Center for Business and Economic Research Dixon Hughes Goodman Triad Business (October 2014)

Center for Business and Economic Research Dixon Hughes Goodman Triad Business (October 2014) The is developed and maintained by: Dr. G. Donald Jud, Center for Bus. & Eco. Res., Bryan School of Bus. & Eco., UNCG. Email: JudDon@uncg.edu Executive Summary The rose 0.4% in August. The index has gained 1.8% over the past 12 months and has risen at a 5.0% annualized rate over the past 3 months. In comparison, business activity in North Carolina has grown 2.6% over the past year and was up 0.3% this month. At the national level, the Conference Board s Leading Economic Index gained 0.2% in August and is up 6.8% over the past 12 months. The ISM Purchasing Managers Index was higher at 59.0, which indicates activity in the manufacturing sector is expanding at an accelerating pace. The seasonally adjusted rate of unemployment in the Triad was 6.4% in August, unchanged from last month but 1.8 percentage points below the level recorded 12 months ago. The national unemployment rate was 6.1%, down 0.1 percentage points from last month and 1.1 percentage points lower than August of last year. Total nonagricultural wage and salary employment in the Piedmont Triad rose 0.2% this month and is up 1.4% over the past 12 months. For the nation as a whole, employment gained 0.1% in August. Over the past 12 months, national employment has increased 1.8%. Area retail sales totaled $1,258.3 million in August. Corrected for inflation and seasonal variation, retail spending was higher by 0.4% in August and was up 5.4% from August of last year. Employment in retail trade was unchanged in August but has gained 0.9% over the past 12 months. Housing statistics suggest that the pace of housing market activity was higher in August. The number of existing, singlefamily homes sold in the Triad was up 2.5% from July. The price of the average home sold rose 0.9% from last month. The average quality-adjusted price of an existing home in the Triad was $187,253. The average was up 6.1% from 12 months ago. Commercial real estate in the Triad has recorded modest increases in rents, but vacancy rates remain above national averages. Passenger boardings at the Piedmont Triad International Airport were down by 0.5% in August but are up 0.3% year over year. Cargo shipments were higher by 1.5% this month but are off 11.1% over the past 12 months. 1

Tracking the Triad Economy Real Gross Domestic Product (GDP) figures released recently by the Bureau of Economic Analysis (BEA) make clear how slow the recovery from the Great Recession has been in the Triad. Since 2009, when the recovery began, real GDP in the Triad has risen 5.9%, compared to 8.2% nationally and 7.4% in North Carolina. In Millions of 2009 Dollars (log scale) 140,000 120,000 100,000 80,000 60,000 40,000 Real GDP in the Triad, 2001-13 2002 2004 2006 2008 2010 2012 Source: http://www.bea.gov/regional/index.htm Triad Charlotte Raleigh The graph compares GDP in the Triad to GDP in the Charlotte and Raleigh MSAs. In the graph, the vertical axis plots GDP on a log scale so the slope of each line reflects its rate of growth. Since the recovery began, growth in the Charlotte and Raleigh areas has been much faster than in the Triad. GDP in Charlotte and Raleigh has risen 16.0% and 11.6% respectively. Within the Triad, growth has been most rapid in Burlington, with GDP there rising 13.7%, followed by 7.3% in Greensboro, and 2.6% in Winston-Salem. 2

The level of economic activity in the Piedmont Triad as measured by the (1992 = 100) was up 0.4% in August. 1 Over the past 12 months, the index has gained 1.8%, and it has risen at a 5.0% annualized rate over the past 3 months. In comparison, business activity in North Carolina was up 2.6% over the past 12 months and was higher by 0.3% in August. 180 160 140 Triad Business Index NC Business Index (right scale) 200 180 160 140 120 100 Triad Business Index (left scale) 80 1990 1995 2000 2005 2010 Shaded areas indicate periods of recession as determined by the National Bureau of Economic Research. 120 100 80 The Conference Board s Leading Economic Index (LEI) rose 0.2% in August and has gained 6.8% over the past year. The LEI is signaling that the pace of economic activity is likely to continue to strengthen over the next 6 months. The ISM Purchasing Managers Index was higher at 59.0 in August, indicating the manufacturing sector is growing and the pace of growth is accelerating. National Economic Indicators ISM Purchasing Managers Index (right scale) 70 60 50 120 100 80 40 30 60 40 20 The Conference Board Leading Economic Index (left scale) 0 1990 1995 2000 2005 2010 A value of 50 or more for the PMI indicates an expanding mfg. sector nationally. 1 The Triad is defined as an eight-county area that is composed of Alamance, Davie, Forsyth, Guilford, Randolph, Rockingham, Stokes, and Yadkin. 3

