Ted C. Jones, PhDChief Economist

Stewart Title

MillennialsBegin

Turning40

ThisYear

1967 – An Economic

Forecast for2020

The beat goes on, the beat goes on

Drums keep pounding a rhythm to the brain

La de da de de, la de da de da

Sonny & Cher

Charleston was once the rage, uh huh

History has turned the page, uh huh

The mini skirts, the current thing, uh huh

Teenybopper is our newborn king, uh huh

Sonny & Cher

125

130

135

140

145

150

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 20

U.S. JobsJobs (Millions) Seasonally Adjusted

1.40% Prior 12 Months 145,000 Net New Jobs December

2.108 Million Net New Jobs in Past 12-Months

More Jobs Than AnytimeIn History

1.40%December 2019

Compound Annual Job Growth Rate

1.31%Past 40-Years

6.4%BetterThan

Average

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 20

U.S. Hourly Wage GrowthPercent Change – Prior 12 Months Seasonally Adjusted

2.9% Prior 12 Months 2.4% 10-Year Compound Annual Average Growth

2019 – Best Wage Increases in a Decade

U.S. Leisure & Hospitality Jobs

12.5

13.5

14.5

15.5

16.5

0

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Recession

Millions of JobsSeasonally-Adjusted

+2.34% Past 12 Months

The Blood Pressure Test of the U.S. Economy

HurricanesHarvey & Irma

Recession is Defined as Two or MoreQuarters of Negative GDP Growth

Recession

3.1%Q1 2019

2.0%Q2 2019

2.1%Q3 2019

2.1%Q4 2019

Yield Curve Inversion May 1998

Recession Started March 2001, 34 Months Later

When Did the Recession Start?

Stock Market

Performance Following Inverted

Yield Curve

Retail sales (which make up approximately 68% of GDP) were up

6.0% in December 2019Vs December 2018

Retail Sales Say No Recession

$250

$300

$350

$400

$450

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 20

U.S. Retail Sales$ Billions – Seasonally Adjusted

0%

2%

4%

6%

8%

10%

12%

'02

'03

'04

'05

'06

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'08

'09

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'11

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20

E-Commerce Sales - Quarterly

Percent of Retail Sales – Seasonally Adjusted

Percent

0

4

8

12

16

20

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 20

Light Weight Vehicle SalesMillions – Seasonally Adjusted Annual Rate

Bureau of Economic Analysis

Cash For Clunkers

Utah 3.11% Arkansas 1.44% Missouri 0.69%

Idaho 2.91% Kansas 1.41% Pennsylvania 0.54%

Arizona 2.79% Dist of Columbia 1.37% North Dakota 0.53%

Texas 2.71% Delaware 1.34% Mississippi 0.52%

Washington 2.44% South Carolina 1.26% Ohio 0.49%

Florida 2.38% Massachusetts 1.23% Louisiana 0.45%

Alabama 2.22% Maine 1.18% Michigan 0.44%

North Carolina 2.09% Virginia 1.13% Wisconsin 0.23%

Colorado 2.06% Maryland 1.12% Minnesota 0.21%

Nevada 1.94% New York 1.10% Connecticut 0.21%

Oregon 1.92% New Hampshire 0.94% Indiana 0.14%

New Mexico 1.84% New Jersey 0.93% Alaska 0.03%

California 1.79% South Dakota 0.88% Iowa -0.15%

Rhode Island 1.73% Montana 0.77% Oklahoma -0.28%

Tennessee 1.59% Hawaii 0.76% Vermont -0.35%

Nebraska 1.53% Illinois 0.73% West Virginia -0.40%

Georgia 1.45% Kentucky 0.70% Wyoming -1.07%

State Job Growth -- 12 Months Ending December 2019

State Business Tax Environments 2020

35

36

37

38

39

40

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Fairbanks MSA JobsJobs (Thousands) Seasonally Adjusted

-0.80% Prior 12 Months 300 Net Lost Jobs in Past 12-Months

Total Jobs Net New Net New

Thousands Jobs Percent Jobs Percent

Employment Supersector Dec 2019 Today 5-Years Ago Thousands Change Thousands Change

