76 77 78 79 8081 82 83 84 85 86 87 88 89 90 91 92 9394 95 96 97 98 99 00 01 02 03 04 05 0607 08 09 10 11 12
Source: National Association of Realators.
The Housing Cycle
(Inflation-Adjusted Annual Home Price Increases)
15%
9.5%
10%
6.5%
5%
5.5%
4.7%
3.1%
2.6%
1.4%
0.9%
0.1%
2.0%
2.0%
1.7%
2.0%
0.1%
7.4%
6.5%
5.7% 6.1%
4.3% 4.2%
3.5%
2.9% 3.3%
-0.1%
0%
-0.4%
7576777879808182838485868788899091929394959697989900010203040506070809101112
-0.8%
-0.8%
-0.9%
-1.3%
-1.4%
-5%
-2.8%
-4.2%
-4.8%
-4.5%
-5.0%
-8.0%
-10%
-10.8%
Real Home Prices
Inflation
-15%
-14.2%
Source: National Association of Realators.
-20%
Negative Downward Spiral
Falling
Home Prices
Falling Household
Wealth
•Lower fed funds interest rate
•$300 billion FHA mortgage bailout
Falling Household
Spending
 HELOC
•Salaries
•Commissions
•Bonuses
•Tips
Lower income
Economic Stimulus Plan
$600 Tax Rebates
Obama Stimulus Plan
Rising Inventories
•Self-reinforcing spiral
•Feedback Loop
•Multiplier Effect
•Sum of an
Infinite Geometric Series
Increase unemployment
Lower Factory
Production
Household Debt
(As a Percent of Disposable Household Income)
140%
140%
130%
130%
120%
120%
110%
110%
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
79
82
85
88
91
94
97
00
03
06
09
12
Source: BEA & Federal Reserve.
The debt-to-income ratio is falling because a lot of mortgage debt has been written off
and new debt is hard to get. Consumers are also deleveraging to work off this mountain
of debt. The debt-to-income ratio reached 1.09% in Q2, 2012, down from 1.29% in Q3
2007. Economists believe a ratio of 100% is sustainable in the long run.
The Great Recession has led to a fundamental attitude shift regarding debt.
The benign macroeconomic environment of the past two decades masked a buildup
of financial instability; it may also have been storing up the elements of prolonged
social discontent.
The “De” Era
Debt => Deleveraging => Deflation => Defaults => Depression
Some households may be experiencing rising real debt burden (Debt/Income)
 wages, hours, prices, profits =>  income =>  real debt burden
Rising real debt burden (Debt/Income)
=>  spending to service debts => slower economy
Or
=>  defaults => weaker financial system => slower economy
Source: Flow of Funds, D.3 Debt Outstanding By Sector, Total Household .
BEA, Disposable Personal Income, $ billions.
12
Oil Price per Barrel
(West Texas Intermediate Crude)
150
140
130
120
Price per barrel
110
100
90
80
70
60
50
40
30
20
10
0
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Recession
Nominal
Real
U.S. crude oil production; 5.7 million barrels per day.
U.S. crude oil imports; 9 million barrels per day.
Oil Economics
Poil = 10 => PGas = 0.25 =>  growth 0.3-0.5%
S&P 500 Stock Index
(monthly average )
2000
2000
1900
1900
1800
1800
1700
1700
1600
1600
1500
1500
1400
1400
1300
1300
1200
1200
1100
1100
1000
1000
900
900
800
800
700
700
600
600
500
500
400
400
300
300
200
Nominal
100
Recession
200
Real
100
0
0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
6 Positive Stock Factors:
1.
Low cash/money market rates => stock rally (putting money back to work)
2.
Rising economic growth and profit expectations
3.
Low inflation expectations and interest rates will keep borrowing costs low
4.
Fed “Quantitative Easing” => lowering L.T. interest rates => stock rally
5.
Liquidity – rather than fundamentals – may be driving the market
6.