The Federal Reserve increased the monetary base in August, indicating its policy of quantitative easing is still ongoing, although at a slowing pace. The real monetary base is up 17.8% over the past 12 months. In contrast, total bank lending (business, consumer, and real estate) adjusted for inflation is up just 3.3% since August of last year, although lending has begun to accelerate in recent months. % Chg. (12 mo) in Real Monetary Base 1.2 0.8 0.4 0.0 Monetary Indicators % Chg. (12 mo.) in Real Bank Lending (right scale) % Chg. (12 mo.) in Real Monetary Base (left scale) -0.4 90 95 00 05 10.15.10.05.00 -.05 -.10 % Chg. (12 mo) in Total Real Lending The national unemployment rate was 6.1%, down 0.1 percentage points from last month and 1.1 percentage points less than August of last year. The seasonally adjusted rate of unemployment in the Triad was 6.4% in August, unchanged from last month but 1.8 percentage points below the level recorded 12 months ago. 12 Unemployment Rate 10 Percent (%) 8 6 National 4 Triad 2 1990 1995 2000 2005 2010 4

Initial claims for unemployment insurance are a leading indicator of the unemployment rate. Claims in the Triad were lower by 0.3% in August and are down 27.5% over the past 12 months. In August, there were 2,772 new unemployment claims, or 0.4% of those employed in the Triad. Nationally, claims were down 1.3% in August and have fallen 11.0% over the past 12 months. 14,000 12,000 10,000 Initial Claims for Unemployment Insurance U.S., in 1,000s (right scale) 700 600 500 400 300 8,000 6,000 4,000 2,000 Triad (left scale) 92 94 96 98 00 02 04 06 08 10 12 14 200 Total nonagricultural wage and salary employment (employer survey) in the Piedmont Triad rose 0.2% in August. Over the past 12 months, employment has gained 1.4%. For the nation as a whole, employment rose 0.1% this month. Over the past 12 months, national employment has increased 1.8%. 680 640 Total Employment (1,000s) National, right scale 140,000 130,000 600 120,000 560 110,000 520 Triad, left scale 480 1990 1995 2000 2005 2010 100,000 5

Goods-producing employment in the Triad gained 0.1% in August. At the national level, goods-producing employment also was up 0.1%. Over the past 12 months, the number of goods-producing jobs in the Triad has dropped 0.9%, while goodsproducing employment nationally has gained 2.4%. Employment in Triad manufacturing rose 0.1% this month but is down 0.4% over the past 12 months. Goods Producing Employment (1,000s) 26,000 160 140 120 100 80 Triad, left scale National, right scale 24,000 22,000 20,000 18,000 16,000 60 1990 1995 2000 2005 2010 The number of persons in the Triad employed in the service-providing sector was higher by 0.2% in August. Higher employment was recorded in wholesale trade, transportation, business services, and leisure services. Over the past 12 months, the number of jobs in the service-providing sector has risen 1.9%, while service-providing employment nationally has gained 1.7%. Employment was higher in wholesale and retail trade, transportation, finance, business and professional services, leisure, and other service. It was lower in education and health care and government. 7.0% 6.0% Service-Providing Employment (12-mo. percent change) 5.7% 5.0% 4.8% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 3.7% 2.4% 1.3% 0.9% 0.0% 0.3% W Trade R Trade Trans Info Fin Bus Ser Ed/Hlth Leis Other Gov -0.5% -0.7% -2.0% 6

