Greater Kansas City Chamber of Commerce October 28, 2016 Status of - PowerPoint PPT Presentation

2017 Economic Forecast Greater Kansas City Chamber of Commerce October 28, 2016

Status of the U.S. economy

U.S. Non-Farm Payroll Employment Change, quarterly The current 1,000 recovery is 500 stronger than 0 the last one in -500 terms of job growth, -1,000 averaging 150K -1,500 per month since -2,000 it began, and -2,500 200K since 2011. 20002001200220032004200520062007200820092010 2011 2012 2013 2014 2015 2016

U.S. GDP Percent Change, quarterly However, the 10% current recovery 8% is weaker than 6% the prior one in 4% terms of GDP 2% growth, 0% -2% averaging 2.1% -4% annually vs. -6% 2.8% before, and -8% only 1.2% over -10% the last year. 2000 2001 2002 2003200420052006 2007 200820092010 2011 2012 2013 2014 2015 2016

U.S. GDP/Employee Percent Change from Same Quarter One Year Ago As a result, 5% productivity 4% growth is much 3% weaker. 2% GDP/employee 1% is growing only ¾ % vs. 2%, and 0% has recently -1% turned negative. -2% 2000 2001 2002 2003 2004 2005 2006 2007 20082009 2010 2011 2012 2013 2014 2015 2016

U.S. Unemployment Rates, quarterly 18% The unemployment 16% rate, at 5%, is half 14% its recession high, 12% though still not as 10% low as in the mid- 8% 2000s. The pace of 6% decline is slowing 4% even though up to 2% 2.6 million people 0% want more or better 20002001200220032004200520062007200820092010 2011 2012 2013 2014 2015 2016 work. Official Unemployment Rate Plus discouraged and part-time for economic reasons

U.S Average Monthly Growth in Working Age Population 15-64 250,000 The labor supply 200,000 is growing slowly, 100K per 150,000 month, or half the current rate 100,000 of job growth. 50,000 This is good for unemployment. 0

US. Prime-Age Employment to Population Ratio, 25-54 years, quarterly Labor force 84% participation is 82% rising, though 80% still below the 78% pre-recession 76% trough, not to 74% mention its 72% peak. 70% 2000 2001 2002 2003 200420052006 2007 20082009 2010 2011 2012 2013 2014 2015 2016

U.S. Job Churn There is some Openings, Hires, Quits and Layoffs, quarterly evidence of labor 7,000 shortages 6,000 beginning to 5,000 arise. Hires are 4,000 not keeping up 3,000 with openings, 2,000 indicating 1,000 difficulty in 0 meeting 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 demand. Openings Hires Quits Layoffs

U.S. Real Median Earnings Growth, Full-Time Workers, Percent change from 1 year ago, quarterly Demand 5% outstripping 4% supply is helping 3% real wages to 2% increase. 1% Household 0% income is also -1% rising at all levels -2% of income. -3% 2000 2001 2002 2003 2004 2005 2006 2007 20082009 2010 2011 2012 2013 2014 2015 2016

U.S. Inflation Rate: Core PCE Personal Conumption Expenditures Price Index, Less Food and Energy Inflation 3.5% remains well- 3.0% contained, 2.5% running at or 2.0% below the 1.5% FOMC’s 2% 1.0% target. 0.5% 0.0% 20002001 2002 2003200420052006 2007 200820092010 2011 2012 2013 2014 2015 2016

Federal Funds Rate, quarterly The Federal 7.0% Funds rate still 6.0% remains highly 5.0% accommodative. 4.0% Sluggish GDP growth has 3.0% prevented the 2.0% FOMC moving it 1.0% up from near 0.0% historic lows. 200020012002 2003200420052006 2007 200820092010 2011 2012 2013 2014 2015 2016

U.S. economic forecast

U.S. Real GDP Projections, FOMC vs. RSQE The median Fourth-quarter to fourth-quarter change 3.0% FOMC forecast 2.5% for GDP is for 1.8% growth in 2.0% 2016, and 2% 1.5% growth in 2017 1.0% and 2018. 0.5% RSQE is more 0.0% optimistic. 2011 2012 2013 2014 2015 2016 2017 2018 Actual FOMC Range FOMC Median RSQE

FOMC Participants' Assessment of Appropriate Monetary Policy Expected Federal Funds Rate at end of year The FOMC expects 5.0 to increase the Fed 4.5 Funds rate ¼ % in 4.0 2016. After that, the 3.5 range of opinion is 3.0 wide. The median 2.5 expectation is for 2.0 1.5 ½- ¾ % increases 1.0 each year until it 0.5 reaches about 3% 0.0 2016 2017 2018 2019 Longer-Run

Status of the KC economy

Percent increase in real GDP 2014-15 KC relative to 30 peer metros KC has struggled to rebound from the Great 0% 2% 4% 6% 8% 10% Recession. It is Percent increase in quality jobs 2015-16 lagging its peers in GDP and job growth, but is #2 -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% in median household Percent increase in real median household income 2014-15 income growth. -1% 1% 3% 5% 7% 9% 11%

KC Employment by Industry Only two key 2001-2015 sectors are 160,000 growing 140,000 strongly, medical 120,000 care and 100,000 professional, 80,000 scientific and 60,000 technical 40,000 services. But 20,000 they are also the 0 largest. Construction Manufacturing Wholesale Health Care Information Finance and Transportation Prof., Trade and Social Insurance and Scientific, and Assistance Warehousing Technical Svcs.

