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