Preparing for the Futurelibres.uncg.edu/ir/uncw/f/simpsont2019-1.pdf · Greater Wilmington Business...

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Preparing for the Future

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Agenda 7:30 a.m. Registration and Breakfast8:00 a.m. Welcome and Greetings8:10 a.m. Economic and Market

Forecasts8:30 a.m. Preparing for the Future9:15 a.m. Table Discussion and

Questions for Speakers9:35 a.m. Closing Remarks 9:45 a.m. Conclude

The U.S. Economy: Losing its Legs?Thomas D. Simpson, Ph.D.

Department of Economics and Finance

University of North Carolina Wilmington

© 10/21/2019 Swain Center All Rights Reserved

Presenter

Presentation Notes

Dr. Simpson’s Slides

Departing from Script• This expansion: Longest on record• Inflation: Still subdued, despite a very tight

labor market• Interest rates: Very low• Monetary policy: Fed has been lowering—

not raising—its policy rate• Sustainable growth: Down to around 2

percent


Growth Has Slowed

2017 2018 2019Q1 Q2 Q3e

2.8 2.5 3.1 2.0 2.0


e - estimate

Some Believe the Yield Curve is Pointing to Recession

-4

-3

-2

-1

0

1

2

3

4

5

Per

cent

10yr minus 3m


But Model-based Recession Probability is Low

-10

10

30

50

70

90

110

Per

cent

Smoothed US Recession Probabilities


The Consumer Has Kept Things Going

• Following a pause around year-end, consumers have opened their wallets.

• However, business investment spending has been subdued, despite a very favorable tax situation

• The external sector has been adversely affected by a slowdown abroad and a strong dollar


Acting as a Serious Headwind is Trade Policy Uncertainty

0

50

100

150

200

250

300

Ind

ex

Trade Policy Uncertainty


• Such uncertainty has been off the charts recently, discouraging business investment

Consumers in Good Position

Growth inConsumption

2016 2017 2018 2019e

2.8 2.9 2.7 2.8


e – Estimate based on first three quarters

• Job growth remains solid• Wage growth is firming

Confidence Remains Buoyant

-15

-10

-5

0

5

10

15

20

25

30

0

20

40

60

80

100

120

GD

P G

row

th

Sen

timen

t In

dex

Consumer Sentiment


GDP Growth

GDP Contraction

Current

Wealth Positions Are Strong

4.5

5

5.5

6

6.5

7

Rat

io

Ratio of Net Worth to Disposable Income


And Debt-Service Burdens Light

9.510

10.511

11.512

12.513

13.514

Per

cent

Debt Service Burden


Despite a Favorable Climate, Businesses Capital Spending Has Been Cautious

44

49

54

59

64

69

$ B

illio

ns

Manufacturers’ New Orders


• 2017 tax reform boosted rates of return and financing costs remain low

• But orders for capital goods have been flat

• Business leaders point to trade policy uncertainty, though lower oil prices have led to a cutback on oil field outlays

Uncertainty Has Affected Small Business Optimism

75

80

85

90

95

100

105

110

115

Per

cent

NFIB Optimism Index


The Outlook Depends on Business Investment

2019 2020 20212.3 2.0 2.0


• Absent a resolution of trade policy rifts, capital spending will remain lackluster

• Struggling economies abroad will be a drag on exports

• The United States will continue to grow, but only in line with potential

Growth Will be Sufficient to Keep Unemployment Low

0

2

4

6

8

10

12

Per

cent

Unemployment Rate


Some of the Employment Gains Have Come From People Coming Off the Sidelines

80.5

81

81.5

82

82.5

83

83.5

Per

cent

Labor Force Participation: 25-44 Years


• But the prime age participation rate is not up on balance this year

Inflation May Drift Above the Fed’s 2 Percent Target

00.5

11.5

22.5

33.5

44.5

Per

cent

Core PCE Inflation


Fed Likely to be Squeezed Between White House Pressure and Inflation Concerns

• Tension between the market and the Fed on the rate outlook


CurrentEnd 2019

End 2020

End 2021

Market 1.85 1.5 1.1 1.1Fed 1.9 1.9 2.0

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Preparing for the Future

Presenter

Presentation Notes

Simpson Jones Handoff

The Regional Outlook: When the Sun Is Out, Don’t Forget to SmileDr. Adam T. Jones