KC Employment by Industry 2001-2015 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Construction Manufacturing Wholesale Trade Health Care and Information Finance and Transportation Prof., Social Insurance and Scientific, and Assistance Warehousing Technical Svcs.

Total Non-Farm Employment Percent change from 1 year ago Since mid- 4% 3% 2014, KC total 2% employment 1% has been 0% -1% growing -2% slightly faster -3% than the U.S. -4% -5% average. 2010 2011 2012 2013 2014 2015 US KC

Professional Services Professional, Percent change from 1 year ago 10% scientific and 8% technical 6% services has 4% generally grown 2% faster than the 0% U.S. and is -2% currently -4% growing twice as -6% fast 2010 2011 2012 2013 2014 2015 US KC

Health Care Percent change from 1 year ago 10% Health care 8% has also grown 6% faster than the U.S., currently 4% by more than a 2% full percentage 0% point. -2% 2010 2011 2012 2013 2014 2015 US KC

Manufacturing Local Percent change from 1 year ago 8% manufacturing 6% struggled a bit 4% coming out of 2% the recession, 0% -2% but has recently -4% been growing at -6% more than twice -8% the national -10% average. 2010 2011 2012 2013 2014 2015 US KC

Finance and Insurance Growth in Percent change from 1 year ago finance and 10% insurance has 8% 6% been very 4% volatile relative 2% to the nation. 0% Currently it is -2% growing about ¾ -4% -6% percentage point -8% faster locally 2010 2011 2012 2013 2014 2015 than nationally. US KC

Construction Percent change from 1 year ago 10% Growth in 5% construction 0% has generally -5% kept pace with -10% the national -15% -20% average. -25% 2010 2011 2012 2013 2014 2015 US KC

Transportation Percent change from 1 year ago Transportation 6% has grown 4% slower than the 2% nation 0% throughout most -2% of the recovery, -4% and is currently -6% growing about -8% half as fast. 2010 2011 2012 2013 2014 2015 US KC

Wholesale Percent change from 1 year ago While wholesale 6% trade has grown 4% faster than the 2% nation in the 0% past, it is -2% currently -4% declining locally -6% while growing -8% nationally. 2010 2011 2012 2013 2014 2015 US KC

Information Percent change from 1 year ago 5% Information, 0% which includes -5% telecom, has -10% been flat -15% -20% nationally but -25% declining -30% steeply locally. -35% 2010 2011 2012 2013 2014 2015 US KC

KC vs. US unemployment rate Slightly faster 12% employment 10% growth locally 8% has resulted in the region’s 6% unemployment 4% rate being about 2% ½ percentage point below the 0% nation’s. 2000 2001 2002 2003 2004 20052006 2007 20082009 2010 2011 2012 2013 2014 2015 2016 KC US

KC vs. U.S. Average Weekly Wage Percent change from 1 year ago 7% Both KC and 6% the U.S. are 5% seeing 4% 3% acceleration in 2% wage increases 1% over the past 0% -1% year. 2010 2011 2012 2013 2014 2015 -2% -3% US KC KC Trend

KC economic forecast

Somewhat faster KC vs. U.S. Real GDP Growth, 2015-2018 employment Annual change, fourth-quarter to fourth-quarter basis 3.0% growth produces 2.4% above average 2.5% 2.1% GDP growth in 2.0% 2.0% 1.9% 1.9% 2.0% 1.9% 1.8% 2016 for KC. In 1.5% 2017, the it is expected that 1.0% the national 0.5% economy regains 0.0% the GDP growth 2015 2016 2017 2018 advantage. KC US

Kansas City Employment Change by Industry Health care and Measured fourth-quarter to fourth-quarter professional Manufacturing Construction services are 1,326 Trans. & Utilities 575 Information expected to lead Retail & Wholesale Trade 2,170 Finance-Insurance-Real Estate the region’s 517 Services - Other employment Services - Accomodations and Food Svcs 2,020 Services - Arts, Ent. Rec. 400 growth, while Services - Health Care 5,031 Services - Educational 486 information is Services - Admin & Waste Mgmt. 2,182 Services - Mgmt of Companies 1,269 projected to Services - Prof. Tech. Sci. 4,072 Govt. continue to Other 138 (2,000) (1,000) - 1,000 2,000 3,000 4,000 5,000 6,000 decline. 2016 2017 2018