Annual Economic Forecast January 29, 2020 Dr. James V. Koch - PowerPoint PPT Presentation

Welcome to 25 th Annual Economic Forecast January 29, 2020

Dr. James V. Koch President John Broderick Dean Jeff Tanner

Presenters at the Annual Economic Forecast Luncheon Since 1996 • Dr. Mark Zandi • Dr. Gilbert Yochum • Dr. Vinod Agarwal • Dr. Mohammad Najand • Dr. Larry ‘Chip’ Filer • Dr. Gary Wagner • Dr. Robert McNab 3

January 1996

January 2004

January 2020

2020 Annual Economic Forecast Robert M. McNab and Vinod Agarwal Dragas Center for Economic Analysis and Policy Strome College of Business Old Dominion University January 29, 2020

Agenda for Today I will cover economic conditions in the United States and Virginia and the prospects for growth in 2020 and beyond. My colleague, Vinod Agarwal, will examine economic conditions in Hampton Roads and how the regional economy will fare in 2020. All our presentation materials can be found at our website: www.ceapodu.com

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Our forecasts and commentary do not constitute official viewpoints of Old Dominion University, its President, John R. Broderick, the Board of Visitors, the Strome College of Business, or the generous donors who support the activities of the Dragas Center for Economic Analysis and Policy.

The Long-Term View

Current and Historical Economic Expansions Expansion Duration Annual Annual In Months Employment Real GDP Growth Growth October 1949 – July 1953 45 4.4% 6.9% May 1954 – August 1957 39 2.5% 4.0% April 1958 – April 1960 24 3.6% 5.5% February 1961 – December 1969 106 3.3% 4.9% November 1970 – November 1973 36 3.4% 5.1% March 1975 – January 1980 58 3.6% 4.3% December 1982 – July 1990 91 2.8% 4.0% March 1991 – March 2001 120 2.0% 3.6% November 2001 – December 2007 73 0.9% 2.9% June 2009 – Present* 126 1.4% 2.3% Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, National Bureau of Economic Research, and Dragas Center for Economic Analysis and Policy. Real GDP in chained 2012 dollars. CAGR = 14 Compound Annual Growth Rate. Annual Real GDP CAGR derived from quarterly series. Annual employment CAGR derived from monthly series. *Current expansion data ends in 2019 Q3 for GDP and December 2019 for US Nonfarm Payrolls. Average annual Real GDP CAGR of previous expansions = 4.5% while average annual employment CAGR from previous expansions = 2.96%.

Change in Nonfarm and Manufacturing Employees (Jobs) United States, 1940 - 2019 25,000 22,579 21,950 19,431 20,000 18,164 17,067 Thousands of Employees 15,000 11,980 10,652 10,000 3,113 2,912 5,000 2,511 1,380 816 0 -601 -1,420 -982 -5,000 -5,805 -10,000 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s Nonfarm Payrolls Manufacturing Payrolls 15 Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Thousands of employees. Seasonally adjusted data. Change in nonfarm employees is measured from December of the preceding decade to the end of the next decade.

Average Inflation United States, 1960 - 2019 8% 7.4% 6.8% 7% Average Inflation Rate 5.7% 6% 5.1% 5% 4% 3.1% 3.0% 3% 2.6% 2.6% 2.5% 2.1% 1.9% 1.8% 2% 1% 0% 1960s 1970s 1980s 1990s 2000s 2010s Inflation Core Inflation 16 Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Seasonally adjusted data. Consumer Price Index for All Urban Consumers (CPI-U) and CPI-U less food and energy. The inflation rate is the December to December change in the Consumer Price Index.

Thirty Year Fixed Rate Conventional Mortgage United States, January 1972 – January 2019 20% 18.63% 18% 16% 14% Interest Rate 12% 8.54% 10% 8% 6.52% 3.60% 6% 4% 2% 0% 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 17 Sources: FreddieMac and Dragas Center for Economic Analysis and Policy. Grey bars are recessionary months. Monthly averages.

