Economic Conditions: Updates on the National, State, and Regional Economies with a Look at 2018

Transcription

1 Presentations Upjohn Research home page 2018 Economic Conditions: Updates on the National, State, and Regional Economies with a Look at 2018 Jim Robey Upjohn Institute, jim.robey@upjohn.org Citation Robey, Jim "Economic Conditions: Updates on the National, State, and Regional Economies with a Look at 2018." Presented to the Association of Southwest Credit Unions at CityScape, Kalamazoo, MI, March 14, This title is brought to you by the Upjohn Institute. For more information, please contact ir@upjohn.org.

2 Economic Conditions: Updates on the National, State, and Regional Economies with a Look at 2018 Jim Robey, PhD Director, Regional Economic Planning Services The W. E. Upjohn Institute for Employment Research March 14, 2018

3 Upjohn Institute for Employment Research The Institute is an activity of the Upjohn Unemployment Trustee Corporation, which was established in 1932 for the purpose of finding ways to alleviate the hardship of unemployment. MISSION: The Upjohn Institute for Employment Research is a private, nonprofit, nonpartisan, independent research organization devoted to investigating the causes and effects of unemployment, to identifying feasible methods of insuring against unemployment, and to devising ways and means of alleviating the distress and hardship caused by unemployment. Today, the Institute has a three pronged mission Research the causes and consequences of unemployment and evaluate public employment programs and social safety nets Administer all federal and state reemployment and training programs in our four county area (Michigan Works!) Disseminate our research findings and information on best practices 2

4 The next recession, is time on our side? Employment Index From Business Cycle Peak Month of Business Cycle Peak = Present (123 Months) Source: Bureau of Labor Statistics Current Employment Survey 3

5 Is there a new norm? Gross Domestic Product and Employment Change 6 1, ,000 GDP Change (%) Employment change is tapering off slightly Forecast ,000 1,500 Employment Change (000s) 8 2, ,500 GDP Change (L) Employment Change (R) Source: Bureau of Labor Statistics Current Employment Survey, Bureau of Economic Analysis, Philadelphia Federal Reserve Consensus Forecast 4

6 National University of Michigan RSQE Forecast GDP (Percent) (Forecast) 2019 (Forecast) Employment (Percent) Light Vehicle Sales ($Millions) Unemployment Rate (Percent) $17.1 $17.1 $ Housing Starts (Millions) CPI/Inflation (Percent)

7 Consumer debt and confidence surge at the end of 17 Billions ($) Consumer Confidence and Change in Consumer Debt Index: 1995 = Consumer Debt (L) Consumer Confidence (R) Source: New York Federal Reserve and Conference Board 6

8 A weaker dollar should be good for the economy Exports ($000s) 250, , , ,000 50,000 U.S. Exports and Major Currencies Index Currency Index Exports (L) Major Currenies Index (R) Source: St. Louis Federal Reserve and U.S. Census Bureau 7

9 Since 2015, wage increases have started to rise Year Over Year Percentage Change in Hourly Earnings Average Jan 15 Sep % Earnings Percent Change Average Jan 11 Dec % Source: Bureau of Labor Statistics Current Employment Survey 8

10 Housing inventory as a % of housing stock is back to pre bubble levels Vacant housing for sale as % of total housing stock Time 9

11 Prices have returned to peak bubble levels permits for single family homes are still below pre bubble levels Price Index Number of Permits (Private, 1000s) Time Shiller Case Price Index Permits Authorized 10

12 Moving on to Michigan 11

13 Statewide University of Michigan RSQE Forecast GDP (Percent) (Forecast) 2019 (Forecast) Employment (Percent) Manufacturing Employment (Percent) Unemployment Rate (Percent) CPI Detroit/Inflation (Percent)

14 Strong growth in most industry sectors Employment Change (000s) Employment Change, 2016 to 2017 Professional and Business Services Government Leisure and Hospitality Professional and Tech. Health Care Mining and Constr. Admin. and Waste Srv. Finance Manufacturing Transport. and Util. Wholesale Utilities Info. Management Educational Srv. Retail Other Services Source: Bureau of Labor Statistics, Current Employment Statistics 13

15 After a slight bump from hurricanes, returning to normal Annual Rate of Sales (in 000,000s) Annualized Rate of U.S. Light Vehicle Sales (in millions) (2000 to 2007 Peak) (2000 to 2007 Average) Source: Bureau of Economic Analysis 14

16 Michigan is still a place that makes things 25 Manufacturing Employment Percent of Total Employment Michigan United States Source: Bureau of Labor Statistics Current Employment Statistics 15

17 Moving on to west Michigan 16

18 The national unemployment rate was 4.6% in 2017 Source: Bureau of Labor Statistics Local Area Unemployment Statistics 17

19 The national labor force participation rate was 62.8% in 2017 Source: Bureau of Labor Statistics Local Area Unemployment Statistics 18