Residential building permits in the Triad, which reflect planned construction, rose 2.4% this month. Over the past 12 months, the pace of planned residential building has risen 12.7%. At the national level, permits gained 0.3% in August and are up 4.5% over the past 12 months. Construction employment in the Triad was down 2.7% over the past year and was unchanged this month. Residential Building Permits U.S., right scale 2,400 2,000 $1,000s 140,000 120,000 100,000 80,000 60,000 1,600 1,200 800 400 1,000s of Units 40,000 Triad, left scale 20,000 1990 1995 2000 2005 2010 7

Retail sales in the Triad totaled $1,258.3 million in August. Corrected for inflation and seasonal variation, retail spending was up 0.4% from July and was higher by 5.4% from August of last year. Employment in retail was unchanged in August but was higher by 0.9% over the past 12 months. 580,000,000 560,000,000 540,000,000 520,000,000 500,000,000 480,000,000 Triad (left scale) Retail Sales National (right scale, in $1,000,000s) 170,000 165,000 160,000 155,000 150,000 145,000 140,000 135,000 460,000,000 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Hotel data provided by the Greensboro Convention and Visitors Bureau show area hotel revenues are up 8.4% year over year. The average occupancy rate for area hotels was 61.0% in August, up from 57.6% in August of last year. Employment in the leisure services was up 3.7% over the past 12 months. 8

Passenger boardings at the Piedmont Triad International Airport declined 0.5% this month but are up 0.3% compared to August of last year. Cargo shipments rose 1.5% in August but are lower by 11.1% compared to August of last year. Air Traffic at the Piedmont-Triad International Airport 160,000 120,000 Pounds 10,000,000 8,000,000 6,000,000 4,000,000 Air Cargo Shipments (left scale) Passenger Boardings (right scale) 80,000 40,000 0 Passengers 2,000,000 0 2004 2006 2008 2010 2012 2014 9

Total employment across the state gained 0.3% in August. Over the past 12 months, employment in North Carolina has risen 2.4%, outpacing the gain recorded for the nation. Employment was higher in 13 of the state s 14 metropolitan areas over the year. The strongest employment gains were recorded in Raleigh (4.0%), Wilmington (3.1%), and Charlotte (2.8%). Employment declined in Rocky Mount (-0.9%). In the Triad, employment was higher by 1.2% in Greensboro/High Point, 1.1% in Winston-Salem, and 1.0% in Burlington. MSA Employment Growth (12-month percent change) Asheville Burlington Charlotte Durham Fayetteville Goldsboro GSO/High Point Greenville Hickory Jacksonville Raleigh Rocky Mount Wilmington Winston- Salem North Carolina Nation - 0.9% 0.2% 0.5% 0.3% 0.6% 1.5% 1.0% 1.9% 1.2% 1.6% 1.1% 1.8% 2.4% 2.8% 3.1% 4.0% - 2.0% - 1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% The unemployment rate in North Carolina was 6.8%, up 0.3 percentage points from last month but 1.2 percentage points below the level recorded 12 months ago. The unemployment rate was higher this month in two (Asheville and Durham) of the state s metropolitan areas and unchanged in the other 12 areas. The highest rate of unemployment was in Rocky Mount (9.4%), while the lowest rate was in Asheville (5.1%). 10

Housing statistics for the Triad indicate that the pace of housing market activity continued to move up in August. The number of existing, single-family homes sold in the Triad totaled 930 in August, after adjustment for seasonal variation. The number sold was up 2.5% compared to the level of sales recorded in July, but it was 4.6% below the number sold during August one year ago. 1,200 1,000 800 Number and Prices of Existing Homes Sold (August 2014) Avg. Price of Homes Sold (right scale) 220,000 200,000 180,000 160,000 600 400 Number of Homes Sold (left scale) 98 00 02 04 06 08 10 12 14 140,000 The price of the average home sold this month rose 0.9% from last month. The average quality-adjusted price of an existing home in the Triad was $187,253. The average this month was up 6.1% from the average recorded 12 months ago. The average time on the market for homes sold was 99.6 days, down 1.1% from July, and the ratio of selling to listing price was unchanged at 94.8%, indicating no change in the level of discounting in the market. The inventory/sales ratio was 7.8 months in August, down from 8.0 months in July. The inventory/sales ratio was much higher for higher-priced homes. The number of real estate foreclosures in the Triad declined 2.9% in August and is down 35.1% over the past year. There were 398 reported foreclosures in the Triad in August. 11

