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Preparing for the Future
Thank you to our sponsors
Thanks to the following organizations that purchased tables.
Coldwell Banker Commercial Sun Coast
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Entrepreneurship
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Agenda 7:30 a.m. Registration and Breakfast8:00 a.m. Welcome and Greetings8:10 a.m. Economic and Market
Forecasts8:30 a.m. Preparing for the Future9:15 a.m. Table Discussion and
Questions for Speakers9:35 a.m. Closing Remarks 9:45 a.m. Conclude
The U.S. Economy: Losing its Legs?Thomas D. Simpson, Ph.D.
Department of Economics and Finance
University of North Carolina Wilmington
© 10/21/2019 Swain Center All Rights Reserved
Departing from Script• This expansion: Longest on record• Inflation: Still subdued, despite a very tight
labor market• Interest rates: Very low• Monetary policy: Fed has been lowering—
not raising—its policy rate• Sustainable growth: Down to around 2
percent
© 10/21/2019 Swain Center All Rights Reserved
Growth Has Slowed
2017 2018 2019Q1 Q2 Q3e
2.8 2.5 3.1 2.0 2.0
© 10/21/2019 Swain Center All Rights Reserved
e - estimate
Some Believe the Yield Curve is Pointing to Recession
-4
-3
-2
-1
0
1
2
3
4
5
Per
cent
10yr minus 3m
© 10/21/2019 Swain Center All Rights Reserved
But Model-based Recession Probability is Low
-10
10
30
50
70
90
110
Per
cent
Smoothed US Recession Probabilities
© 10/21/2019 Swain Center All Rights Reserved
The Consumer Has Kept Things Going
• Following a pause around year-end, consumers have opened their wallets.
• However, business investment spending has been subdued, despite a very favorable tax situation
• The external sector has been adversely affected by a slowdown abroad and a strong dollar
© 10/21/2019 Swain Center All Rights Reserved
Acting as a Serious Headwind is Trade Policy Uncertainty
0
50
100
150
200
250
300
Ind
ex
Trade Policy Uncertainty
© 10/21/2019 Swain Center All Rights Reserved
• Such uncertainty has been off the charts recently, discouraging business investment
Consumers in Good Position
Growth inConsumption
2016 2017 2018 2019e
2.8 2.9 2.7 2.8
© 10/21/2019 Swain Center All Rights Reserved
e – Estimate based on first three quarters
• Job growth remains solid• Wage growth is firming
Confidence Remains Buoyant
-15
-10
-5
0
5
10
15
20
25
30
0
20
40
60
80
100
120
GD
P G
row
th
Sen
timen
t In
dex
Consumer Sentiment
© 10/21/2019 Swain Center All Rights Reserved
GDP Growth
GDP Contraction
Current
Wealth Positions Are Strong
4.5
5
5.5
6
6.5
7
Rat
io
Ratio of Net Worth to Disposable Income
© 10/21/2019 Swain Center All Rights Reserved
And Debt-Service Burdens Light
9.510
10.511
11.512
12.513
13.514
Per
cent
Debt Service Burden
© 10/21/2019 Swain Center All Rights Reserved
Despite a Favorable Climate, Businesses Capital Spending Has Been Cautious
44
49
54
59
64
69
$ B
illio
ns
Manufacturers’ New Orders
© 10/21/2019 Swain Center All Rights Reserved
• 2017 tax reform boosted rates of return and financing costs remain low
• But orders for capital goods have been flat
• Business leaders point to trade policy uncertainty, though lower oil prices have led to a cutback on oil field outlays
Uncertainty Has Affected Small Business Optimism
75
80
85
90
95
100
105
110
115
Per
cent
NFIB Optimism Index
© 10/21/2019 Swain Center All Rights Reserved
The Outlook Depends on Business Investment
2019 2020 20212.3 2.0 2.0
© 10/21/2019 Swain Center All Rights Reserved
• Absent a resolution of trade policy rifts, capital spending will remain lackluster
• Struggling economies abroad will be a drag on exports
• The United States will continue to grow, but only in line with potential
Growth Will be Sufficient to Keep Unemployment Low
0
2
4
6
8
10
12
Per
cent
Unemployment Rate
© 10/21/2019 Swain Center All Rights Reserved
Some of the Employment Gains Have Come From People Coming Off the Sidelines
80.5
81
81.5
82
82.5
83
83.5
Per
cent
Labor Force Participation: 25-44 Years
© 10/21/2019 Swain Center All Rights Reserved
• But the prime age participation rate is not up on balance this year
Inflation May Drift Above the Fed’s 2 Percent Target
00.5
11.5
22.5
33.5
44.5
Per
cent
Core PCE Inflation
© 10/21/2019 Swain Center All Rights Reserved
Fed Likely to be Squeezed Between White House Pressure and Inflation Concerns
• Tension between the market and the Fed on the rate outlook
© 10/21/2019 Swain Center All Rights Reserved
CurrentEnd 2019
End 2020
End 2021
Market 1.85 1.5 1.1 1.1Fed 1.9 1.9 2.0
The picture can't be displayed.
