THE ECONOMY IN 2017: BETTER, BUT WORSE!

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1 THE ECONOMY IN 2017: BETTER, BUT WORSE! Presented by: Elliot F. Eisenberg, Ph.D. President: GraphsandLaughs, LLC May Harrisburg, PA

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

3 The Stock Market Is Doing Well

4 Households are Repairing their Balance Sheets Trillions in Net Worth Recovered, at a New Record Level

5 Households Deleveraging is Done!!!!!! Lack of income growth hurts, but debt is growing once again. Down 6.5% from peak

7 Mortgage Delinquencies Are Starting to Rise Notice that 2016 mortgages are delinquent more than in 2015

8 Bloomberg Comfort Index Nearly at Decade High Index is near its post-recession high.

9 Small Business Confidence is OK Spectacular rise since the presidential election. Well above the 42 year average of 98

10 The Soft Data is Good, the Hard Data is Soft We need to see stronger hard data

11 US Light Vehicle Sales are High but Flat?

12 Las Vegas Attendance Rocks The gamblers are back, the conventioneers are too!

13 Annual Y-o-Y Percent Change in PCE A solid growth rate of 2.75%

14 Drilling Activity is Way Up Number of oil rigs is finally rising and has been steadily rising since May 2016.

15 Corporate Profits are Again Rising After Weakening

16 OK. Now, Look at Capital Goods Orders! Minus Defense and Aircraft

17 Budget Deficit Got Much Better but is Getting Worse

18 The Budget Faces Some Real Problems

19 GDP Growth Goes Nowhere Slowly Trump may boost GDP by 25 or 30 bps in 2018 due to tax cuts and infrastructure spending.

20 GDP Can t Grow Fast! Very weak population growth and labor productivity growth

21 Best of All, No Recession is in the Cards! Yield Curve Inversion Test: 1-Year Treasury Yield 10-Year Treasury Yield

22 Labor Markets: They re on the mend

23 Historical Job Growth Y-o-Y Total Employment Change s 2.24 million!

24 STEADY Labor Market Improvement: Involuntary Separation Long Term Trends: Initial claims below 300K for 113 weeks, amazing!

25 Tighter Labor Market than Perceived? The number of Unemployed per Job Opening Keeps Falling!!!!! Best level in a decade!

26 Quits, No matter How Measured Are Improving Within 5% of their pre recession levels, and maybe still rising!

27 Gap Between Blacks and Overall Rate is Low Was over 7%, and is now under 4%; near all-time low of 3%

28 Gap Between Hispanics and Overall Rate is Low Was over 3%, and is now under 1%; near lowest level since records began in 1973

29 Unemployment By Education Rates for the best have stopped falling. Rates for those in the middle still decline.

30 Wage Growth is Weak, but Improving!

31 Y-o-Y Percent Change in Hourly Earnings

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

33 Differences in Household Income by Education

34 To help protect your privacy, PowerPoint has blocked automatic download of this picture. Household Income Growth by Percentile

35 Income Inequality by Race and Gender Men are clearly losers

36 Inflation? What Inflation!

37 Producer Prices Show Signs of Inflation!!

38 Consumer Price Index: Inflation is Topping Out? Headline and Core may be topping out

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

40 Inflation Expectations are Declining of Late! 5 year and 10 year breakeven rates

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

42 Federal Reserve Behavior Fed funds is currently 0.875% 12/31/17: 1.375% 10-yr 2.70% 12/31/18: 2.125% 10-yr 3.10% 12/31/19: 2.875% 2 more hikes in Balance sheet shrinks starting in fall.