Commercial real estate data in this section are provided by ReisReports. Reis data indicate conditions in the Triad Apartment and Retail sectors improved in July. Average rent in the apartment market rose 0.3% during the month and has risen 1.9% over the past year. The average vacancy rate inched down to 5.5% (compared to 4.1% nationally), and the average rate is down from 6.1% 12 months ago. Nevertheless, the vacancy rate in the Triad apartment market ranks among the 20 highest metro areas in the nation. Conditions in the office market remained poor. In July, average rent slipped 0.1%. The average vacancy rate was 21.6% (among the 20 highest metro areas in the country) and down 0.1 percentage points from May. The rate in July was up from the 21.0% rate recorded 12 months ago. Retail market conditions improved during the month. Rents rose 0.1% and are up 1.5% year over year but lag the rate of inflation. Retail vacancies averaged 9.6% in July (compared to 9.5% nationwide). The average retail vacancy rate dropped 0.3 percentage points from June and is down from 9.7% 12 months ago. Rent $710 $705 $700 $695 $690 $685 $680 $675 $670 $665 $660 Triad Apartment Market 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% Vacancy Rate (%) $655 Jan. Feb. Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 0.0% Rent Vacancy Rate Source: ReisReports, see https://www.reisreports.com/ $16.60 Triad Office Market 21.8% Rent $16.50 $16.40 $16.30 $16.20 $16.10 21.6% 21.4% 21.2% 21.0% 20.8% 20.6% 20.4% Vacancy Rate (%) $16.00 20.2% Jan. Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Rent Vacancy Rate Source: ReisReports, see https://www.reisreports.com/ $13.50 Triad Retail Market 11.0% $13.40 10.8% 10.6% Rent $13.30 $13.20 $13.10 10.4% 10.2% 10.0% 9.8% 9.6% Vacancy Rate (%) $13.00 9.4% 9.2% $12.90 9.0% Jan. Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Rent Vacancy Rate Source: ReisReports, see https://www.reisreports.com/ 12

