5. #2. The US economy steadier … US real GDP (percent change from four quarters earlier) Source: US Department of Commerce
6. … steadier, even though oil “ate” the fiscal stimulus US real GDP (chained 2000 dollars) Source: Macroeconomic Advisers LLC
7. #3. The housing drag more contained Selected GDP measures (percent change from four quarters earlier) Source: US Department of Commerce
8. #4. The housing ATM not such a big deal Home equity extracted ($ billions) Real consumer spending (% ch vs four quarters earlier) Sources: US Department of Commerce; Federal Reserve Board
9. #5. Employment weaker … Employment and real GDP (percent change from four quarters earlier) Sources: US Department of Commerce; US Department of Labor
10. … and unemployment up more than usual Unemployment rate (percent of the labor force) Sources: US Department of Commerce; US Department of Labor
11. #6. Education matters more than usual Unemployment rate by maximum educational level achieved (percent of the labor force) Source: US Department of Labor
12. #7. Productivity surprisingly robust for a slowdown Labor productivity (percent change from four quarters earlier) Sources: US Department of Labor
13. #8. Profit margins remain near records Profits (percent of Gross Domestic Income) Sources: NBER recession bars; US Department of Commerce; Standard & Poor’s
14. #9. Inexplicable oil surge Global oil demand (millions of barrels daily) Oil prices (dollars per barrel) Sources: US Department of Energy; American Petroleum Institute
15. #10. Despite rising inflation “readings” … Oil ($/barrel) Inflation (percent change from 12 months earlier) Sources: NBER recession bars; US Department of Commerce
16. … a more sanguine investor community 10-year inflation expectations (percent) Sources: Bloomberg; Federal Reserve Board
19. Inflated valuations are largely history … Nominal income per household and house prices (ratio to 1970 Q1 level) Sources: Standard & Poor’s; US Department of Commerce
20. … that’s why price declines are slowing Selected measures of existing house prices (percent change from 12 months/4 quarters earlier) Sources: Standard & Poor’s; Ofheo; Census
21. The GSE rescue broke the ice in credit markets 30-year mortgage rate (percent) Source: Bank Rate Monitor
22. Builders still have some wood to chop … Housing starts (thousands at an annual rate) Unsold new single family houses (thousands) Source: Census Department
23. … maybe another year of “slow” ... Housing starts (thousands at an annual rate) Unsold new single family houses (months’ supply) Source: Census Department
24. What building takes, exports give Contribution of selected sectors to growth (pct points contribution to year-over-year real GDP growth) Source: US Department of Commerce
27. But market signals have the last word … Petroleum, WTI ($/gallon) Pump price of gasoline ($/gallon) Source: Baker Hughes
28. … when demand and supply respond Gasoline consumption (billions of 2000 dollars) Gasoline prices (chain price index) Source: US Department of Commerce
29. It’s about the future, not the now, and that’s what specs do Global oil demand (millions of barrels daily) Petroleum, WTI (dollars per barrel) Source: American Petroleum Institute
30. Why oil matters in the short run … some scenarios Contribution to real GDP growth (contribution to percent change from four quarters earlier) Sources: US Department of Commerce; JPMorgan Chase &Co.
32. This was “Made-in-Congress”, not China Corn prices received by farmers (dollars per bushel) Source: US Department of Agriculture
33. When Washington wants to fix the problem, run for the hills Retail food prices (percent change at an annual rate over the most recent two years) Source: US Department of Commerce; US Department of Agriculture; JPMorgan Chase & Co. Note: 9 billion gallons of ethanol (the 2008 mandate) requires 3.27 billion bushels of corn which requires 20 million acres of farmland
35. When it’s about oil, not aggregate demand … Oil ($/barrel) Inflation (percent change from 12 months earlier) Sources: NBER recession bars; US Department of Commerce
36. … it’s a relative price event, not inflation Selected CPI indexes (percent change from 12 months/four quarters earlier) Source: US Department of Labor
37. A clue: what is a COLA? Private sector workers who belong to a union (percent of the labor force) Source: US Department of Labor
38. The more we pay for energy, the less for other things Hourly wage gains (percent change from 12 months earlier) Source: US Department of Labor
39. Wall Street knows all about this, even if its pundits don’t 10-year inflation expectations (percent) Sources: Bloomberg; Federal Reserve Board
41. US consumers were blessed … Consumer spending (percent of GDP) Source: US Department of Commerce
42. … and saving fell because savings rose … that was then Household saving (percent of income) Net worth (ratio to income) Sources: US Department of Commerce; Federal Reserve Board
43. They borrowed more because they could … that was then Monthly financial obligations (percent of income) Household debt (ratio to income) Source: Federal Reserve Board
44. Paying for health care this way costs us more Labor compensation share (percentage of Gross Domestic Income) Source: US Department of Commerce
46. A bad bet won’t jeopardize securitized finance Assets held at financial intermediaries (share of all assets held at financial intermediaries) Source: Federal Reserve Board
55. Central banks shifting to “accommodative” … Federal funds rate (percent) Unemployment rate (percent) Sources: NBER recession bars; Federal Reserve Board; US Department of Labor
56. It’ll be that way unemployment turns back down … Federal funds rate (percent) Unemployment rate (percent) Sources: NBER recession bars; Federal Reserve Board; US Department of Labor
57. … and it doesn’t compromise inflation Federal funds rate and inflation (percent) Sources: NBER recession bars; Federal Reserve Board; US Department of Labor
58. Alternatively, a steep curve for a while Federal funds rate less 10-year rates (percentage points) Sources: NBER recession bars; Federal Reserve Board
59. Lower natural level of interest rates Nominal and real 10-year Treasury yield (percent) Sources: NBER recession bars; Federal Reserve Board; US Department of Commerce
60. After the “Runs of August” … Selected borrowing costs (percent) Source:s Federal Reserve Board; Bloomberg; JPMorgan Chase & Co.
61. … investors will demand more protection High yield debt yield less 10-year Treasury yield (basis points) Source: JPMorgan Chase & Co.
62. If it’s global, the dollar will go up Real trade weighted dollar index (March 1973 = 100) Source: Federal Reserve Board
63. … because others are slowing too Percent change since July 21, 2005 (China’s revaluation) Source: Federal Reserve Board
64. Stocks, where we discount eternity … patience … Wilshire 5000 index of all publicly traded stocks (index) Source: Bloomberg
65. … to undo the “stagflation” trade Wilshire 5000 index of all publicly traded stocks (index) Source: Bloomberg
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