America's Future Hasn't Looked This Good In Decades

[Hyderabad_Nawab]

Almost two years ago I wrote The Future's so Bright .... In that post I outlined why I was becoming more optimistic.  

Now that 2014 is the best year for employment since the '90s, it is time for an update!

For new readers: I was very bearish on the economy when I started this blog in 2005 - back then I wrote mostly about housing (see: LA Times article and more here for comments about the blog).

I started looking for the sun in early 2009, and now I'm more optimistic.

Here are some updates to the graphs I posted two years ago. 

Several of these graphs have changed direction since I wrote that post.  As example, state and local government employment is now increasing, and household deleveraging is over (as predicted).

 

 

This graph shows total and single family housing starts. Even though starts have almost doubled from the bottom, starts are still way below the average level of 1.5 million per year from 1959 through 2000.  As of October, starts are still close to the bottom for previous recessions.

Growth for starts in 2014 was slow, but that just means there is more growth ahead.  Demographics and household formation suggests starts will increase to around 1.5 million over the next few years. That means starts will probably increase another 50% or so from the October 2014 level of 1 million starts (SAAR).

Residential investment and housing starts are usually the best leading indicator for the economy, so this suggests the economy will continue to grow over the next couple of years.

 

This graph shows total state and government payroll employment since January 2007. State and local governments lost 129,000 jobs in 2009, 262,000 in 2010, 249,000 in 2011, and 33,000 in 2012. 

 In 2013, state and local government employment increased by 44,000 jobs.

This year, through November 2014, state and local employment is up 96,000.   So, in the aggregate, state and local government layoffs are over - and the economic drag on the economy is over.

 

And here is a graph on the US deficit. This graph, based on the CBO's recent projections, shows the actual (purple) budget deficit each year as a percent of GDP, and an estimate for the next ten years based on estimates from the CBO.

As we've been discussing, the US deficit as a percent of GDP has been declining, and will probably remain under 3% for several years. 

 

This graph from the the NY Fed shows aggregate household debt has increased for the last 5 quarters.

From the NY Fed: Household Debt Balances Increase as Deleveraging Period Concludes  

Total cash flow from mortgage debt and nonmortgage debt combined (black dotted line) has turned slightly positive during the past four quarters, ending a five-year period of negative values, suggesting that, by this measure, the deleveraging process has ended; households have begun to use credit to supplement their cash flow again. (emphasis added)There will be some more deleveraging ahead for certain households (mostly from foreclosures and distressed sales), but in the aggregate, household deleveraging is over.

 

This graph is from the Fed's Q2 Household Debt Service and Financial Obligations Ratios. These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households.

The overall Debt Service Ratio decreased in Q2, and is near the record low set in Q4 2012.  Note: The financial obligation ratio (FOR) is also near a record low  (not shown)

Also the DSR for mortgages (blue) are near the low for the last 30 years.  This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly.

There was a huge surge in the prime working age population in the '70s, '80s and '90s - and the prime age population has been mostly flat recently (even declined a little).

The prime working age population peaked in 2007, and appears to have bottomed at the end of 2012.  The good news is the prime working age group has started to grow again, and should be growing solidly by 2020 - and this should boost economic activity in the years ahead.

 

 

[sigsegv]

sooper .. dabulle dabbulu 

[Hyderabad_Nawab]

sooper .. dabulle dabbulu 

Ippudu Illu Konetollaki matram Pandage Pandaga.. Next Yr. Mast Perugutaayanta Rates..;)

[mukunda1]

Ippudu Illu Konetollaki matram Pandage Pandaga.. Next Yr. Mast Perugutaayanta Rates.. ;)

 

dont worry...aa konnodu 3 yrs payments kattina tharuvatha foreclose sesthadu...so malli recession.

 

recessions - 1993, 2000, 2003, 2008, 2018

[afrnds]

masthuga chisinam ilantivi....bubble economics