Department Chair and Regional Economist

Cameron School of Business – Swain Center


Presenter

Presentation Notes

Jones slides Welcome to 149th forum on potential sale of the hospital

Your View


Presenter

Presentation Notes

Attendee forecasts to be inserted

Sunny With a Dark Cloud


Florence Was the Story…

0

0.5

1

1.5

2

2.5

3

3.5

Loca

l Rat

e –

Nat

iona

l Rat

e

Months Pre and Post Storm


Baton RougeHouston

New Orleans

Atlantic City

Source: BLS

Hospitality Most Exposed

9092949698

100102104106108110

Ind

ex

Sectoral Employment

Ed & Health Prof Bus Serv Fin, Ins, Real EstateTrade & Trans Manufacturing Leis. And Hosp


Source: BLS

Growth Settling Into Normal

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

% G

row

th

Wilmington MSA GDP Growth


Source: BEA

Unemployment Ticking Up Slightly

23456789

101112

Rat

e

Unemployment Rate

Three County NC US


Aug. 4.3%

Source: BLS

Sales Continuing to Grow, But Levelling

02468

1012141618

Per

cent


Home Prices Rising Again

90110130150170190210230250

Ind

ex

NHC Home Price Index

3Br 4Br 5+Br


Source: Zillow

Labor Market Tightening, “New Wages” Increasing

$30$32$34$36$38$40$42$44$46$48

3

4

5

6

7

8

9

Wag

e

Op

enin

gs (0

00s)

Wage Openings


Source: NC Works

Presenter

Presentation Notes

Despite drop off in openings, number of openings still remains high. Most openings are NHRMC, UNCW

Wages Growing But Slowing

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

% G

row

th Y

oY

Earnings Growth in Wilmington MSA


Source: BLS

Presenter

Presentation Notes

Take out the aberration of 17 and 18 and there’s a downward trend though. Seemingly contradictory to openings. Thus, likely not seeing enough “moving” yet to push up wages. End up with compression or inversions.

Homes Remain “Somewhat Affordable”

0.6

0.8

1

1.2

1.4

1.6

1.8

Rat

io

Home Price to Income


Source: BLS/FHFA

Gasoline Prices Remain Favorable

0

50

100

150

200

250

300

350

400

Ind

ex

Gasoline Gas / Wage


Source: US EIA

Room Occupancy Distorted

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

% G

row

th

NHC Peak Season ROT Growth


Source: NHC

Non-Tourists Still In ROT Data

0

0.5

1

1.5

2

2.5

3

Dol

lars

(m)

NHC Occupancy Taxes

2017 2018 2019


Source: NHC

Room Occupancy Distorted But Likely Slowing

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

% G

row

th

Peak Season ROT Growth


Source: NHC

But…


Some Believe the Yield Curve is Pointing to Recession

-1

0

1

2

3

4

5

Per

cent


Source: STL Fed

Construction Remains Slightly Sluggish

0100200300400500600700800900

1000

Num

ber

of P

erm

its

Housing Units Permitted

Total Single-Family


Source: Census

Uncertainty Is Rising

30507090

110130150170190210230

Ind

ex (Q

uart

erly

Avg

)

Economic Policy Uncertainty


Source: Baker Bloom Davis

Carolina Business Expectations

-30-25-20-15-10-505

10152025

YoY

Cha

nge

(3m

TA

)

Change in Expectations

Sales General Employment


Source: Richmond Fed

Recreational Goods Expenditures

-15

-10

-5

0

5

10

15

20

Per

cent

Regional GDP Growth NC Total NC Per Capita National Total


Source: BEA

Presenter

Presentation Notes

Recreational goods

RV Shipments Declining

20

25

30

35

40

45

50

55

Shi

pm

ents

(000

s)

2017 2018 2019


Inflection Point(May 2018)

Source: RVIA

RV Shipments Declining

-50

-40

-30

-20

-10

0

10

20

30

Per

cent

YoY Growth


Source: RVIA

Forecast

2019 2020

US Economy 2.3% 2.0%Wilmington MSA 1.9% 1.6%


Sunny With a Dark Cloud


Presenter

Presentation Notes

The uncertainty cloud of the current political environment could easily lift, especially with pressure of an election.

The World is Changing

Big Data & Augmented Intelligence

Rise of Millennials, Women, and

Diversity

Personal Transformation,

Resiliency, & Agility

Future Trends

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Presentation Notes

Three speakers

Table Activity• How will the economic outlook and future

trends impact you and your organization?

• As time permits, what is one question your table would want to ask one of the speakers?

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Presentation Notes

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uncw.edu/EOCFeedback• We encourage you to use the online version.

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Presentation Notes

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