JosephVonNessen,Ph.D.ResearchEconomistOctober18,2018
South Carolina’s Economy in 2018 Where We Are and Where We’re Headed
Both the U.S. and S.C. economies
are strong and stable overall
U.S. GDP Growth (Annualized)
Source: U.S. Bureau of Economic Analysis
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
q110 q310 q111 q311 q112 q312 q113 q313 q114 q314 q115 q315 q116 q316 q117 q317 q118
4.2%
Real Personal Consumption Expenditures Growth
Source: U.S. Bureau of Economic Analysis
Year/Year Percent Change, SAAR
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Real Private Non-Residential Fixed Domestic Investment Growth
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%q1
11
q211
q311
q411
q112
q212
q312
q412
q113
q213
q313
q413
q114
q214
q314
q414
q115
q215
q315
q415
q116
q216
q316
q416
q117
q217
q317
q417
q118
q218
Source: U.S. Bureau of Economic Analysis
Year/Year Percent Change, SAAR
Real Net Export Growth
Source: U.S. Bureau of Economic Analysis
Year/Year Percent Change, SAAR
-15.0%-10.0%-5.0%0.0%5.0%
10.0%15.0%20.0%25.0%30.0%35.0%
q111
q211
q311
q411
q112
q212
q312
q412
q113
q213
q313
q413
q114
q214
q314
q414
q115
q215
q315
q415
q116
q216
q316
q416
q117
q217
q317
q417
q118
q218
GDP = C + I + G + NX Keep your eye on the fundamentals...
Which growth trend will dominate?
Private Investment vs. Net Exports in 2019
U.S. Consumer Sentiment
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.02001-01-01
2001-08-01
2002-03-01
2002-10-01
2003-05-01
2003-12-01
2004-07-01
2005-02-01
2005-09-01
2006-04-01
2006-11-01
2007-06-01
2008-01-01
2008-08-01
2009-03-01
2009-10-01
2010-05-01
2010-12-01
2011-07-01
2012-02-01
2012-09-01
2013-04-01
2013-11-01
2014-06-01
2015-01-01
2015-08-01
2016-03-01
2016-10-01
2017-05-01
2017-12-01
2018-07-01
Source: University of Michigan
Labor Force Participation
59.060.061.062.063.064.065.066.067.068.0
75.0
77.0
79.0
81.0
83.0
85.0
87.01981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
25-54 AllAges16+
Source: U.S. Bureau of Labor Statistics
10-Year Treasury Constant Maturity Rate Less 2-Year Treasury Constant Maturity Rate
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Source: Board of Governors of the Federal Reserve System
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
10-Year Treasury Constant Maturity Rate
Source: Board of Governors of the Federal Reserve System
-100.0%
-50.0%
0.0%
50.0%
100.0%
150.0%
19861988199019921994199619982000200220042006200820102012201420162018
Source: Board of Governors of the Federal Reserve System
2-Year Treasury Constant Maturity Rate (Yr/Yr Pct. Change)
What about South Carolina?
South Carolina Employment Growth
+1.8%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
May-18
Source: U.S. Bureau of Labor Statistics
S.C. Employment Growth
-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%
2016/2017 2017/2018
Source: U.S. Bureau of Labor Statistics
S.C. Employment Growth
-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%
2016/2017 2017/2018
Source: U.S. Bureau of Labor Statistics
S.C. Construction Markets
Construction Emp. Growth vs. SC Average
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%Jan-11
Ap
r-11
Jul-1
1Oct-11
Jan-12
Ap
r-12
Jul-1
2Oct-12
Jan-13
Ap
r-13
Jul-1
3Oct-13
Jan-14
Ap
r-14
Jul-1
4Oct-14
Jan-15
Ap
r-15
Jul-1
5Oct-15
Jan-16
Ap
r-16
Jul-1
6Oct-16
Jan-17
Ap
r-17
Jul-1
7Oct-17
Jan-18
Ap
r-18
Jul-1
8
Construction SouthCarolina
Source: U.S. Bureau of Labor Statistics
S.C. Construction Emp. Growth Components
-20.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%15.0%20.0%
ConstructionofBuildings HeavyandCivilEngineering SpecialtyTradeContractors
Source: U.S. Bureau of Labor Statistics
275
325
375
425
475
525
575
625
Random Lengths Framing Lumber Composite Index
U.S. Commerce Dept. Places Higher Import Tariffs on
Canadian Lumber
Index up 21% since January 2017
Housing Demand is Strong
Sales Activity
Permit Activity
Inventory
Increasing builder costs
vs.
