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Hon.John
A.
DeFrancisco
Chairman
Senate
Finance
Committee
Hon.Liz
Krueger
Ranking
Minority
Member
SenateFinanceCommittee
NEWYORKCONSENSUSFORECASTINGCONFERENCE
RobertLMegna
Director
NYS
Divisionof
the
Budget
MEMORANDUM
Hon.
Herman
D.
Parrell,
Jr.
Chairman
AssemblyWays
and
Means
Committee
Hon.
Robert
C.
Oaks
Ranking
Minority
Member
Assembly
Ways
andMeans
Committee
TO:
FROM:SUBJECT:GovernorAndrewM.CnomoSenatorDeanG.SkelosAssemblymanSheldonSilverSenatorJohnL.SampsonAssemblymanBrianM.KolbRobertL.MegaRobert
Mujica'
Matthew
A.
HowardJosephF.Pennisi
f)-P'
RebeccaI'.D'Agati/ConsensusForecastReportMarch1,2012
Attachedpleasefindthe2012-13"ConsensusEconomicandRevenueForecastReport"required
by
Section
23
of
theStateFinanceLaw.Attachment
 
1
ECONOMIC
AND
REVENUECONSENSUSREPORT2012-13
Thisreportcontainstheresults
of
theconsensuseconomicandrevenueforecastingprocessconductedbytheExecutiveandtheLegislatureinadvance
of
theenactment
of
StateFiscalYear(SFY)2012-13Budget,pursuanttotheprovisions
of
Chapter309
of
theLaws
of
1996.TheConsensusForecastingConferencewasheldonFebruary29,2012.Basedonthetestimony
of
expertsattheConference,theoutlooksforboththeeconomyandrevenuehaveimprovedbutremainuncertain,thoughupsideanddownsiderisksappearbalanced.
EconomicForecastReview
TheeconomicforecastscontainedintheExecutiveBudgetandLegislativereportsportrayaneconomicrecoverythat
is
reboundingfromawave
of
setbacksexperiencedin2011.Thisrebound
is
evident
in
therecentstrengthening
of
thelabormarketandequitymarketvaluesthatareflirtingwithprerecessionhighs.Thesedevelopmentsareexpected
to
resultinagradualaccelerationinbothhouseholdandbusinessinvestmentspendingoverthecourse
of
thisyear.Theprojectedrise
in
domesticmomentum
is
expected
to
morethanoffsetalikelyrecession
in
Europeanditsuncertainimpactacrosstheglobaleconomy.Thus,thedemandforU.S.exportsisexpected
to
representmuchless
of
asupportforgrowthin2012thanitwasearlierintherecovery.Theconsensusforecastsfor2012and2013realU.S.GDPgrowthare2.2percentand2.7percent,respectively.Allpartiesexpectjobgrowth
to
continue
to
improvegoingforward,accompaniedbyfaster,butstillhistoricallylow,wagegrowth.Agradualimprovementintheunemploymentraterepresentsapositivesignalforbothconsumerspendingandthehousingmarket.Inaddition,corporateprofitsgrowthisexpected
to
slowasbusinesshiringpicksup,butremainhealthy,withthefinancialsectorrepresentingless
of
adragthanin2011.
CONSENSUSU.S.
FORECAST
CALENDARYEAR
~ ( : ~ ~ ~ n t : . ~ ~ , l t , l 1 g ~
CY2012CY2013
PERSONALINCOME
WAGES
CORPPROFITS
NONFARM
EMPLOYMENT3-MONTHT-BILLRATECPI
2.2
3.53.6
4.21.4
0.1
2.02.74.5
3.5
1.50.32.0
ThepartiesagreethattheNewYorkStatelabormarketimprovedsteadilyin
20
II.
However,thepace
of
improvementisexpected
to
slowin2012
as
theimpact
of
weakfinancesectorbonusesandlayoffsreverberatethroughoutthedownstateeconomy.Theconsensusforecastfor2012nonfarmemploymentgrowth
is
1.1
percent;the2012projectionsspana
 
2relativelynarrowrangefromgrowth
of
0.9percentto
1.3
percent.Theconsensusforecastfor2013nonfarm
job
growthis
1.3
percent.Theconsensusforecastfor2012wagegrowthis2.8percent,representingadecelerationfrom2011.Wagegrowthprojectionsfor2012rangefrom2.0percentto4.5percent,withthevariationacrosspartiespertaininglargelytodifferingassumptionsregardingthestrength
of
financeandinsurancesectorbonuses,aswellasvaryingassumptionspertainingtotheexpiration
of
thelowerfederaltaxratesattheend
of
thatyearanditsimpactontaxpayerbehavior.Some
of
thevariationisalsoduetotheuse
of
alternativedatasources.Theconsensusforecastfor2013wagegrowthisahigher5.0percent;thevariationfor2013isalsodueinparttovaryingassumptionspertainingtofederaltaxpolicy.Theconsensusforecastfor2012personalincomegrowthis3.2percent,withprojectionsrangingfrom3.0percentto3.4percent,withthevariationlargelyduetothesamefactorsaffectingwages.Personalincomegrowthisexpectedtoacceleratein2013,despitetheexpiration
of
thesocialsecuritytaxcut.
CONSENSUSN.Y.FORECASTCALENDARYEAR
J > e r c ~ " t C h a n g ~
CY2012CY2013NONFARM
EMPLOYMENT
.
..PERS0i'<AL.
INCOME
........
\ Y ~ G E S
.....
l.l
3,2.
2.8
1.3
4.1
5.0
Allpartiesexpectthenationalrecoverytoproceedatamoderatepacegoingforward,withthegreatestrisksstemmingfromelevatedoilandgasolineprices,theimpact
of
theEurodebtcrisisonglobaleconomicstability,andthepotentialdragfromfederalfiscalpolicy.Sources
of
upsideriskincludeastrongerthanexpectedlabormarketexpansionorarapidresolution
of
thecrises
in
theMiddleEastthathaveresultedintheupwardacceleration
of
energyprices.ThegreatestriskstotheconsensusforecastfortheNewYorkeconomypertaintoconditionsinthelaborandfinancialmarkets.WallStreetisstillthelargestsinglesource
of
volatilityinStatetaxcollections.Ashiftintheindustry'scompensationpractices,includingareduction
of
thecashportion
of
executivebonuses
in
favor
of
deferredincomeintheform.
of
stockgrants,onlyaddsuncertaintytotheState'sincomeandrevenueprojections.Inaddition,agreaterpullbackinconsumerspendingasaresult
of
fallingbonusescouldfurtherweakenjobgrowth.ShouldthenationallabormarketimprovemorequicklythantheFederalReservecurrentlyexpects,thecentralbankmaybeforcedtoaccelerateimplementation
of
itsexitstrategyfromthecurrentrecord-lowinterestrateenvironmentandtheextraordinaryexpansion
of
itsbalancesheet.Althoughanimprovedlabormarketwouldbeapositivedevelopment,shiftsfromanexpansionarytoalessaccommodativepolicystancehavetendedtohaveanegativeimpactonthefinancialmarkets,bonuses,andthereforeonStatewages.
In
contrast,astrongernationalandglobaleconomycouldincreasethedemandforNewYorkfinancialandotherbusinessservices,presentingupsiderisktoStateemploymentandwages.
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