Keynote Address - The Economy in 2017: Better, But … ECONOMY IN 2017: BETTER, BUT WORSE! The...
Transcript of Keynote Address - The Economy in 2017: Better, But … ECONOMY IN 2017: BETTER, BUT WORSE! The...
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Presented by: Elliot F. Eisenberg, Ph.D.
President: GraphsandLaughs, LLC
May 12 2017 Harrisburg, PA
THE ECONOMY IN 2017: BETTER, BUT WORSE!
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The Economy is Solid!
GDP = C+I+G+(X-M)
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Households are Repairing their Balance Sheets Trillions in Net Worth Recovered, at a New Record Level
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Households Deleveraging is Done!!!!!! Lack of income growth hurts, but debt is growing once again. Down 6.5% from peak
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Mortgage Delinquencies Are Starting to Rise Notice that 2016 mortgages are delinquent more than in 2015
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Bloomberg Comfort Index Nearly at Decade High Index is near its post-recession high.
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Small Business Confidence is OK Spectacular rise since the presidential election. Well above the 42 year average of 98
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The Soft Data is Good, the Hard Data is Soft We need to see stronger hard data
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Las Vegas Attendance Rocks The gamblers are back, the conventioneers are too!
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Annual Y-o-Y Percent Change in PCE A solid growth rate of 2.75%
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Drilling Activity is Way Up Number of oil rigs is finally rising and has been steadily rising since May 2016.
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OK. Now, Look at Capital Goods Orders! Minus Defense and Aircraft
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Budget Deficit Got Much Better but is Getting Worse
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The Budget Faces Some Real Problems
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GDP Growth Goes Nowhere Slowly Trump may boost GDP by 25 or 30 bps in 2018 due to tax cuts and infrastructure
spending.
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GDP Can’t Grow Fast! Very weak population growth and labor productivity growth
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Best of All, No Recession is in the Cards! Yield Curve Inversion Test: 1-Year Treasury Yield – 10-Year Treasury Yield
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Labor Markets: They’re on the mend
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Historical Job Growth Y-o-Y Total Employment Change s 2.24 million!
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STEADY Labor Market Improvement: Involuntary Separation Long Term Trends: 1967-2017 Initial claims below 300K for 113 weeks, amazing!
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Tighter Labor Market than Perceived? The number of Unemployed per Job Opening Keeps Falling!!!!! Best level in a decade!
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Quits, No matter How Measured Are Improving Within 5% of their pre recession levels, and maybe still rising!
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Gap Between Blacks and Overall Rate is Low Was over 7%, and is now under 4%; near all-time low of 3%
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Gap Between Hispanics and Overall Rate is Low Was over 3%, and is now under 1%; near lowest level since records began in 1973
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Unemployment By Education Rates for the best have stopped falling. Rates for those in the middle still decline.
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Wage Growth is Weak, but Improving!
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Changes in Median Wage Growth Looks Good! Looks only at those continuously full-time employed
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Differences in Household Income by Education
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Household Income Growth by Percentile To help protect your privacy, PowerPoint has blocked automatic download of this picture.
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Income Inequality by Race and Gender Men are clearly losers
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Inflation? What Inflation!
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Consumer Price Index: Inflation is Topping Out? Headline and Core may be topping out
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Core PCE Price Index: Inflation is Clearly Rising! It’s due to rising wages, a weakening dollar and rising energy prices.
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Inflation Expectations are Declining of Late! 5 year and 10 year breakeven rates
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Federal Reserve Behavior
Rates Will Rise. But, How Fast?
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Federal Reserve Behavior
• Fed funds is currently 0.875%
• 12/31/17: 1.375% 10-yr Treasury @ 2.70%
• 12/31/18: 2.125% 10-yr Treasury @ 3.10%
• 12/31/19: 2.875%
• 2 more hikes in 2017. Balance sheet shrinks starting in fall.
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Housing? It’s Improving but In
Fits and Starts!