20 The Kalamazoo area is doing well 1.4 Employment Change, Q to Q Professional Srv. Employment Change (000s) Construct. Manufacturing Wholesale Tranportation and util. Financial Retail Information Educ. and health Leisure Other srv.government 0.4 Source: Bureau of Labor Statistics Current Employment Statistics and Upjohn Institute 19

21 Kalamazoo MSA New Units Per Month New Dwelling Units and All Transaction Sale Price Price Index (Dec 2007 = 100) New Dwelling Units 12 Month Moving Average Housing Price Source: Dodge Analytics & Federal Housing Finance Agency 15

22 Battle Creek 70 New Dwelling Units and All Transaction Sale Price 110 New Units Per Month Price Index (Dec 2007 = 100) New Dwelling Units 12 Month Moving Average Housing Price Source: Dodge Analytics & Federal Housing Finance Agency 15

23 Grand Rapids MSA New Dwelling Units and All Transaction Sale Price New Units Per Month Price Index (1995 = 100) New Dwelling Units 12 Month Moving Average Housing Price Source: Dodge Analytics & Federal Housing Finance Agency 15

24 Can firms make money at these points? Residential Construction, Value Per Sq. Foot $Dollar Kalamazoo MSA Battle Creek MSA Grand Rapids MSA Source: Dodge Data and Analytics 23

25 Household income has rebounded since the recession Household Income Index (2007 = 100) Kalamazoo Portage MSA Battle Creek MSA Grand Rapids Wyoming MSA 23% 18% 12% Source: US Census ACS Table

26 Some of the factors affecting 2018 Headwinds Volatile dollar Unclear regulatory changes Tight labor market Limited buildings Potential rising cost of capital Longer run slowing light vehicles Tailwinds Volatile dollar Unclear regulatory changes Continued expansion Recent estimates of GRP at +3% Strong consumer confidence 25

27 So, what keeps me up at night? The changing face of economic development, trading jobs for capital investment The Production Function equation Middle skilled jobs Artificial intelligence Universal Basic Income (UBI) & paying for public goods 26

28 The shift from jobs to CapEx? Grand Rapids Kalamazoo Alpha Cleveland Cliffs 27

29 Why the production function? Production is a function of how firms use (K*L*T) Where: K= capital L= labor T=technology And they can be substituted as driven by economics 28

30 A sign of the times? 29

31 Based on continued information and speculation my thoughts continue to evolve.. The coming of Industry 4.0 Pre Post Time 30

32 What are middle skilled jobs? Jobs that require more than a high school diploma and at least 6 months of formal on the job training, but less than a Bachelor s degree. The majority of individuals employed in these professions are considered middle skilled: 94.6% Installation, Maintenance, & Repair Occupations 84.4% Production Occupations 77.5% Construction and Extraction Occupations 69.7% Health Care Support Occupations 55.4% Protective Services Occupations 31

33 Middle skill employment shares Employment by Skill Level (2016) High Skill, 25.6% Low Skill, 39.8% Middle Skill, 34.6% Source: BLS & Upjohn Institute 32

34 Middle skill employment trend 20% 15% 10% 5% Employment Change 2006 to 2016 (By Skill Level, % Change since 2006) Great Recession 17.70% 13.30% 11.00% 7.60% 4.40% Middle Skill Non routine 0% 5% 10% % Middle Skill Routine 15% Low Skill Routine Middle Skill Routine High Skill Routine Low Skill Non Routine Middle Skill Non Routine High Skill Non Routine Source: Bureau of Labor Statistics & Upjohn Institute 33

35 Middle skill employment trend 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1% Employment Change 2012 to 2016 (By Skill Level, % Change since 2012) 8.8% 8.7% 8.7% 8.3% Low Skill Routine Middle Skill Routine High Skill Routine Low Skill Non Routine Middle Skill Non Routine High Skill Non Routine 5.8% 3.6% Middle Skill Non routine Middle Skill Routine Source: Bureau of Labor Statistics & Upjohn Institute 34

36 Warren Buffett queried on AI Buffett said that AI could be "enormously disruptive," yet beneficial in making the economy more efficient. "I would certainly think [AI] would result in significantly less employment in certain areas," he said. "It would be a good thing that would require enormous transformation in how people relate to each other, what they expect of government, all kinds of things. Buffett laid out a theoretical scenario at one of Berkshire's best known companies, Geico. The insurer employs about 36,000 people, yet the financial services industry is seen as vulnerable to automation. Buffett asked: What if all of Geico's current functions, aided by AI, could be done by 10,000 people or a third of the staff? Source: Chip Cutter, Managing editor at LinkedIn 35

37 How do we pay for public services & UBI? If you assume worker displacement due to AI State and local governments across the U.S. are funded by: Income taxes Sales taxes Property taxes Real Personal User fees, excise taxes, permit fees, and others How do we support population and services? 36

38 Questions and comments? Jim Robey, PhD Director of Regional Economic Planning Services Twitter: JimRobey 37