Presented by Harry M. Davis, Ph.D davishm@appstate.edu NCBA Professor of Banking and Economist...

“Should We Be Happy About The U.S. Economy?” N.C. Affordable Housing Conference

Raleigh Convention CenterRaleigh, North Carolina

Presented by

Harry M. Davis, Ph.Ddavishm@appstate.edu

NCBA Professor of Banking and EconomistAppalachian State University

October 29, 2015

The U.S. Economy

Recovery is almost 6.5 years old

GDP annualized growth of .6% in the first quarter and 3.9% in the second quarter

This recovery is the slowest in the post WWII period

States has been adding much less to GDP than in past

The U.S. Economy

The FED has over estimated the rate of economic each quarter since the “Great Recession”

The rate of productivity growth is the slowest for a recovery in 60 years

Consumers

Consumer spending is growing about 2.5% a year

Real per Capita after-tax income and real average weekly earnings were flat in 2012 and 2013

Real median household income was $57,342 in 2008, while in July 2015 the figure was $55,132

U.S. Economy - Positive

Stock markets are still near record levels - earning continue to surprise on the up side

Corporate profits driven somewhat by lower energy prices

Housing

Existing home sales have been above 5 million (annualized) for the last 5 months and almost reached 6 million in July

Residential construction is at the highest rate since 2008. Multi-family continue to be above average as a % of total construction but that percentage is dropping

Household formations and millennials

Existing home prices up about 5% y/y

U.S. Employment - PositiveUnemployment rate for September was 5.1% - the

lowest in over 7 years

Created only 136,000 new jobs in August followed 142,000 in September

Created an average of 260,000 new jobs per month in 2014

The labor participation rate fell to 62.4% a greater than 38 year low in September - 350,000 individuals left the labor force

Employment

Up until 1999, baby boomers reached adulthood and entered the workforce along with a surge in women working

The labor force grew faster than the adult population – fueled economic growth and per capita income

The labor participation rate (LPR) peaked in 1999

Employment

Bureau of Labor Statistics estimates 5.8 million jobs unfilled due to lack of qualified workers

Areas include: software engineers, nurses and technicians, welders and machinists, general engineers

Education system and business community need to interact much more

NC Employment Situation

August unemployment rate of 5.9%

Grew 110,200 nonfarm jobs in last 12 months

Since the “Great Recession” nearly 60% of all new jobs were created in the Charlotte and Raleigh metro areas

N.C. per capita income as % of U.S.

Age Does Matter in the U.S.

In 1959 people 65 and older had the highest rate of poverty (35%)

Today that group has the lowest rate at 9.5%

The poorest Americans today are the youngest – those 35 and under

Spending in all categories except healthcare peaks at age 45

The FEDIn a box

All Central Bankers are looking for one thing which is not around – a 2% rate of inflation

FED should forget about raising rates until the 10-year bond rate rises above 2.4% and stays there for more than 30 days

Energy

Pump prices lowest in 10 years

Each adult auto owner has received a $800-$1,000 tax free gift from lower gas prices

North America – the center of the energy universe

What To Do?!

Regulation Czar – moratorium on new regulations

Build Infrastructure – regulations

Immigration reform

Simplify and flatten the tax code for businesses and individuals

The Outlook

GDP will grow about 2.75% for the year

We are at full employment forgetting the labor participation rate and the number under employed

Income and salary growth will remain tepid - even so, consumer spending growth will increase to 2.75%

U.S. is the pick of the litter - as the growth in numerous countries is slowing

The Outlook Housing will continue to be a bright spot -

with a slight shift in construction to single family homes

The FED will raise rates very little - not even in 2016

NC’s unemployment rate will drop close to 5% in the next 12 months

The state will create about 100,000 next year, down from the level for 2014 and 2015