Northern Kentucky/Greater Cincinnati 2015 Forecast

Cincinnati Consensus Forecasting Committee

Prepared October 2014

Real GDP – Chained 2009 Dollars(Annual Percentage Change)

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Est.

2014

Fore

cast

201

5

-5%-4%-3%-2%-1%0%1%2%3%4%5%

United States Cincinnati MSA

Data source: U.S. Bureau of Economic Analysis; 2014/2015 forecasts: Cincinnati Consensus Forecasting Committee

Real GDP Forecast

US since 2009: 5 years real GDP growth

US GDP growth continues…2014: up 2.2%2015: up 2.9%

NKY/Cincy Region since 2003: Slower than US average2010-2012: Greater than US average (Mfg. uptick)

NKY/Cincy Region GDP grows, but slower than US…2014: up 2.1%2015: up 2.7%

2.7%

Personal Income Trends (Cincinnati MSA, $ thousands)

2006 2007 2008 2009 2010 2011 2012$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

$100,000,000

Personal incomePersonal income less transfer payments

$1,0

00s

Federal Share of State Revenues

FY 2000

FY 2002

FY 2004

FY 2006

FY 2008

FY 2010

FY 201225%

27%

29%

31%

33%

35%

37%

39%

41%

Percent of State Revenues from Federal Government

Kentucky Ohio

Federal Share FY2012• Kentucky: 35.7%• Ohio: 34.9%

Federal Share Annual Avg. 2000-2008: • Kentucky: 31.7%• Ohio: 30.6%• National avg.: 28.9% Federal Share Annual Avg. 2009-2012:• Kentucky: 37%• Ohio: 36.3%• National avg.: 33.4%

Source: The Pew Charitable Trusts’ analysis of the U.S. Census Bureau’s Annual Survey of State Government Finances, accessed January 23, 2014.

Employment(Annual Growth Rate in Percent)20

03

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Est.

2014

Fore

cast

201

5

-6.0%-5.0%-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%

U.S. U.S. ForecastCincinnati MSA Cincinnati MSA Forecast

Data source: U.S. Bureau of Labor Statistics; 2014/2015 forecasts Cincinnati Consensus Forecasting Committee

Employment(thousands of jobs)

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Est.

201

4

Fore

cast

201

5

120,000

125,000

130,000

135,000

140,000

145,000

940

960

980

1,000

1,020

1,040

1,060

1,080

U.S. Cincinnati MSA

U.S

. Job

s in

Tho

usan

ds

Cinc

inna

ti M

SA Jo

bs in

Tho

usan

ds

Data source: U.S. Bureau of Labor Statistics; 2014/2015 Cincinnati Consensus Forecasting Committee

Employment Forecast

Q2 2013- Q2 2014NKY/Cincy: up 1.9% (19,000 jobs)US: up 1.8% (2.4M jobs)

Calendar Year 2015NKY/Cincy: up 2% (20,850 jobs)US: up 2%

2.0%

Manufacturing Jobs(Annual Percentage Change)

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Estim

ate

2014

Fore

cast

201

5

-14.0%-12.0%-10.0%

-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%

U.S. Cincinnati MSA

Data source: U.S. Bureau of Labor Statistics; 2014/2015 forecasts Cincinnati Consensus Forecasting Committee

New Privately-Owned Housing Units Authorized(12-month Moving Average)

3835

3

3871

8

3908

3

3944

8

3981

4

4017

9

4054

4

4090

9

4127

5

4164

0

020,00040,00060,00080,000

100,000120,000140,000160,000180,000200,000

0

200

400

600

800

1,000

1,200

U.S. Cincinnati MSA

Uni

ted

Stat

es

Cinc

inna

ti M

SA

Data source: U.S. Census Bureau; Cincinnati Consensus Forecasting Committee

Residential Construction Forecast

2004: Permits peak at 13,000 2010: Permits bottom out at 3,200 (76% drop)

Short-term trends GOOD:2014: Permits up 5 percent2015: Permits up 7 percent at 4,9002015: Mortgage Bankers Association forecast- 30-yr. fixed rate BELOW 5.3% all year

Long-term trends NOT-SO-GOOD:Housing demand SOFTENS, due to demographic trends

7.0%

Unemployment Rate

2007

2008

2009

2010

2011

2012

2013

Est.

201

4

Fore

cast

201

5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

United States Cincinnati MSA

Perc

ent

Data source: U.S. Bureau of Labor Statistics; 2014/2015 forecasts Cincinnati Consensus Forecasting Committee

Unemployment Forecast

GOOD:2015 Average Unemployment DOWN 5.0%

NOT-SO-GOOD:Civilian Labor Force DOWN 2.1 % since 2009 peakBLS: Civilian Labor Force trend DOWN next 10 years

5.0%

Civilian Labor Force

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1,000,000

1,020,000

1,040,000

1,060,000

1,080,000

1,100,000

1,120,000

1,140,000

Cincinnati MSA

Data source: U.S. Bureau of Labor Statistics

US Retail Sales Forecast

OVERALL:2015: up 5.7%

HOLIDAY SEASON:2014: up, but not sensational5.7%

Annual Inflation(Percentage Change, CPI-U)

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Estim

ate

2014

Fore

cast

201

5

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Data source: U.S. Bureau of Labor Statistics; 2014/2015 forecasts Cincinnati Consensus Forecasting Committee

Forecast Risks

“Prediction is very difficult, especially about the future”-Niels Bohr, Nobel prize-winning physicist

Population Growth Rate Slowing(Annual Percentage Change)

19901992

19941996

19982000

20022004

20062008

20102012

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

United States Cincinnati MSA

Data source: U.S. Census Bureau

1.2%

0.04%

1.4%

0.07%

Economic, Population GrowthGo Hand-in-Hand

• 30-50% of economic growth tied to regional population growth

• Impacts size, composition of workforce

US Old Age Dependency Ratios

2010 2020 2030 2040 20500

5

10

15

20

25

30

35

40

2228

35 37 37

Data source: U.S. Census Bureau

Employment to Population Ratio

• Employment rates for 25 to 54-year-olds remain statistically lower in Ohio and Kentucky

Employment to Population Ratio

Highest (North Dakota) 85.6%

Lowest (West Virginia) 67.8%

Ohio ranked 31st 76.2%

Kentucky ranked 46th 71.8%Source: The Pew Charitable Trusts’ analysis of data from the Current Population Survey, U.S. Bureau of Labor Statistics and the U.S. Census Bureau.

Cincinnati Forecast Summary

2.7% 2.0% 1.7% 7.0% 5.0%

GDP TotalEmp.

MFGEmp.

NewDwelling

Units

Unemp. Rate