Post on 11-Aug-2020
11/26/2019
1
ECONOMIC OUTLOOK: HOW FAR WILL THE RECORD EXTEND?
Dr. Mike Walden
Reynolds DistinguishedProfessor
North CarolinaStateUniversity
1
ECONOMIC HEADLINES
GROWTH GOES IN TO 11TH YEAR
DEATH OF THE PHILLIPS CURVE
TRADE TENSIONS
FED CUTS RATES DURING AN EXPANSION
CHANCE OF A RECESSION
2
1
2
11/26/2019
2
REAL GROSS DOMESTIC PRODUCT GROWTH RATE (%, ANNUALIZED)
3
UNEMPLOYMENT RATE IS AT A NEAR 50 YEAR LOW
4
3
4
11/26/2019
3
BUT LABOR FORCE PARTICIPATION STILL HAS ROOM TO IMPROVE
5
LABOR PRODUCTIVITY HAS PICKED UP
6
5
6
11/26/2019
4
AND WAGE GROWTH HAS BEEN IMPROVING
7
WHY DOES THE PHILLIPS CURVE APPEAR TO BE DEAD?
GLOBALIZATION
LOGISTICS
WEAK UNIONS
AUTOMATION
8
7
8
11/26/2019
5
WITH NO RUN-UP IN THE INFLATION RATE(annualized rates)
9
EVALUATING POTENTIAL THREATS TO THE ECONOMY
10
9
10
11/26/2019
6
HOUSEHOLDS ARE ABLE TO CARRY THEIR DEBT
11
HOUSEHOLD DEBT DELINQUENCY RATES AREIN GOOD SHAPE
12
11
12
11/26/2019
7
RELATIVE BUSINESS DEBT IS ALSOHISTORICALLY LOW
13
RATIO OF PRIVATE DEBT TO GDP HASACTUALLY FALLEN – A GOOD SIGN
14
13
14
11/26/2019
8
ALTHOUGH HOME PRICES HAVE RISEN, THE GAINS ARE BASED ON LACK OF SUPPLY
15
BUT SERVICING THE NATIONAL DEBT IS TAKING A BIGGER SHARE OF THE ECONOMY
16
15
16
11/26/2019
9
ALSO, RELATIVE SIZE OF CONSUMER SPENDING HAS MODERATED
17
BUSINESS INVESTMENT HAS RECENTLY FALLEN
18
17
18
11/26/2019
10
STOCK MARKET HAS MOVED WITHNEWS ON CHINA TRADE DISPUTE
19
IF A RECESSION DOES OCCUR
ORIGIN WILL BE ON BUSINESS SIDE
LOWER EARNINGS AND MARGINS – LEADING TO CUTBACKS AND DECLINING VALUES
20
19
20
11/26/2019
11
TRADE WARS
* NEW NAFTA: USMCA, BUT PENDING
* EU TALKS* S. KOREA TREATY* JAPAN TALKS
REMAINING BIG CHALLENGE – CHINA
MAY HAVE ALREADYREDUCED GDP GROWTH BY 0.6% POINTS
21
POSSIBILITY OF FOREIGN RECESSIONS
ECONOMIC GROWTH IS SLOWING IN EUROPE TO 0% -BREXIT
JAPAN’S GROWTH RATE IS UNDER 1%
CHINA’S GROWTH RATE IS 6%, BUT LOWEST IN 25 YEARS
HOWEVER, TRADE IS A MINOR PART OF THE US ECONOMY
22
21
22
11/26/2019
12
THE FEDERAL RESERVE BLINKED ANDREVERSED THE “PUNCH BOWL POLICY”
STANDARD POLICY: GO COUNTER TO TRENDS IN THE ECONOMY IN ORDER TO PROMOTE STEADY GROWTH
RECOVERY- RAISE RATES(REMOVE PUNCH BOWL)
RECESSION – CUT RATES(RETURN PUNCH BOWL)
23
FEDERAL FUNDS RATE
24
23
24
11/26/2019
13
WHAT IS THE FED’S POLICY, & WHY?
OVER-TIGHTENED, SO CORRECTING NOW?
NO WORRIES ABOUT INFLATION
BUT TOOLS FOR NEXT RECESSION?
25
YIELD CURVE HAS BECOME MORE NORMALIZED(10 YEAR T-YIELD MINUS 2 YEAR T-YIELD)
26
25
26
11/26/2019
14
OTHER CHANGES
1. EMERGENCE OF U.S. AS AN OIL PRODUCER
2. IMPLICATIONS OF AGING POPULATION, FALLING BIRTH RATE, ANDIMMIGRATION ON LABOR SUPPLY
3. TECHNOLOGY, JOBS, AND RE-TRAINING
4. THE FUTURE OF TRANSPORTATION – MODES AND FINANCING
27
NORTH CAROLINA
28
27
28
11/26/2019
15
GROWTH ALSO CONTINUES
MOST RECENT DATA – ADDING JOBS AT FASTER RATE THAN NATION
SLOWDOWN IN MANUFACTURINGAND TRADE ISSUES FOR FARMERSHAVE HURT
29
SOME OTHER GOOD NEWS
NON-METRO COUTIES ARE SHARING INJOB GROWTH
TECH SECTOR BOOMING
MIDDLE-PAYING JOBS GROWING
FEWER COUNTIES DEPOPULATING30
29
30
11/26/2019
16
LEADING INDICATORS SUGGESTDECELERATION IN NC’S GROWTH
31
70
75
80
85
90
95
100
10520
07 feb
2007
may
2007
aug
2007
nov
2008
feb
2008
may
2008
aug
2008
nov
2009
feb
2009
may
2009
aug
2009
nov
2010
feb
2010
may
2010
aug
2010
nov
2011
feb
2011
may
2011
aug
2011
nov
2012
feb
2012
may
2012
aug
2012
nov
2013
feb
2013
may
2013
aug
2013
nov
2014
feb
2014
may
2014
aug
2014
nov
2015
feb
2015
may
2015
aug
2015
nov
2016
feb
2016
may
2016
aug
2016
nov
2017
feb
2017
may
2017
aug
2017
nov
2018
feb
2018
may
2018
aug
2018
nov
2019
feb
2019
may
2019
sep
t
Source: calculations by Dr. Michael Walden
NCSU INDEX OF NORTH CAROLINA LEADING ECONOMIC INDICATORS
OUTLOOK
32
31
32
11/26/2019
17
WHAT I SEE COMING
1. NO RECESSION (CONSENSUS IS NOW ONE-THIRD CHANCE
2. “SMALL” CHINA TRADE DEAL MADE3. FED HAS “PAUSED” IN RATE CUTS4. CONTINUED SUPER-LOW INFLATION5. DUE TO SLOW LABOR FORCE GROWTH,
2% ANNUAL GROWTH IS NEAR NORMAL
33
34
33
34
11/26/2019
18
FINANCING ISSUES
MOVEMENT AWAY FROM GAS AND GAS TAX
PREDICTIONS OF LOWER VEHICLE OWNERSHIP
OPTIONS: MILEAGE TAX, TOLLS, TAXING PROPERTY BENEFITING FROM TRANSIT IMPROVEMENTS
35
MOBILITY MODE ISSUESECLIPSE OF THE PRIVATE AUTO?
WHAT KIND OF MASS TRANSIT?- BUS, RAIL, RIDE-SHARE
IMPACT OF WORKING AT HOME
OTHER: PORTS – AIR AND WATER
36
35
36
11/26/2019
19
THANKS – QUESTIONS?
37
37