Economic Outlook and Forecast 2015 Prince William County Fe b r u ar y 17, 2 0 15
Overview National growth Labor market improving but still weaknesses GDP growth expected to remain moderate Next 2 years expected to be the best in current expansion Virginia is lagging the nation: Cuts in federal spending Prince William outpacing the state despite cuts in defense spending
Recession Ended in June 2009; Employment Hit Previous Peak mid- 20 14 142,000 Nonfarm Employment 140,000 138,000 136,000 134,000 132,000 130,000 128,000 126,000 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Source: U.S. Department of Labor. Data through January 2015.
Unemployment Rate has been Declining Unemployment Rate 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Source: U.S. Department of Labor. Data through January 2015.
Unemployment Rate not as Low as it Seems PWC Labor Participation is High: 73.1% 64.9% in VA and 63.8% in the Nation
Real GDP Grow t h is M oderat e DoD Contracting (- 20.1% Q 4 12; - 10.9 % Q 1 13; - 11.4% Q 4 13; - 12.5% Q 4 14 Qtrly Annualized) Source: Bureau of Economic Analysis Data through 4 th quarter 2014.
Continued Modest Growth Expected Expansion started 6/ 09; Now in 69 th Month; Last 3 Expansions Averaged 95 M onths Actual Forecast 2012 2013 2014 2015 2016 Percent Change Real Gross Domestic Product 2.3 2.2 2.4 3.2 3.4 Consumption Expenditures 1.8 2.4 2.5 3.2 3.1 Gross Private Domestic Investment 9.2 4.9 6.0 6.2 7.5 Residential Investment 13.5 11.9 1.6 4.9 5.5 Nonresidential Investment 7.2 3.0 6.1 6.4 8.4 Producer s Durable Equipment 6.8 4.6 6.3 6.5 10.1 Structures 13.2-0.5 8.0 5.7 8.0 Intellectual Property Products 3.9 3.4 4.6 6.4 6.0 Government Expenditures -1.4-2.0-0.2 1.1 1.6 Trade Deficit (Billions of 2009 Dollars) Net Exports, Goods & Services -452.6-420.5-452.7-499.4-541.3 Consumer Price Index 2.1 1.5 1.6 0.9 2.0 Yields (%) Federal Funds Rate 0.1 0.1 0.1 0.6 2.8 Prime Rate 3.3 3.3 3.3 3.8 5.8 10-Year Treasury 1.8 2.4 2.5 3.0 4.7 30-Year Conventional Mortgage 3.7 4.0 4.2 4.6 6.3 Source: Chmura Economics & Analytics
Fed Tightening Fed Cleveland President Loretta Mester, Feb 3, 20 15 The economy is moving back to more normal territory, and as it does, monetary policy should begin to do so too. Because monetary policy affects the economy with a lag, policymakers need to be forward looking. We need to base our policy on both realized and expected progress toward our goals. Based on my forecast and the risks I see around that forecast, I believe it will soon be appropriate to begin moving rates up from zero. Because policy must be forward looking, in my view liftoff should occur before our goals are fully met. But even after liftoff, policy will remain very accommodative for some time, promoting attainment of both goals. Indeed, if incoming economic information supports my forecast, I would be comfortable with liftoff in the first half of this year, but as the FOMC has emphasized, policy isn t on a pre-set path. Both liftoff and the path of policy thereafter will be based on incoming information to the extent that it affects the economic outlook and progress toward our goals of maximum employment and price stability. Monetary policy affects the economy with a lag Liftoff should occur before goals are met Maximum employment Price stability Comfortable with liftoff in 1 st half of year Policy isn t on a pre-set path
Defense Budget: FY 80-14 Sequestration May Occur Again in October 2015 Constant 2014 $ Billions $800 $700 $600 $500 $400 $300 Cold War Build-Up Cold War Drawdown FY85-98 -33% Post-9/11 Era FY10-14 -22% $200 $100 $0 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 TOA Sequestration Note: Total Obligational Authority in constant billions of dollars. These dollars include all enacted war and supplemental funding through FY13. Sources: Table 6-2, FY 2014 DoD Comptroller s Green Book. CBO, Long-Term Implications of the 2014 Future Years Defense Program. FY15 Budget Overview Brief.
Largest DoD Cuts were in 2013 Source: USASpending.gov; Forecast: Chmura and Presidents Budget 2016, subject to revision.