Total 36.2 100.0% 100.0% (0.3) -0.8% (1.4) -3.7%

Mining & Logging 0.7 1.9% 1.9% - 0.0% - 0.0%

Mining, Logging and Construction 2.9 8.0% 9.3% (0.3) -9.4% (0.6) -17.1%

Construction 2.2 6.1% 7.4% (0.3) -12.0% (0.6) -21.4%

Manufacturing 0.5 1.4% 1.6% (0.1) -16.7% (0.1) -16.7%

Trade-Transport-Utilities 7.1 19.6% 20.5% (0.3) -4.1% (0.6) -7.8%

Information 0.4 1.1% 1.3% - 0.0% (0.1) -20.0%

Financial Activites 1.1 3.0% 3.2% - 0.0% (0.1) -8.3%

Professional and Business Service 2.6 7.2% 5.9% - 0.0% 0.4 18.2%

Education and Health Services 5.6 15.5% 14.1% - 0.0% 0.3 5.7%

Leisure & Hospitality 4.2 11.6% 10.1% 0.2 5.0% 0.4 10.5%

Other 0.9 2.5% 2.7% (0.1) -10.0% (0.1) -10.0%

Government 10.9 30.1% 31.4% 0.3 2.8% (0.9) -7.6%

All Jobs

Fairbanks MSA Supersector Job Growth Analysis -- December 2019Not Seasonally Adjusted

12-Months 5 Years

Percent of

Not Seasonally Adjusted

Employment Supersector Fairbanks U.S. Fairbanks U.S.

Mining & Logging 1.9% 0.5% 0.0% -2.9%

Mining & Logging + Construction 8.0% 5.3% -9.4% 1.5%

Construction 6.1% 4.9% -12.0% 2.0%

Manufacturing 1.4% 8.4% -16.7% 0.4%

Trade-Transport-Utilities 19.6% 18.7% -4.1% 0.5%

Information 1.1% 1.9% 0.0% 0.6%

Financial Activities 3.0% 5.7% 0.0% 1.4%

Professional and Business Service 7.2% 14.2% 0.0% 1.9%

Education and Health Services 15.5% 16.1% 0.0% 2.7%

Leisure & Hospitality 11.6% 10.8% 5.0% 2.5%

Other 2.5% 3.9% -10.0% 1.3%

Government 30.1% 15.0% 2.8% 0.7%

U.S. Vs Fairbanks MSA Supersector Employment Analysis

Source: U.S. Bureau of Labor Statistics, Stewart Title Guaranty Company

Percent of

All Jobs

12-Month

Job Growth

December 2019 (November Fairbanks)

Unemployment Rate

3.5%U.S.

6.1%Alaska

5.3%Fairbanks

30-Year Conventional Residential Mortgage Rates

3.2%

3.5%

3.8%

4.1%

4.4%

4.7%

5.0%

5.3%

J F M M A M J J A S O N D

Percent

2017 2018 2019 2020

Year Fannie Freddie MBA Average

2019 3.9% 3.9% 3.7% 3.83%

2020 3.6% 3.8% 3.7% 3.70%

2021 3.6% 3.8% 3.8% 3.73%

2022 4.1% 4.10%

30-Year Fixed-Rate Forecast

December

December U.S. Housing Sales

2018 377,0002019 434,000

Up 13.1 Percent

U.S. Existing Home Sales & Median PricesSales - Trailing 12 Months

4.8

5.0

5.2

5.4

5.6

$180

$200

$220

$240

$260

$280

$300

'14 '15 '16 '17 '18 '19 20

Median Price Homes Sales

Median Price $ Thousands Home Sales 12-Months Millions

Fairbanks Home Sales & Median PricesSales Trailing 12 Months

900

1,000

1,100

1,200

1,300

$150

$175

$200

$225

$250

$275

'14 '15 '16 '17 '18 '19

Average Price Homes Sales

Average Price $ Thousands Home Sales 12-Months

5%

6%

7%

8%

9%

10%

11%

12%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Fairbanks U.S.