High demand due to steady employment & wage growth
Tradeoffs!
FHFA House Price Index
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%q1
10
q210
q310
q410
q111
q211
q311
q411
q112
q212
q312
q412
q113
q213
q313
q413
q114
q214
q314
q414
q115
q215
q315
q415
q116
q216
q316
q416
q117
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SouthCarolina Charleston Columbia Gville/Spt. HiltonHead
Source: Federal Housing Finance Agency
E/P Ratio Employment (D)
Permits (S)
A Demand to Supply Ratio
-0.50
0.51
1.52
2.53
3.5
2010 2011 2012 2013 2014 2015 2016 2017 2018
Charleston
-0.50
0.51
1.52
2.53
3.5
2010 2011 2012 2013 2014 2015 2016 2017 2018
Greenville
-0.5
0.5
1.5
2.5
3.5
2010 2011 2012 2013 2014 2015 2016 2017 2018
Columbia
-0.50
0.51
1.52
2.53
2010 2011 2012 2013 2014 2015 2016 2017 2018
Charlotte E/P Ratio Increases 2010-2018
Source: U.S. BLS & U.S. Census Bureau
Total Employment Growth: 2010-2018
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Charlotte Charleston Columbia Greenville SouthCarolina
27.3% 25.7%
16.6%18.9% 17.1%
Source: U.S. Bureau of Labor Statistics
How are tariffs affecting manufacturing in South Carolina?
Short-run Long-run • Increased production costs
• Lower demand (-1.9%)
• USMCA to replace NAFTA?
• Adjust global production strategies – a possible benefit for South Carolina
Growth in S.C. Employment Services
-12.0%-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%
Jan.'15 Jul.'15 Jan.'16 Jul.'16 Jan.'17 Jul.'17 Jan.'18 Jul.'18
Source: U.S. Bureau of Labor Statistics
USMCA May Benefit the S.C. Automotive Sector
• 75% of a vehicle’s value must be produced in North America
• 40% of a vehicle must be made by workers earning at least $16/hour
• “We will allocate more U.S. production for the U.S. market” – Harald Kruger, BMW CEO
• Moving away from export-oriented manufacturing?
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%Jan-08
Jun-08
Nov-08
Apr-09
Sep-09
Feb-10
Jul-1
0
Dec-10
May-11
Oct-11
Mar-12
Aug-12
Jan-13
Jun-13
Nov-13
Apr-14
Sep-14
Feb-15
Jul-1
5
Dec-15
May-16
Oct-16
Mar-17
Aug-17
Jan-18
Jun-18
SC US
Unemployment Rates
SC: 3.4% US: 3.7%
Source: U.S. Bureau of Labor Statistics
Average Hourly Earnings of all U.S. Employees
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: U.S. Bureau of Economic Analysis
Annualized Growth in Employer Costs per Hour Worked (2011-2017)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
TotalCompensation Wages&Salaries SupplementalPay Non-ProductivityBonuses
2.8% 2.6%
7.4%
10.7%
Source: U.S. Bureau of Labor Statistics
Spotlight on Millennials & iGen
Total S.C. Population by Age
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
<15 15-29 30-44 45-59 60-74 75+
915,3721,008,405
918,345 991,136860,084
331,027
Source: American Community Survey
Average Daily Spending by U.S. Adults
$0
$20
$40
$60
$80
$100
$120
18-29 30-49 50-64 65+
$93$108
$95
$75$74
$110$95
$78
2008 2016
Source: Gallup; August 2017
S.C. vs. U.S. Student Loan Debt per Capita
Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
SC US
Average Homeownership by Age 30
Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax & National Student Clearinghouse
Group HomeownershipbyAge30
NoCollege 22%
Associate’sDegree,StudentDebt 24%
Associate’sDegree,NoStudentDebt 31%
Bachelor’sDegreeorhigher,StudentDebt 33%
Bachelor’sDegreeorhigher,NoStudentDebt 40%
The Bottom Line Strong national economic growth w/ steady employment and wage gains
Consumer spending experiencing consistent growth
Broad-based growth across most South Carolina sectors
Tariffs
Labor shortages
Interest rates
Thank You!