Presentation on theme: "Testimony for Hearings on FY 2010 Revenues Yolanda K. Kodrzycki Senior Economist and Policy Advisor Federal Reserve Bank of Boston Presented to: Massachusetts."— Presentation transcript:
Testimony for Hearings on FY 2010 Revenues Yolanda K. Kodrzycki Senior Economist and Policy Advisor Federal Reserve Bank of Boston Presented to: Massachusetts House and Senate Ways and Means Committees December, 2008
2 Massachusetts employers have added virtually no net new jobs in the past 12 months. Year-over-year Employment Growth United States Massachusetts United States: Last 12 months: -0.9% 1974-2007 trend: +1.7% Since trough: +5.5% + 7,077,000 jobs Massachusetts: Last 12 months: +0.1% 1970-2007 trend: +1.0% Since trough: +3.3% + 105,300 jobs
3 MA payroll employment is down 11,000 jobs since the August peak. Of that net decrease, 10,000 came in September and October. Number of jobs in thousands
4 In Q1 and Q2, MA personal income was about 5% above year-ago. Q3 and especially Q4 will be worse because of job losses. Year-over-year Personal Income Growth United States Massachusetts Source: U.S. Bureau of Labor Statistics.
5 Employment Growth by Sector Percent Change, October 2007 – October 2008 (Seasonally Adjusted) The construction and real estate services sectors have had the largest percentage job decreases over the past year.
6 Source: U.S. Bureau of Labor Statistics. Employment Growth by Sector Change, October 2007 – October 2008 (Seasonally Adjusted) Construction, retail, and manufacturing have lost the largest numbers of jobs. Healthcare and professional & business services have added the most jobs.
7 Forward-looking measures are negative about the MA economy. Source: Associated Industries of Massachusetts and the University of Massachusetts.
8 MA housing sales seem to have stabilized at a low level. Temporary response to foreclosure sales? Total Existing Home Sales (thousands of units) Source: National Association of Realtors. United States (right scale) Massachusetts (left scale)
9 Massachusetts home prices are down from a year ago. Boston area decrease is much smaller than in other large urban areas. Massachusetts United States FHFA Index (peak=100) Source: OFHEO, S&P/Case-Shiller. Composite of 20 large metropolitan areas Boston area S&P Case-Shiller Index (peak=100) Percent change from a year ago United States-4.0 Massachusetts-4.8 Composite 20-17.4 Boston-5.7 Percent change from a year ago
10 Foreclosures Started, All Loans Foreclosures initiated in quarter, as a percent of loans in pool. Source: Mortgage Bankers Association / Haver Analytics Seriously Delinquent Mortgages Mortgages with payments 90 days past due plus inventory of mortgages in foreclosure, as a percent of loans in pool. Workouts and moratoria are holding down foreclosure rate. The serious-mortgage-delinquency rate continues to rise. United States Massachusetts
11 Subprime ARMs remain the most troublesome category, but serious delinquencies are much higher than historical norms for all categories of mortgages. Seriously Delinquent Mortgages by Type of Loan in Massachusetts (as a percent of loans in pool)
12 Federal Reserve officials downgraded their U.S. economic forecasts in October. New data are leading to further downgrades. Source: Federal Open Market Committee, Summary of Economic Projections for the Meetings of June 2008 and October 2008. Table shows central tendencies among the Federal Reserve Board governors and Federal Reserve Bank presidents. Note: Projections are fourth-quarter–to- fourth-quarter growth rates except for the unemployment rate, which is the fourth quarter level. CY 2008 Q4 CY 2009 Q4 CY 2010 Q4 Real GDP growth (%) Jun-081.0 to 1.6 2.0 to 2.8 2.5 to 3.0 Oct-080.0 to 0.3-0.0 to 1.2 2.3 to 3.2 Unemployment rate (%) Jun-085.5 to 5.75.3 to 5.85.0 to 5.6 Oct-086.3 to 6.57.1 to 7.66.5 to 7.3 PCE inflation (%) Jun-083.8 to 4.22.0 to 2.31.8 to 2.0 Oct-082.8 to 3.11.3 to 2.01.4 to 1.8
13 Implications for Massachusetts revenue projections. Incoming economic data indicate that revenues are likely to weaken further in the 2 nd half of FY 2009. FY 2010 depends on the effectiveness of monetary and fiscal stimulus. Monetary and fiscal policies affect the economy with a lag. FY 2010 revenues will definitely be sub-par. Hard to project the size of the FY 2010 revenue problem.