Table 1: Triad Economic Indicators % Chg % Chg Indicators August 2014 July 2014 May. 2014 August 2013 Month Ago Year Ago Piedmont- Triad Bus. Index 160.8 160.0 159.2 157.9 0.5% 1.8% NC Business Index 178.9 178.3 177.7 174.5 0.3% 2.5% Piedmont- Triad Bus. Index 161.2 160.6 159.9 158.4 0.4% 1.8% NC Business Index 179.7 179.1 178.4 175.1 0.3% 2.6% Unemployment Rate 6.4 6.4 6.4 8.2 0.0-1.8 Initial Claims for Unemployment Ins. 2,772 2,781 2,767 3,825-0.3% - 27.5% Total Employment (1,000s) 622.5 621.2 619.6 613.9 0.2% 1.4% Goods- producing 102.3 102.2 102.2 103.2 0.1% - 0.9% Construction 21.6 21.6 21.6 22.2 0.0% - 2.7% Manufacturing 80.7 80.6 80.6 81.0 0.1% - 0.4% Service- providing 520.2 519.0 517.4 510.7 0.2% 1.9% Wholesale Trade 28.3 28.2 28.1 27.0 0.4% 4.8% Retail Trade 68.7 68.7 68.6 68.1 0.0% 0.9% Transportation 26.0 25.9 25.8 25.4 0.4% 2.4% Information 7.4 7.4 7.4 7.4 0.0% 0.0% Financial 31.8 31.8 31.7 31.7 0.0% 0.3% Prof. & Business 88.4 87.8 87.0 83.6 0.7% 5.7% Education & Health 107.1 107.2 107.3 107.9-0.1% - 0.7% Leisure 62.0 61.5 61.0 59.8 0.8% 3.7% Other 23.0 23.0 23.1 22.7 0.0% 1.3% Government 76.7 76.7 76.7 77.1 0.0% - 0.5% Retail Sales ($ millions) $1,258.3 $1,252.7 $1,245.9 $1,194.1 0.4% 5.4% Hotel Revenues (nsa) $15,727,330 $15,494,056 $14,864,315 $14,514,661 1.5% 8.4% Hotel Occupancy Rate Avg. (%) (nsa) 61.0 60.9 59.6 57.6 0.1% 5.9% Residential Building Permits ($1,000s) $73,267 $71,565 $70,135 $65,010 2.4% 12.7% Avg. Existing Home Price $187,253 $185,635 $184,019 $176,571 0.9% 6.1% No. of Existing Homes Sold 930 907 882 975 2.5% - 4.6% Real Estate Foreclosures 398 410 429 613-2.9% - 35.1% Air Passenger Boardings 69,690 70,048 70,369 69,488-0.5% 0.3% Air Cargo Shipments (1,000s of lbs) 7,448 7,337 7,237 8,374 1.5% - 11.1% NATIONAL INDICATORS: Unemployment Rate 6.1 6.2 6.1 7.2-0.1-1.1 Total Employment (1,000s) 139,118 138,976 138,764 136,636 0.1% 1.8% Goods- producing 19,144 19,122 19,055 18,696 0.1% 2.4% Service- providing 119,974 119,854 119,709 117,940 0.1% 1.7% Retail Sales ($ millions) $397,576 $396,194 $394,805 $387,232 0.3% 2.7% Res. Bldg. Permits (units in 1,000s) 1,029 1,026 1,020 985 0.3% 4.5% Consumer Price Index (CPI- U,sa) 237.9 238.3 238.3 233.9-0.2% 1.7% The Conf. Board Leading Eco. Indx. 103.8 103.6 102.4 97.2 0.2% 6.8% Initial Claims for Unemployment Ins. 300,000 304,000 309,000 337,000-1.3% - 11.0% ISM Purchasing Managers Index 59.0 57.1 55.3 56.3 3.3% 4.8% Policy Uncertainty Index 73.0 77.7 80.7 105.0-6.1% - 30.5% All data are statistically adjusted to eliminate statistical aberrations unrelated to trend and cycle. Monetary figures (except for housing prices) are deflated by the CPI- U to reflect inflation- adjusted 2014 dollars. Figures are compiled by Dr. G. Donald Jud, Bryan School of Business & Economics, UNCG, E- mail: Juddon@uncg.edu. 13