Market could be exposed to a violent reversal (without warning)
08
09
10
11
12
13
13
Federal Government Debt
Held by Public
100%
$14
$13
Rogoff/Reinhart 90% limit
90%
$12
11.2
2012:
Public Debt
= $11.2 Trillion
Public-Debt-to-GDP = 72.5%
$ Trillion
$10
$9
Dollar Amount
$8
Percent of GDP
$7
9.0
8.5
70%
60%
> 90% => 1% GDP Loss
5.8
$6
$5
4.6
4.8
50%
5.0
4.3
$4
3.0
3.2
3.4
3.6
3.7 3.8
3.7 3.6
3.9
3.4 3.3
3.5
40%
2.7
$3
$2
$1
80%
10.1
Percent
$11
0.9
0.7 0.8
1.1
1.3
1.5
1.7
1.9
2.1 2.2
2.4
30%
20%
$0
80
84
88
92
96
00
04
08
12
Federal Government Surplus/Deficit
(Billions of Dollars)
$500
236
$250
128
126
69
$0
80
82
-74 -79
-128
-$250
84
86
88
90
92
94
96 -22 98
-107
-150-155-153
-164
-203
-208-185-212-221
-221
-269-290-255
00
02
04
06
-158
10
12
-161
-248
-318
-378
-413
-$500
08
-459
-$750
-$1,000
-1,079
-$1,250
-1,294
-1,296
Source: Congressional Budget Of f ice.
-$1,500
-1,400
Existing Home Sales, Inventory & Prices
(Measure of housing demand)
Web address: www.realtor.org/research.nsf/pages/ehsdata
Small monthly revision, annual revision in February.
Existing home sales are a function of :
•
•
•
Mortgage interest rates ( imort. 1% =>  sales 250,000)
Confidence regarding future job and income prospects
Expectations of future home prices
Economic
Indicator 2
Strong correlation between sales and consumption so series may
portend economic turning point
Sales => unlock/realize capital gains => house trade-up =>  discretionary durable
consumption =>  economic growth
Series is not timely. Sign initial purchase agreement contract, then 1-3 months later is
the actual sale with deed transfer. Housing market conditions may have
changed during the lag period so take care when extrapolating data.
Housing Inventory - number of homes available for sale
•
Harbinger of future housing trends
Inventory-to-sales ratio – number of months to sell off existing inventory
•
•
•
4.5-6 months supply of homes is a balanced market between buyers and sellers
Less than 4.5 is tight supply (sellers market) with increasing prices
Greater than 6 is a soft market (buyers market) with falling prices
Median home prices - changes are a function of changing supply and demand
conditions, the economic climate and the sales mix.
If DPH/PH > DP/P,
then housing considered an attractive investment. Benefit owners, hurt non-owners.
-----------------------------------------------------------------------------------------Market Analysis
Bonds: High sales =>  C =>  DP/P =>  DBonds =>  PBonds=>  iBonds
Stocks: High sales =>  C =>  corporate profits =>  PStocks
Dollar: Low sales =>  C =>  DY/Y =>  Fed funds rate =>  DDollar =>  $
8000
4250
7500
4000
7000
3750
6500
3500
6000
3250
5500
3000
5000
2750
4500
2500
4000
2250
3500
2000
3000
Thousands
Thousands
Existing Home Sales (annual rate)
& Inventories
1750
95
96
97
98
99
00
01
02
03
04
05
Recession
06
07
08
Sales (LHS)
09
10
11
12
13
Inventories (RHS)
Median Existing Home Price
& Months Supply at Current Sales Rate
14
13
12
11
10
9
8
7
6
5
4
3
2
$250
$240
$230
$220
$210
$200
$190
$180
$170
$160
$150
03
04
05
06
07
08
09
Home Prices (LHS)
10
11
12
16
Months Supply (RHS)
13
Homework 1
Due Tuesday, January 29 in Lecture
Pick one of the economic indicators
presented in this handout and
write a one page report on what
impact it is having on the overall
U.S. economy.