Dependence on Defense Contracts is High Cuts Have Slow ed not Stalled PWC Dependency in Arlington (13.4%) and Fairfax (14%) is Higher Source: Chmura Economics & Analytics
Prince William County Continued Growth Expected Proximity to Washington DC and military bases Highly-educated workforce/paying well Diverse industry mix Competitive wages and land values
PWC Quickly Recovered Jobs Lost During Recession
PWC Employment Growth Outpacing Northern Virginia and the State
PWC Outpacing Loudoun and Fairfax
Unemployment Rate Continues to Inch Down
PWC Initial Unemployment Claims Point to Further Improvement in Labor Market 1400 Initial Unemployment Claims Twelve-Month Moving Average, Prince William County Not Seasonally Adjusted 1200 1000 800 600 400 200 Source: Virginia Employment Commission 0 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Note: The large increase in claims in October 2013 coincides with the federal government shutdown.
Highly Educated Population Earns Higher Wages and Unemployment Rate is Lower PWC VA USA No High School Diploma 10.2% 10.2% 12.2% High School Graduate 20.3% 24.1% 26.7% Some College, No Degree 22.9% 20.8% 22.0% Associate's Degree 7.6% 7.6% 8.6% Bachelor's Degree 23.8% 22.1% 19.5% Postgraduate Degree 15.3% 15.2% 11.0% Source: ACS 2009-2013
High Median Household Income ($98,071) Fairfax: $110,292; Loudoun: $122,238 Source: ACS 2009-2013
Favorable Indust ry Mix Prince William County Current Historical Forecast Change over the Last 5 Average Annual % Change in Years Employment 2009q3-2014q3 Four Quarters Ending with 2014q3 Avg. Annual Wages Prince William County, Virginia Northern Virginia, VA MSA Over the Next 10 Years Total Approx Repl Demand Total Growth Demand Avg. Annual Growth Percent Location Industry Employment Quotient Employment USA Agriculture, Forestry, Fishing and Hunting 63 $35,260 0.06-9 -2.6% -0.6% 1.2% 23 7 1.1% Mining, Quarrying, 88 $63,903 0.12 16 4.0% 4.4% 4.6% 24 26 2.6% Utilities 491 $82,407 0.70-55 -2.1% 0.6% -0.5% 130 42 0.8% Construction 12,323 $49,780 2.31 1,824 3.3% -0.9% -0.8% 2,865 5,171 3.6% Manufacturing 1,864 $58,282 0.18 57 0.6% -2.8% -0.2% 466 309 1.5% Wholesale Trade 2,929 $55,460 0.58 477 3.6% -1.4% 0.5% 712 665 2.1% Retail Trade 22,286 $26,284 1.68 2,112 2.0% 1.1% 0.8% 7,608 5,079 2.1% Transportation and Warehousing 2,297 $45,460 0.50 5 0.0% -0.4% 0.6% 647 416 1.7% Information 1,454 $67,060 0.59 7 0.1% -3.1% -1.1% 364 124 0.8% Finance and Insurance 1,908 $59,526 0.39 274 3.2% 1.1% -0.2% 494 423 2.0% Real Estate and Rental and Leasing 1,631 $46,627 0.91 236 3.2% -0.1% 0.2% 407 431 2.4% Professional, Scientific, Technical Services 8,518 $80,542 1.17 739 1.8% 0.3% 1.8% 2,080 3,535 3.5% Management of Companies and Enterprises 693 $70,842 0.38-259 -6.2% 1.3% 2.6% 158 113 1.5% Administrative & Support & Waste Mgmt 5,284 $36,307 0.71 557 2.3% 1.9% 3.1% 1,342 1,582 2.7% Educational Services 16,362 $44,067 1.55 1,483 1.9% 1.2% 0.0% 3,889 5,019 2.7% Health Care and Social Assistance 11,321 $42,952 0.66 2,226 4.5% 2.2% 2.2% 2,610 5,230 3.9% Arts, Entertainment, and Recreation 3,257 $29,321 1.53 618 4.3% 0.6% 1.1% 1,106 851 2.3% Accommodation and Food Services 13,009 $15,966 1.20 2,497 4.4% 2.5% 2.2% 5,011 2,941 2.1% Other Services 3,900 $32,676 1.07 739 4.3% 1.2% -1.1% 1,098 1,072 2.5% Public Administration 7,876 $80,475 1.26 1,880 5.6% 1.5% -0.7% 2,016 1,006 1.2% Total - All Industries 117,552 $43,657 1.00 15,420 2.9% 0.8% 0.9% 32,294 34,041 2.6% Source: JobsEQ
Conclusion National growth expected to pick up over next two year Virginia will continue to lag due to cuts in federal spending Prince William pace of growth increases despite continued federal cuts