43 Housing? It s Improving but In Fits and Starts!

44 Residential Fixed Investment Slowly Rises! Up 3.0% Y-o-Y. Non-residential up 5%, public down 15% and residential down 26% from peak

45 Household Formation is Improving Compared to the 2007 through 2013 trough, it s better.

46 Credit is Generally Very Hard to Get It is getting easier, but very slowly.

47 Change in Wealth by Median Household Credit Source: Russell Sage Foundation

48 Student Debt Payments are Not That High Median payment is $200/month while the average is $350/month

49 Let s Do this Without Wood! Prices are up 19% to 27% Y-o-Y

50 New Home Prices Are Too High Due to Regulation

51 Existing Inventory is Shrinking Down 6.6% Y-o-Y. Higher prices should help, but rental conversions especially at lower price points & aging in place are hurting supply.

52 Price Growth Appears Not to be Slowing Prices rise faster than wages! Y-o-Y prices up 5.1% 5.8% or 5.7% depending on the measure

53 Housing is in General is Rising Too Quickly Approaching the magnitude of the Housing Boom

54 Rents are Rising Increasingly Quickly Rents rise faster than wages! Y-o-Y prices up 4%. Fastest since the housing boom!

55 Bigger Houses Continue to Get Built

56 To Many Big Houses

57 Single-Family and Multifamily Starts A Slow Recovery Lack of lots, gun shy lenders, high prices, higher rates, SF looks good

58 Existing Home Sales 1st-time buyers remain largely MIA. Distressed sales are just 6% of total. Where is inventory? TRID was the reason for the 14% November decline.

59 Recent Existing Home Sales Solid and very steady improvement.

60 MBA Mortgage Purchase Apps A Steady Rise 1 st time applications are up 10% Y-o-Y, at level of the late 1990s! 10% rise in purchase applications in 2017 from $990 billion to $1.1 trillion

61 Refinance Activity is Quite Flat! 2017 refi activity falls to $475 billion from $900. Share falls from 50% to 30%. Refi activity rose due to very low rates, but has fallen hard.

62 Urban Renters Face a Slightly Improving Situation But, things are still relatively bad.

63 Rural Renters Face a Worsening Situation So many are cost burdened

64 Renter Face an Increasingly Tough Market Things could get much worse, and they are already bad.

65 Renter Face an Increasingly Tough Market Things could get much worse, and they are already bad.

66 For Older Renters, It s Even Worse

67 Renter Face an Increasingly Tough Market To be able to earn nearly $150,000/year and still qualify for a subsidy? Wow!

68 What About Things Here?

69 The Future Looks Better than the Present

70 State Unemployment Rates Significant differences exist: However, unemployment is almost below 6% everywhere!

71 Unemployment Rates in Big PA Cities are Improving Lancaster is #1, Harrisburg #2, Scranton is weakest. Pittsburgh weakens. (A town & Scranton)

72 Payroll Data is Pretty Good Since the Recession there has been weak labor growth, especially of late, Lancaster is tops

73 Labor Force Data is Less Good! Since the recession there has been weak labor growth, especially of late, Lancaster is tops

74 Per Capita Personal Income in Biggest Cities Scranton is weak. Pittsburgh is on the move passing Allentown and Harrisburg!

75 Rental Vacancy Rates Are Low in Pennsylvania! This suggests no rents relief

76 Philadelphia Housing Starts Single-family is dismal and multifamily is strong. Both are flat.

77 House Prices in Pennsylvania Pittsburgh is best. Philadelphia has recovered, Allentown is recovering

78 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

79 Home Ownership Rates Are Down in Pennsylvania! But not on a relative basis

80 Home Vacancy Rates Are Slightly Elevated in PA. But not a trend yet

81 Per Capita Personal Income in Biggest Cities Scranton is weak. Pittsburgh is on the move passing Allentown and Harrisburg!

THE 2018 ECONOMY: BETTER THAN IN 2017

THE 2018 ECONOMY: BETTER THAN IN 2017 Presented by: Elliot F. Eisenberg, Ph.D. President: GraphsandLaughs, LLC March 5, 2018 Boise, ID The Economy is Solid! GDP = C+I+G+(X-M) The Stock Market Is Doing