Table 2: North Carolina Metro Indicators (August 2014) Percent Change THIS LAST YEAR LAST YEAR AREA INDICATORS: MONTH MONTH AGO MONTH AGO Asheville Total Employment (1,000s) 177.2 176.9 174.6 0.2% 1.5% Unemployment Rate (%) 5.1 5.0 6.3 0.1% - 1.2% Burlington Total Employment (1,000s) 59.5 59.4 58.9 0.2% 1.0% Unemployment Rate (%) 6.3 6.3 8.2 0.0% - 1.9% Charlotte Total Employment (1,000s) 901.3 898.7 876.5 0.3% 2.8% Unemployment Rate (%) 6.3 6.3 8.2 0.0% - 1.9% Durham Total Employment (1,000s) 290.5 289.8 285.1 0.2% 1.9% Unemployment Rate (%) 5.2 5.1 6.2 0.1% - 1.0% Fayetteville Total Employment (1,000s) 131.6 131.6 131.4 0.0% 0.2% Unemployment Rate (%) 7.5 7.5 9.4 0.0% - 1.9% Goldsboro Total Employment (1,000s) 43.1 43.2 42.9-0.2% 0.5% Unemployment Rate (%) 6.6 6.6 8.2 0.0% - 1.6% Greensboro/High Point Total Employment (1,000s) 350.7 350.3 346.7 0.1% 1.2% Unemployment Rate (%) 6.7 6.7 8.5 0.0% - 1.8% Greenville Total Employment (1,000s) 82.2 82.0 80.9 0.2% 1.6% Unemployment Rate (%) 6.7 6.7 8.3 0.0% - 1.6% Hickory Total Employment (1,000s) 145.0 145.0 144.5 0.0% 0.3% Unemployment Rate (%) 6.9 6.9 9.2 0.0% - 2.3% Jacksonville Total Employment (1,000s) 49.0 49.0 48.7 0.0% 0.6% Unemployment Rate (%) 6.7 6.7 7.8 0.0% - 1.1% Raleigh Total Employment (1,000s) 565.2 563.8 543.5 0.2% 4.0% Unemployment Rate (%) 5.2 5.2 6.6 0.0% - 1.4% Rocky Mount Total Employment (1,000s) 53.7 53.8 54.2-0.2% - 0.9% Unemployment Rate (%) 9.4 9.4 11.8 0.0% - 2.4% Wilmington Total Employment (1,000s) 146.1 145.9 141.7 0.1% 3.1% Unemployment Rate (%) 6.5 6.5 8.5 0.0% - 2.0% Winston- Salem Total Employment (1,000s) 211.4 211.1 209.0 0.1% 1.1% Unemployment Rate (%) 6.0 6.0 7.7 0.0% - 1.7% North Carolina Total Employment (1,000s) 4,153.7 4,141.2 4,054.9 0.3% 2.4% Unemployment Rate (%) 6.8 6.5 8.0 0.3% - 1.2% 14

Table 3: Triad Business Index Historical Values Triad Total Goods- Prod. Unemp. Year Mo. Index % Chg Employment Employment Rate 2014 8 161.2 0.4% 622.5 102.3 6.4 2014 7 160.6 0.4% 621.2 102.2 6.4 2014 6 159.9 0.4% 619.6 102.2 6.4 2014 5 159.2 0.4% 617.4 102.3 6.4 2014 4 158.5 0.3% 614.7 102.4 6.5 2014 3 158.1 0.0% 612.6 102.5 6.5 2014 2 158.1-0.3% 611.8 102.6 6.6 2014 1 158.5-0.3% 612.7 102.7 6.7 2013 12 158.9-0.2% 614.2 102.8 6.9 2013 11 159.2 0.1% 615.4 103.0 7.1 2013 10 159.1 0.2% 615.8 103.0 7.5 2013 9 158.8 0.3% 615.1 103.1 7.8 2013 8 158.4 0.3% 613.9 103.2 8.2 2013 7 157.9 0.3% 612.5 103.3 8.5 2013 6 157.4 0.2% 611.5 103.3 8.7 2013 5 157.1 0.1% 611.0 103.3 8.9 2013 4 157.0 0.1% 611.1 103.3 9.1 2013 3 156.8 0.1% 611.3 103.2 9.3 2013 2 156.7 0.2% 611.2 103.2 9.4 2013 1 156.4 0.2% 610.5 103.1 9.5 2012 12 156.1 0.2% 609.2 102.9 9.6 2012 11 155.8 0.2% 607.6 102.7 9.6 2012 10 155.5 0.1% 606.1 102.5 9.6 2012 9 155.3 0.2% 604.7 102.3 9.6 2012 8 155.2 0.1% 603.7 102.2 9.5 2012 7 155.1 0.0% 603.2 102.3 9.5 2012 6 155.0-0.1% 603.3 102.5 9.5 2012 5 155.1 0.0% 603.8 102.8 9.4 2012 4 155.1 0.1% 604.5 103.3 9.4 2012 3 154.9 0.2% 604.6 103.7 9.4 2012 2 154.6 0.4% 603.7 103.8 9.5 2012 1 154.0 0.4% 601.9 103.6 9.7 15