Preparing for the Future
The Regional Outlook: When the Sun Is Out, Don’t Forget to SmileDr. Adam T. Jones
Department Chair and Regional Economist
Cameron School of Business – Swain Center
© 10/21/2019 Swain Center All Rights Reserved
Your View
© 10/21/2019 Swain Center All Rights Reserved
Sunny With a Dark Cloud
© 10/21/2019 Swain Center All Rights Reserved
Florence Was the Story…
0
0.5
1
1.5
2
2.5
3
3.5
Loca
l Rat
e –
Nat
iona
l Rat
e
Months Pre and Post Storm
© 10/21/2019 Swain Center All Rights Reserved
Baton RougeHouston
New Orleans
Atlantic City
Source: BLS
Hospitality Most Exposed
9092949698
100102104106108110
Ind
ex
Sectoral Employment
Ed & Health Prof Bus Serv Fin, Ins, Real EstateTrade & Trans Manufacturing Leis. And Hosp
© 10/21/2019 Swain Center All Rights Reserved
Source: BLS
Growth Settling Into Normal
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
% G
row
th
Wilmington MSA GDP Growth
© 10/21/2019 Swain Center All Rights Reserved
Source: BEA
Unemployment Ticking Up Slightly
23456789
101112
Rat
e
Unemployment Rate
Three County NC US
© 10/21/2019 Swain Center All Rights Reserved
Aug. 4.3%
Source: BLS
Sales Continuing to Grow, But Levelling
02468
1012141618
Per
cent
© 10/21/2019 Swain Center All Rights Reserved
Home Prices Rising Again
90110130150170190210230250
Ind
ex
NHC Home Price Index
3Br 4Br 5+Br
© 10/21/2019 Swain Center All Rights Reserved
Source: Zillow
Labor Market Tightening, “New Wages” Increasing
$30$32$34$36$38$40$42$44$46$48
3
4
5
6
7
8
9
Wag
e
Op
enin
gs (0
00s)
Wage Openings
© 10/21/2019 Swain Center All Rights Reserved
Source: NC Works
Wages Growing But Slowing
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
% G
row
th Y
oY
Earnings Growth in Wilmington MSA
© 10/21/2019 Swain Center All Rights Reserved
Source: BLS
Homes Remain “Somewhat Affordable”
0.6
0.8
1
1.2
1.4
1.6
1.8
Rat
io
Home Price to Income
© 10/21/2019 Swain Center All Rights Reserved
Source: BLS/FHFA
Gasoline Prices Remain Favorable
0
50
100
150
200
250
300
350
400
Ind
ex
Gasoline Gas / Wage
© 10/21/2019 Swain Center All Rights Reserved
Source: US EIA
Room Occupancy Distorted
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
% G
row
th
NHC Peak Season ROT Growth
© 10/21/2019 Swain Center All Rights Reserved
Source: NHC
Non-Tourists Still In ROT Data
0
0.5
1
1.5
2
2.5
3
Dol
lars
(m)
NHC Occupancy Taxes
2017 2018 2019
© 10/21/2019 Swain Center All Rights Reserved
Source: NHC
Room Occupancy Distorted But Likely Slowing
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
% G
row
th
Peak Season ROT Growth
© 10/21/2019 Swain Center All Rights Reserved
Source: NHC
Room Occupancy Distorted But Likely Slowing
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
% G
row
th
Peak Season ROT Growth
© 10/21/2019 Swain Center All Rights Reserved
Source: NHC
But…
© 10/21/2019 Swain Center All Rights Reserved
Some Believe the Yield Curve is Pointing to Recession
-1
0
1
2
3
4
5
Per
cent
© 10/21/2019 Swain Center All Rights Reserved
Source: STL Fed
Construction Remains Slightly Sluggish
0100200300400500600700800900
1000
Num
ber
of P
erm
its
Housing Units Permitted
Total Single-Family
© 10/21/2019 Swain Center All Rights Reserved
Source: Census
Uncertainty Is Rising
30507090
110130150170190210230
Ind
ex (Q
uart
erly
Avg
)
Economic Policy Uncertainty
© 10/21/2019 Swain Center All Rights Reserved
Source: Baker Bloom Davis
Carolina Business Expectations
-30-25-20-15-10-505
10152025
YoY
Cha
nge
(3m
TA
)
Change in Expectations
Sales General Employment
© 10/21/2019 Swain Center All Rights Reserved
Source: Richmond Fed
Recreational Goods Expenditures
-15
-10
-5
0
5
10
15
20
Per
cent
Regional GDP Growth NC Total NC Per Capita National Total
© 10/21/2019 Swain Center All Rights Reserved
Source: BEA
RV Shipments Declining
20
25
30
35
40
45
50
55
Shi
pm
ents
(000
s)
2017 2018 2019
© 10/21/2019 Swain Center All Rights Reserved
Inflection Point(May 2018)
Source: RVIA
RV Shipments Declining
-50
-40
-30
-20
-10
0
10
20
30
Per
cent
YoY Growth
© 10/21/2019 Swain Center All Rights Reserved
Source: RVIA
Forecast
2019 2020
US Economy 2.3% 2.0%Wilmington MSA 1.9% 1.6%
© 10/21/2019 Swain Center All Rights Reserved
Sunny With a Dark Cloud
© 10/21/2019 Swain Center All Rights Reserved
The World is Changing
Big Data & Augmented Intelligence
Rise of Millennials, Women, and
Diversity
Personal Transformation,
Resiliency, & Agility
Future Trends
Table Activity• How will the economic outlook and future
trends impact you and your organization?
• As time permits, what is one question your table would want to ask one of the speakers?
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