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Economic Outlook
January 2019
NAIOP New Jersey Annual Meeting
January 24, 2018
Alexander Heil, PhD
Chief Economist
Port Authority of New York & New Jersey
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Why is everyone so concerned now?
Slide 2
62 trading days
Total decline of 19.6%
4 days with more than 3% change
9 days with 2-3% change
12 days with 1-2% change
Last year:
0 DAYS WITH >1% CHANGE
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Real GDP – Contributions to Growth
Slide 3
Fiscal stimulus to
diminish in 2019/2020
REAL GDP GROWTH
4.2% 3.5%
REAL GDP GROWTH
4.2% 3.5%
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Government Shutdown – January 2019 Edition
• Economic Impact = 0.13% LESS GDP growth for every week [CEA, White House Estimate]
• As of now, growth will be 0.52+% lower growth in Q1 2019
Slide 4
Source: https://www.nytimes.com/2019/01/15/us/politics/government-shutdown-economy.html
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Employment Growth & Wages
Slide 5
Average net gains of 220K+ in 2018
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Benefits have not grown significantly in real terms
2.5% Growth
Slide 6
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Labor Force Participation
Slide 7
-3%
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Regional Employment Growth
Slide 8
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Regional Employment Growth:
Reversion to the Mean
Average since 1991
NY-NJ 0.7%
NJ 0.5%
NYC 0.8%
Slide 9
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Regional Employment Growth
Average since 1991
NY-NJ 0.7%
NJ 0.5%
NYC 0.8%
November ‘18 Y-Y
NY-NJ 1.2%
NJ 1.5%
NYC 1.5% [Oct]
Slide 10
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Recession Indicator #1
Yield Curve
Slide 11
• Inversion likely by
mid-2019
Source: New York Times
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Recession Indicator #2
Unemployment
Slide 12
Unemployment < Natural Rate
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Tariff Impacts
• Effective tariff rate for US
triples [from 1.6%] as a result
of new trade policy
• Impacts on US economy still
relatively modest
• US growth lower by roughly -
0.25% in 2019
• CPI plus 0.2%-0.3% in 2019
Slide 13
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ISM Indicators Richmond FED Survey
Slide 14
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NY FED Empire State Manufacturing Survey
Slide 15
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What about Housing?
Slide 16
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Watch out for the 2018 Tax Returns …
Slide 17
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Manhattan Office Market
Source: Cushman & Wakefield, Q4 2018 Market ReportSlide 18
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New Jersey Office Market
Slide 19
Nort
her
n N
ew J
erse
y
Cen
tral
New
Jer
sey
Source: Cushman & Wakefield, Q4 2018 Market Reports
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Sources: US Bureau of Labor Statistics, Federal Reserve
Recent decline in growth:Construction Employment in NYC has felt the sting of increasing interest rates
NYC Construction Market
0%
1%
2%
3%
4%
5%
6%
7%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Fed F
unds R
ate
NY
C C
onstr
uction
Em
plo
yment
(Y/Y
% C
hange)
NYC Construction of Buildings Employment Change and Fed Funds Rate
Y/Y Construction Employment Change Fed Funds Rate
Slide 20
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0
10
20
30
40
50
60
70
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Warehousing EmploymentAll Employees, in Thousands
includes transportation*
New JerseySource: Bureau of Labor Statistics, Current Employment Statistics
A boom in New Jersey …
Slide 21
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NYC Warehousing Space Driving the NJ Trends
Data Source: NYC PLUTO, Tax Parcel Data 2010 and 2016 Quote Source: New York Times “New York Tries to Revive Garment Industry, Outside the Garment District”By WINNIE HUFEB. 7, 2017
“The streets used to be lined with trucks that were picking up or delivering to the
garment district. Today, if you see 10 percent of what it used to be, that’s a lot.”
Frank Dara, 71, who spent decades cutting fabric for companies
Staten Island Bronx Brooklyn Manhattan Queens Total
2010 7.2 32.0 89.9 56.7 71.5 257.4
2016 7.4 31.7 81.0 32.8 70.7 223.6
Change 0.2 -0.3 -9.0 -23.9 -0.8 -33.8
% Change 3.0% -0.9% -10.0% -42.1% -1.1% -13.1%
Factory and Storage Space millions of square feet
Slide 22
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New Jersey’s Warehousing Boom
• A Majority of Warehousing Is Built Along Major
Highways
• NJ Turnpike
• I-80
• I-278
• I-78
• Nearly 200 Million Sqft of Warehousing and Storage
Space
Built or Planned form 2000 – 2017 (More than 5 Central
Parks)
• Most Less Than ½ Hour From Port Newark
Source: New Jersey DCA
0
50
100
150
200
250
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Mill
ions
New Jersey Warehousing and Storage Building Permits Issued
Cumulative Square Footage
Slide 23
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And if you aren’t concerned enough …
Slide 24
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January 2019 Economic Outlook
Thank you!
Any Questions?
Alexander Heil, PhD, Chief Economist
Planning & Regional Development Department
The Port Authority of New York and New Jersey
4 World Trade Center | 150 Greenwich Street,16th fl, New York, NY 10006
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PA Twitter: @PANYNJ
Slide 25