Home Sales SeasonalityMonthly Percentage of Annual Home Sales – 2013 - 2019

Fairbanks

USA 5.6% 5.8% 7.7% 8.6% 9.9% 10.4% 9.9% 9.9% 8.5% 8.5% 7.4% 7.9%

4.6% 4.7% 7.0% 8.4% 10.0% 10.5% 11.2% 11.1% 10.4% 9.1% 7.0% 6.1%

NormalIs

1.25 to 1.50Net NewJobs Per

New Dwelling

Net Dwelling Jobs

New Unit Per New

Year Jobs Permits Dwelling

2013 (500) 56 (8.93)

2014 (500) 54 (9.26)

2015 (500) 7 (71.43)

2016 400 11 36.36

2017 (700) 15 (46.67)

2018 - 13 -

Total (1,800) 156 (11.54)

Fairbanks

Jobs & Residential Dwelling Unit Permits

Average Rent 1,652$ Average Rent 1,652$

Rate 3.51% Rate 3.46%Term 30 Years Term 30 Years

Fairbanks Northstar Borough 3 & Up

Median Price 242,400$ Median Price 242,400$

Less 20% Down (48,480) Less 3.5% Down (8,484)

Loan Amount 193,920$ Loan Amount 233,916$

Monthly Payment (872) Monthly Payment (1,045)

Residual 780$ Residual 607$

Conventional - 20% Down FHA - 3.5% Down

Conventional Loan FHA

Monthly Rental

Payment Applied to HomePurchase

$0

$100

$200

$300

$400

$500

$600

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U.S. Commercial Real Estate Sales Volume

$ Billions – Trailing 12 Months

Property and Portfolio Sales $2.5 Million and Up

+6.0% Year-Over-Year

$0

$50

$100

$150

$200

$250

$300'0

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Alaska Commercial Real Estate Sales Volume

$ Millions – Trailing 12 Months

Property and Portfolio Sales $2.5 Million and Up

Cap Rates

All Seniors

Hotels

Apartments

Industrial

Retail

Office

6.21

%6.71

%6.68

%6.10

%5.35

%8.53

%7.76

%

Q3 2019

Federal Debt – Total Public Debt

0

4

8

12

16

20

24

'80

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$ Trillions

St Louis Federal reserve

Federal Debt Interest Payments+30.0% March 2017 Vs 2016+10.7% March 2018 Vs 2017+15.5% March 2019 Vs 2018

+56.2% in 36 MonthsDebt Up 16.3%

Oil Prices

$30

$50

$70

$90

$110

$130

0

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Recession

$ Per BarrelMonthly Average

West Texas Intermediate Crude

0

2

4

6

8

10

12

14

16

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Alaska Drilling Rig CountsNumber of Operating Rigs

36.5%

30.6%

13.1%

8.3%

5.1%

2.5%

0.2%

2.5%

0.9%

2018

Manhattan Institute

“$200,000 worth of Tesla batteries, which collectively weigh over 20,000 pounds, are needed to store the energy equivalent of one barrel of oil. A barrel of oil, meanwhile, weighs 300 pounds and can be stored in a $20 tank.” 1

Barrel

$200,000Batteries

=

Manhattan Institute

“The $5 billion Tesla “Gigafactory” world’s biggest battery manufacturing facility

Total annual production …. store 3 minutes worth of

annual U.S. electricity demand”

3Minutes

Manhattan Institute

“…… to fabricate a quantity of batteries to

store two days’ worth of U.S. electricity demand

would require 1,000 years of Gigafactory production” 2

1,000Years

$5 Billion

Days

What the U.S. Bought from China in 2018 $US Billions

What China Bought from the U.S. in 2018

China Trade

$US Billions

$539.0 Imported$120.3 Exported$418.7 Deficit

$US Billions

25.0% Tariff Paid on U.S. Cars in China

2.5% Tariff Paid on Chinese Cars in U.S.

China-U.S. Tariffs – April 9, 2019

Good Economy just so average

Growing Jobs & Wages best wage growth in 10 years

Stable & Low Interest Rates no place but up

Rising Home Prices albeit at a Lower PaceCheap (But Profitable) Energy fuels the economy

Manufacturing Comeback no college or debt required

2020 Economic Outlook

http://blog.stewart.com

DrTCJ

Cybersecurity