The Economy and Its Impact on Education September 2006 Russ Thibeault Applied Economic Research

US Economy: So Far…..So Good

Economic Growth is in the Comfort Zone: Not Too Fast or Slow

Unemployment Has Dropped Sharply

We’re Not Making Much Stuff

But We’re Buying Lots: Rising Consumer Spending (Retail Sales) are Driving Economic Growth

Inflation is Back, Raising Concerns at the Fed, But Lower Energy Prices Will Help

Consumer Confidence is OK, But Just OK

Leading Indicators Have Been Falling

Savings Rate is Negative

Trade Deficit Remains a Ticking Time Bomb

Budget Deficit Borrows Future Prosperity But Some Modest Improvement is Emerging

In a Nutshell Economy is in good shape now Economy is in good shape now Solid growth Solid growth Low unemployment Low unemployment Interest rates are reasonable Interest rates are reasonable But inflation on the rise: falling energy prices may help But inflation on the rise: falling energy prices may help We favor consumption over investment We favor consumption over investment Negative savings rate Negative savings rate Large trade deficit Large trade deficit Large federal budget deficit Large federal budget deficit Transitioning to slower growth Cooler housing market will soften consumer spending Transitioning to slower growth Cooler housing market will soften consumer spending

The Outlook Through December 2007 Slower economic growth ( % GDP), but not a recession Slower economic growth ( % GDP), but not a recession Moderate Rise in inflation and interest rates Moderate Rise in inflation and interest rates No major storm clouds No major storm clouds What to Watch: Energy Costs and Inflation What to Watch: Energy Costs and Inflation BUT: Serious problems over the mid-long- term BUT: Serious problems over the mid-long- term Trade deficit Trade deficit Budget deficit Budget deficit Low savings rate Low savings rate

NH Economy: Humming Along

Record Job Level

But: Erosion of Manufacturing Job Base Resurfaces

Unemployment is Low

Personal Income tops $50 Billion

Income Growth Returns to Long Term Trend

NH Economic Prospects Moderating growth nationally will have an impact on NH job growth Moderating growth nationally will have an impact on NH job growth Big issues: Big issues: Attracting quality, bread-winner jobs Attracting quality, bread-winner jobs Affordable housing Affordable housing Out migration of young workers Out migration of young workers Overall, a softening but not a 90s style recession Overall, a softening but not a 90s style recession

Real Estate Markets: Soft Landing (So Far)

US Housing Markets are Cooling Off

National Housing Starts at Three Year Low

Housing Construction Rises, But Not to Alarming Levels: Recent Data Shows a Decline in 2006

Fewer Units Selling This Year

Inventory Doubles as High Prices Attract Listings

Effective Inventory Has Risen, Approaching Dangerous 12 month Level

NHHFA Purchase Price Data Shows Some Value Loss 2005-Spring of 2006

Prices Outstrip Income

Consumers Mortgage Poor?

Of Special Note

Declining Enrollment is Now Obvious

Smaller Entry Level Classes Portend Lower Future Total Enrollment

Home Schooling is Leveling Off

New Units: Not Many Kids

The Wal Mart Economy: NH Occupational Growth