2017 Economic Forecast

Transcription

1 2017 Economic Forecast Mid-Year Update Greater Kansas City Chamber of Commerce June 29, 2017

2 We ve come a long way

3 but the pace of job recovery seems to be gradually downshifting

4 This is even more true for GDP than employment

5 As a result, productivity is growing much slower than in decades past currently 0.6% per year.

6 Productivity pays for prosperity.

7 Potential economic growth = growth in productivity + growth in workingage population. Growth in workingage population has also ratcheted down, from 1% to 0.5% to now 0.1%

8 One source of workers is the currently unemployed. It appears we are near, but not yet at, full employment as the unemployment rate is still heading down.

9 Also, while employment as a share of the working-aged population is rising, it is still below the prerecession peak.

10 This elasticity of the labor supply is one reason why annual wage increases have been a modest 2.5 percent, despite low unemployment.

11 U.S. economic forecast

12 The median FOMC forecast for GDP is for 2.2% growth in 2017, 2.1% in 2018, 1.9% in 2019, and a long-run trend of 1.8% FOMC GDP Forecasts Longer run Actual Median

13 RSQE is more optimistic than the FOMC in Both head towards 2 % in 2019 and Add RSQE, Moody's Forecasts beyond Actual RSQE Median

14 Status of the KC economy

15 KC Traded Sector Employment Change, ,000 Dashed line represents employment levels if Kansas City grew at U.S. rates 140, , ,000 80,000 60,000 40,000 20,000 - Construction Manufacturing Wholesale Health Care Information Finance and Insurance Source: Jobs EQ Trans. and Warehousing Prof., Scientific and Tech., Svcs.

16 KC Traded Sector Employment Change , , ,000 Dashed line represents employment levels if Kansas City grew at U.S. rates 100,000 80,000 60,000 40,000 20,000 - Construction Manufacturing Wholesale Trade Health Care and Social Assistance Information Finance and Insurance Transportation and Warehousing Professional, Scientific, and Technical Services Source: Jobs EQ

17 The region s unemployment rate, which is only available not seasonally adjusted, was 3.9% in May. This is just below the national seasonally unadjusted rate of 4.1% U.S. vs KC Unemployment rates US KC

18 KC economic forecast

19 The U.S. and KC economies are expected to grow at similar rates into the future, with both rebounding in second quarter 2017 to about 3% growth before settling back down to near 2% growth by the end of % 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% U.S. vs. KC GDP Forecast I II III IV I II III IV I II III IV US GDP KC GDP

20 After a surge in employment during 2016, employment growth is expected to remain relatively high in 2017 and 2018, though with modest moderation Change in KC Total Employment, in thousands, 4Q/4Q

21 KC Employment Forecast, by Industry, Professional and technical services will lead the region s employment growth, followed by health care, finance and construction. Information, which has been a huge drag on the KC economy since 2000, stabilizes. Professional, Scientific, and Technical Services Health Care and Social Assistance Finance and Insurance Construction Administrative and Waste Management Government Retail Trade Wholesale Trade Real Estate and Rental and Leasing Management of Companies and Enterprises Manufacturing Accommodation and Food Services Educational services; private Other Services, except Public Administration Mining Arts, Entertainment, and Recreation Transportation and Warehousing Forestry, Fishing, and Related Activities Utilities Information

22 Conclusion The economic expansion continues, putting downward pressure on the unemployment rate and modest upward pressure on wages There is still some slack in the labor market, primarily due to room for increased participation. Long-run potential growth appears to be highly constrained by weak productivity and population growth. After weaker than average growth last decade, the KC economy is now performing about average. To do better than average, civic and business leaders must find ways to energize the region s traded sectors through increased innovation and expansion into global markets.

23 Questions? Thank you! Frank Lenk Director of Research Services Mid-America Regional Council