THE 2018 ECONOMY: BETTER THAN IN 2017

Transcription

1 THE 2018 ECONOMY: BETTER THAN IN 2017 Presented by: Elliot F. Eisenberg, Ph.D. President: GraphsandLaughs, LLC March 5, 2018 Boise, ID

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

3 The Stock Market Is Doing Amazingly Well

4 Households are Repairing their Balance Sheets Trillions in Net Worth Recovered, at a New Record Level HNONWRQ027S

5 Change in US Wealth by Income Class

6 Retirement Wealth Gap Keeps Growing The top percentiles keep pulling away.

7 Income Share of The Wealthiest 1% of Population It moves largely in lock step across nations

8 Income Share of The Wealthiest 1% of Population

9 Hourly Earnings Growth

10 Income Disparities Continue to Grow

11 Households Deleveraging is Done!!!!!! Mortgage debt remains 4.4% below the 2008 peak

12 Conference Board Consumer Confidence is High Near the best level since December 2000!

13 Small Business Confidence is Strong Spectacular rise since election.

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

15 US Light Vehicle Sales are Down but are Solid

16 Residential Remodeling Rising Nicely Owner-Occupied Improvements. Higher prices and less sales boost renovation

17 Let s Buy a Horse

18 Let s Buy a Plane The percentage is now as high as it was during the Housing Boom

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

20 Drilling Activity is Up Number of oil rigs is now rising as a result of the rising price of crude

21 Agriculture Prices are in a Bear Market 2017 farm income will be lousy. And NAFTA fears make it worse

22 Corporate Profits are Again Rising After Weakening

23 ISM Manufacturing Numbers are Strong Manufacturing is not as important as it was in the past. It is however booming!

24 ISM Non-Manufacturing Numbers are Good Service sector is doing well

25 OK. Now, Look at Capital Goods Orders! Minus defense and aircraft

26 Tax Cuts Are Going to Supercharge the Economy But, only in the short run

27 Budget Deficit Got Much Better but is Getting Worse

28 The Dollar is Weakening Against all Currencies Peaked in January A weaker dollar is a concern Strong Stronger Weak

29 Western Democracies are All Growing! Both emerging markets and developed look increasingly better

30 GDP Growth Goes Nowhere Slowly Trump tax cuts should boost GDP by 40 bps in 2018

31 GDP Can t Grow Much Faster!

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

33 Labor Markets: They re on the mend

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

35 STEADY Labor Market Improvement: Involuntary Separation Long Term Trends: Initial claims below 300K for 152straight weeks!

36 Tighter Labor Market than Perceived? For Sure! The number of unemployed per job opening is at a record low!

37 Wage Growth is Weak, But...

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

39 Changes in Median Wage Growth Looks OK! Looks only at those continuously full-time employed

40 Rise in Lower Paying Jobs is Obvious Between now and 2026 lots of low end healthcare jobs.

41 Labor Productivity Growth is Dismal

42 Labor Productivity Growth Remains Dismal Maybe this is why

43 Inflation? What Inflation!

44 CPI: Inflationary Pressures are Weakt Remove Healthcare, and apparel are now weak. Was drugs, cellphones and autos

45 Core PCE Price Index: Inflation is Very Tame! Surprising this late in the business cycle.

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

47 Taller Fed Chair, Higher Rates?

48 Federal Reserve Behavior Most likely scenario Fed funds is currently 1.375% 12/31/18: 2.125% (50%/50%) 10-yr 3.10% 12/31/19: 2.625% 10-yr 3.40% 12/31/20: 3.125% 10-yr 3.55% Balance sheet keeps shrinking.

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

50 Residential Fixed Investment Slowly Rises! Non-residential is up 6%, public is down 8% and residential is down 23% from peak

51 Bigger Houses Only!

52 New Home Prices Are Recovering Too Nicely

53 New Home Sales by Price Houses under 200K are an insignificant percentage

54 Regulation is a Killer

55 Input Costs are Way Up due to Policy and China Prices are up 31% to 39% Y-o-Y. End of NAFTA is making this worse

56 Labor Shortage is Quite Serious Average annual wage increase for construction workers is still just 3.5%

57 No Productivity Gains in US Construction!

58 Huge Influx of Chinese Buyers Will Persist Top destinations: CA 38%, WA 8%, NY 7%, IL 4%, TX 4%, NC 3%, FL 3%. The Chinese account for 16% of foreign buyers, Canadians are now 14%

59 Huge Influx of Foreign Buyers

60 Existing Inventory is Shrinking Down 6.4% Y-o-Y and down for 32straight months. Higher prices should help, but rental conversions especially at lower price points, aging in place & mortgage lock-in are hurting

61 Price Growth Appears to be Rising? Prices rise faster than wages! Y-o-Y prices up 6.0%, 6.3% or 6.3% depending on the measure

62 Rents Rise More Slowly But Still Faster Than Wages Rents rise faster than wages! Y-o-Y prices up 3.7%. Is it plateauing or declining?

63 Credit is Tight: Thus, No Housing Bubble All FICO Scores are up about 40 points

64 Single-Family and Multifamily Starts A Slow Recovery Lack of lots, gun shy lenders, high prices, SF looks decent

65 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. 9 quarters in a row below 50

66 House Prices by Geography DC, CA and HI are the most expensive. NY, MA and CT follow

67 Average Property Tax Rate by State Minnesota is close to the middle

68 MID Average Savings by Homeowner

69 Top Marginal Income Tax Rate by State Minnesota is fourth highest!

70 Impact of the Mortgage Interest Deduction by Geography A house costing up to $900,000 is still somewhat protected.

71 Refinance Activity Keeps Slowly Declining 2018 refi activity falls to $450 billion from $600. Share falls from 37% to 27%.

72 MBA Mortgage Purchase Apps Flatten 1 st time applications up 3% Y-o-Y, at level of late 1990s! The recent decline has reversed volume looks to be slightly better than 2017

73 But Existing Home Sales?

74 Recent Existing Home Sales Solid and steady improvement until late Since then, largely flat.

75 Pending Home Sales are Flat High prices due to low inventories are finally being felt

76 Demographics Will Start to Really Help Beginning to approach the Peak. Chase Millennials, move-up buyers and Boomers

77 Demographics Will Start to Really Help Beginning to approach the Peak. Chase Millennials, move-up buyers and Boomers

78 What About Things Here?

79 Things Are Good Everywhere

80 The Future Looks a Bit Better Than the Present

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

82 Unemployment Rates in Idaho MSAs Coeur d Alene is always highest. Idaho Falls is usually lowest. All five are remarkably low

83 Labor Force Growth in ID Varies Considerably Growth is tops in Boise & Twin Falls. Up a bit in Idaho Falls and flat in Coeur & Pocatello

84 Payroll Growth Has Been Excellent Growth is tops in Boise but is now generally declining everywhere

85 Per Capita Income in the Biggest Cities in ID Pocatello and Twin Falls are weaker. Boise, Coeur and Idaho Falls are very similar

86 Housing Prices in and Around Idaho All above pre-recessions peaks. 3 groupings; Boise & Coeur, ID Falls & Pocatello, Twin Falls

87 Home Ownership Rate in Idaho Very similar movements to that of the US

88 Rental Vacancy Rate in Idaho Again, similar to the movements in the US

89 Home Vacancy Rate in Idaho Again, very similar to the rate in the US

90 Home Construction Activity in Idaho It keeps steadily improving

91 Population Growth in Idaho It is double the rate of growth for the nation as a whole

92 Interstate Migration Patterns 2017 Since 2013 it has been strongly positive

93 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