THE 2018 ECONOMY: A BIT BETTER THAN IN 2017

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1 THE 2018 ECONOMY: A BIT BETTER THAN IN 2017 Presented by: Elliot F. Eisenberg, Ph.D. President: GraphsandLaughs, LLC November 9, 2017 Detroit, MI

2 The Economy is Solid! GDP = C+I+G+(X-M)

3 The Stock Market Is Doing Well

4 Households are Rich HNONWRQ027S

5 Households Borrowing is Up!

6 Consumer Confidence is Good

7 Small Business Confidence is Up

8 The Soft Data is Great if You are a Republican

9 Las Vegas is Rocking

10 Vehicle Sales are Good

11 Americans want Light Trucks! Car Sales Plummet

12 Americans want Light Trucks! Car Sales Plummet

13 Auto Loan Size has Been Steadily Rising

14 Auto Loan Lending Has Risen Dramatically

15 Auto Loan Lending Growth is Dramatically Slowing

16 Subprime Auto Loan Lending Shrinks

17 Auto Loan Delinquencies are Revving Up

18 Used Car Volumes are Skyrocketing

19 Used Car Values are Declining

20 New Auto Prices are Now Declining

21 New Car Buyers are Often Upside-Down

22 Auto Loans Have Very Long Durations

23 Auto Loan Incentive Growth Declines

24 Auto Inventories are Uncomfortably Large

25 Annual Y-o-Y Percent Change in PCE A solid albeit lackluster growth rate of 2.7%

26 Drilling Activity is Up Number of oil rigs was rising and has now plateaued

27 Corporate Profits are Up

28 Manufacturing Numbers are Strong

29 Non-Manufacturing Numbers are Strong Too

30 Capital Goods Orders Strengthen!

31 Factory Utilization Rates Are Slowly Improving! In 2014 the dollar rose and oil prices collapsed

32 Fiscal Policy is Decidedly Neutral

33 Budget Deficit Got Much Better but is Getting Worse

34 The Dollar is Weakening Against all Currencies It will help employment growth but and maybe boost inflation Strong Stronger Weak

35 GDP Growth is 2.2%, It Should Improve

36 GDP Can t Grow Much Faster!

37 Best of All, No Recession is in the Cards! Leading Economic Indicators for the USA, not near zero!

38 Best of All, No Recession is in the Cards! Designed to track real macroeconomic activity in real time

39 Labor Markets: They re on the mend

40 Historical Job Growth Y-o-Y Total employment growth is slowing. We are running out of workers

41 STEADY Labor Market Improvement: Involuntary Separation Long Term Trends: Initial claims below 300K for 139 weeks, amazing!

42 Gap Between Blacks and Overall Rate is Low Was over 7%, and is now around 3% and at an all-time low

43 Manufacturing Employment is Climbing.Again Weaker dollar, stronger global growth and better energy prices are why.

44 Wage Growth is Weak, But...

45 Y-o-Y Percent Change in Hourly Earnings Despite a very low unemployment rate, wages growth is very weak

46 Changes in Median Wage Growth Looks Good! Looks only at those continuously full-time employed

47 Labor Productivity Growth is Dismal

48 Inflation? What Inflation!

49 CPI: Inflationary Pressures are Declining.

50 Core PCE Price Index: Inflation is Declining! It s due to rising wages, a weakening dollar and rising energy prices.

51 Federal Reserve Behavior Rates Will Rise. But, How Fast?

52 Taller Fed Chair, Higher Rates?

53 Federal Reserve Behavior Who replaces Yellen? Fed funds is currently 1.125% 12/31/17: 1.375% (80%/20%) 10-yr 2.50% 12/31/18: 2.125% 10-yr 2.90% 12/31/19: 2.625% (Note: this is quite low!) Balance sheet shrinks starting in fall.

54 Construction? It s Improving but In Fits and Starts!

55 Commercial Real Estate is Recovering

56 Commercial Real Estate is Recovering

57 Residential Fixed Looks OK

58 Bigger Houses Only!

59 Regulation is a Killer

60 Input Costs are Way Up due to Policy and China Prices are up 22% to 19% Y-o-Y

61 Huge Influx of Foreign Buyers

62 Single-Family and Multifamily Starts Too Weak!

63 Number of Multifamily Units Under Construction Finally Peaks

64 Existing Inventory is Shrinking

65 Price Growth Appears Not to be Slowing Prices rise faster than wages! Y-o-Y prices up 5.4%, 6.0% or 6.1% depending on the measure

66 No Housing Bubble!!!!!

67 MBA Mortgage Purchase Apps are Falling 1 st time applications are up 9% Y-o-Y, at level of late 1990s!

68 Existing Home Sales Improve?

69 Not So Much! Yikes!

70 Pending Home Sales are Slumping High prices due to low inventories are finally being felt

71 The U.S. Home Ownership Rate Has Bottomed Demographic changes should start pushing it up

72 Demographics Will Start to Really Help

73 Demographics Will Start to Really Help Millenials are about to have kids and will need space

74 Apartment Vacancy Rates The MF cycle has probably turned. Rental vacancy rates are starting to rise.

75 Apartment Vacancy Rates The MF cycle has probably turned. Rental occupancies are starting to fall

76 Apartment Vacancy Rates The multifamily party is winding down especially at the upper end! S > D. Rent growth should slow and vacancy rates will rise. 8 quarters in a row below 50

77 What About Things Here?

78 Things Are Great in the South!

79 The Future Looks the Same As the Present

80 State Unemployment Rates Only three states have rates that are meaningfully above 5%

81 Interstate Migration Patterns 2016

82 MI Population Growth Rates

83 Homeownership Rates

84 Rental Vacancy Rates Rates have bottomed

85 ANY QUESTIONS? Elliot F. Eisenberg, Ph.D. Cell: Do you want to get my daily 70 word economics ? Please give me your business card or text bowtie to Thank YOU all very very