Sources of Household Income United States, 1950 Q1 to 2019 Q3 100% Percent of Household Income 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1950 1952 1955 1957 1960 1962 1965 1967 1970 1972 1975 1977 1980 1982 1985 1987 1990 1992 1995 1997 2000 2002 2005 2007 2010 2012 2015 2017 Wages Capital Transfers Benefits Proprietor's 18 Sources: Bureau of Economic Analysis, Personal Income Tables and Dragas Center for Economic Analysis and Policy.

Mobility Rates and Reason for Moving United States, 1999 - 2019 17.8% 25,000 20% 18% 20,000 16% Thousands of Movers 14% 9.8% Mobility Rate 15,000 12% 10% 10,000 8% 6% 5,000 4% 2% 0 0% 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Mobility Rate Family-Related Job-Related Housing-Related 19 Source: U.S. Census Bureau, Mortgage Bankers Association, and Dragas Center for Economic Analysis and Policy.

The Expansion

Growth in Real Gross Domestic Product United States, 2006 Q1- 2019 Q4* 8% 5.5% 6% 3.5% 2.2% 4% Annualized Change 2% 0% -2% -4% -6% -8% -8.4% -10% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 21 Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporate latest BEA revisions in January 2020. Data for 2019 Q3 are the third estimate. Data for 2019 Q4 represents our forecast.

Growth in Real Gross Domestic Product Virginia, 2006 Q1- 2019 Q4* 6% 3.7% 4% 1.9% Annualized Change 2% 0% -2% -4% -6% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 22 Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporate latest BEA revisions in January 2020. Data for 2019 Q3 are the third estimate. Data for 2019 Q4 represents our forecast.

Index of Real Gross Domestic Product Virginia and the United States, 2006 Q1 to 2019 Q4* 130 125.9 125 Index (2006 Q1 = 100) 120 115 110 115.1 105 100 95 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 United States Virginia 23 Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporate latest BEA revisions in January 2020. Data for 2019 Q3 are the third estimate. Data for 2019 Q4 represents our forecast.

Recovery from the Great Recession Measured in Total Jobs Restored, 2008-2019* 10.1% 12% 10% 8% Jobs Gained or Lost 6% 7.0% 4% 2% 0% -2% -4% -6% -8% 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 Months Since Pre-Recession Peak United States Virginia Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Peak Pre-Recession Dates are January 2008 (United States), and April 2008 (Virginia). *Data 24 through December 2019. US data are preliminary the last two months. Virginia data are preliminary for the last month. Seasonally adjusted data.

Unemployment Rate (U3) United States and Virginia, January 2007 – December 2019 12% 10.0% 10% Unemployment Rate 8% 6% 4.6% 7.5% 3.5% 4% 2% 2.9% 2.6% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 United States Virginia 25 Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Seasonally adjusted data.

Job Openings Per Unemployed Person United States and Virginia, February 2001 – September 2019 1.77 2.0 Job Openings Per Unemployed Person 1.8 1.6 1.42 1.4 1.2 1.0 0.8 1.22 0.6 0.22 0.4 0.2 0.16 0.0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 United States Virginia 26 Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Seasonally adjusted data. State level JOLTS data is an experimental product.

Civilian Labor Force Participation Rate United States and Virginia, January 1976 – December 2019 74% 71.5% Labor Force Participation Rate 72% 69.9% 70% 66.3% 65.9% 68% 66% 64% 62% 60% 63.2% 61.3% 58% 56% 1976 1981 1986 1991 1996 2001 2006 2011 2016 United States Virginia 27 Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Seasonally adjusted data.

University of Michigan, Consumer Sentiment January 2000 – January 2020 120 99.1 110 96.9 100 Index (1966 = 100) 90 80 70 60 50 40 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 28 Source: University of Michigan, Survey of Consumer Sentiment, January 2020.

2020: The Economic Expansion Continues ▪ Price and wage inflation does not accelerate. ▪ Interest rates and monetary policy remain accommodative. ▪ Consumer sentiment continues to drive economic activity. ▪ The Phase I trade deal lifts short-term exports to China. ▪ Federal spending sustains moderate growth in Virginia. 29

Warning Signs