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Residential Fixed Investment Slowly Rises! Up 3.0% Y-o-Y. Non-residential up 5%, public down 15% and residential down 26% from peak
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Household Formation is Improving Compared to the 2007 through 2013 trough, it’s better.
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Credit is Generally Very Hard to Get It is getting easier, but very slowly.
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Change in Wealth by Median Household 2003 -2013
Credit Source: Russell Sage Foundation
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Student Debt Payments are Not That High Median payment is $200/month while the average is $350/month
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Let’s Do this Without Wood! Prices are up 19% to 27% Y-o-Y
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New Home Prices Are Too High Due to Regulation
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Existing Inventory is Shrinking Down 6.6% Y-o-Y. Higher prices should help, but rental conversions especially at lower price
points & aging in place are hurting supply.
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Price Growth Appears Not to be Slowing Prices rise faster than wages! Y-o-Y prices up 5.1% 5.8% or 5.7% depending on the measure
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Housing is in General is Rising Too Quickly Approaching the magnitude of the Housing Boom
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Rents are Rising Increasingly Quickly Rents rise faster than wages! Y-o-Y prices up 4%. Fastest since the housing boom!
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Bigger Houses Continue to Get Built
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To Many Big Houses
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Single-Family and Multifamily Starts – A Slow Recovery Lack of lots, gun shy lenders, high prices, higher rates, SF looks good
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Existing Home Sales 1st-time buyers remain largely MIA. Distressed sales are just 6% of total. Where is inventory? TRID was the reason for the 14% November decline.
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Recent Existing Home Sales Solid and very steady improvement.
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MBA Mortgage Purchase Apps – A Steady Rise 1st time applications are up 10% Y-o-Y, at level of the late 1990s!
10% rise in purchase applications in 2017 from $990 billion to $1.1 trillion
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Refinance Activity is Quite Flat! 2017 refi activity falls to $475 billion from $900. Share falls from 50% to 30%.
Refi activity rose due to very low rates, but has fallen hard.
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Urban Renters Face a Slightly Improving Situation But, things are still relatively bad.
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Rural Renters Face a Worsening Situation So many are cost burdened
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Renter Face an Increasingly Tough Market Things could get much worse, and they are already bad.
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Renter Face an Increasingly Tough Market Things could get much worse, and they are already bad.
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For Older Renters, It’s Even Worse
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Renter Face an Increasingly Tough Market To be able to earn nearly $150,000/year and still qualify for a subsidy? Wow!
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What About Things Here?
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The Future Looks Better than the Present
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State Unemployment Rates Significant differences exist: However, unemployment is almost below 6% everywhere!
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Unemployment Rates in Big PA Cities are Improving Lancaster is #1, Harrisburg #2, Scranton is weakest. Pittsburgh weakens. (A’town & Scranton)
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Payroll Data is Pretty Good Since the Recession there has been weak labor growth, especially of late, Lancaster is tops
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Labor Force Data is Less Good! Since the recession there has been weak labor growth, especially of late, Lancaster is tops
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Per Capita Personal Income in Biggest Cities Scranton is weak. Pittsburgh is on the move passing Allentown and Harrisburg!
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Rental Vacancy Rates Are Low in Pennsylvania! This suggests no rents relief
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Philadelphia Housing Starts Single-family is dismal and multifamily is strong. Both are flat.
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House Prices in Pennsylvania Pittsburgh is best. Philadelphia has recovered, Allentown is recovering
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Elliot F. Eisenberg, Ph.D.
Cell: 202.306.2731
www.econ70.com
Do you want to get my daily 70 word economics email? Please give me your business card or text “bowtie” to 22828
Thank YOU all very very much!
@ECON70
ANY QUESTIONS?
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Home Ownership Rates Are Down in Pennsylvania! But not on a relative basis
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Home Vacancy Rates Are Slightly Elevated in PA. But not a trend yet
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Per Capita Personal Income in Biggest Cities Scranton is weak. Pittsburgh is on the move passing Allentown and Harrisburg!