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1
Old Dominion University2017 Regional Economic Forecast
January 25, 2017
Professor Vinod AgarwalDirector, Economic Forecasting Project
Strome College of Businesswww.odu.edu/forecasting
The views expressed in this presentation do not represent official positions on the part of Old Dominion University, the Old Dominion University Board of Visitors, or any of the sponsors of the Economic Forecasting Project. The data in this presentation may be subject to revision. To our knowledge, all data in this presentation are accurate at the time of the presentation.
2
Presentation outline
I. 2016 Economic Performance
a) Regional and National Economies
b) Defense
c) Civilian Nonfarm Jobs
d) Residential Market in Hampton Roads
e) Taxable Sales and Hotel Revenue
f) Port and Cargo
II. Forecast for 2017
3
Selected Time Periods from 2001 to 2017*
13.69%
10.84%
2.60% 1.59% 2.18%
21.21%
0.87%
3.71%1.36% 1.41%
0%
5%
10%
15%
20%
25%
2001 to 2009 2009 to 2014 2014 to 2015 2015 to 2016e 2016 to 2017f
USA Hampton Roads
Source: Bureau of Economic Analysis and the Old Dominion University Economic Forecasting Project. Data on GDP incorporates latest BEA
revisions in September 2016. * numbers for 2016 are estimates.
Rate of Growth of Real Gross Domestic Product (U.S.) and Gross Regional Product (Hampton Roads)
Growth rate in 2015Virginia: 1.44%
DC Metro: 1.27%
The 2007-2009 Recession and its Recovery through December 2016% Change in Total Non-farm Payroll Employment from Pre-Recession Peak
4.96%
4.30%
-1.79%
-8%
-6%
-4%
-2%
0%
2%
4%
6%0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110
Ch
an
ge
from
Pre
-Rec
essi
on
Peak
Months After Pre-Recession Peak
USA VA HR
Pre-Recession Peak Dates:U.S.: January, 2008Virginia: April, 2008
Hampton Roads: July, 2007
Unemployment Rates in U.S., Virginia, and Hampton Roads
0
2
4
6
8
10
12
1/1
/2000
9/1
/2000
5/1
/2001
1/1
/2002
9/1
/2002
5/1
/2003
1/1
/2004
9/1
/2004
5/1
/2005
1/1
/2006
9/1
/2006
5/1
/2007
1/1
/2008
9/1
/2008
5/1
/2009
1/1
/2010
9/1
/2010
5/1
/2011
1/1
/2012
9/1
/2012
5/1
/2013
1/1
/2014
9/1
/2014
5/1
/2015
1/1
/2016
9/1
/2016
Recession US Virginia Hampton Roads
Source: Bureau of Labor Statistics
Per
centa
ge
6
Defense Spending
450
500
550
600
650
700
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Bil
lion
s of
doll
ars
BCA 2011 Sequestration ATRA2012 BBA 2013 BBA 2015
7
Caps on Department of Defense Discretionary Spending, FY 2012 to FY 2021
Source: BCA2011,Budget Requests for FY14, CBO Sequestration Update Report and the Old Dominion University Economic Forecasting Project.
The legislated cap on spending increased by $27B (5.18%) during FY 2016 and by
only $3B or 0.55% during FY 2017; is expected be $2B less in FY 2018.
What can we expect from President Trump’s Administration?
Three among many possibilities…
8
450
500
550
600
650
700
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Billio
ns o
f d
ollars
Sequestration ATRA2012 BBA 2013 BBA 2015 forecast
9
Caps on Department of Defense Discretionary Spending, FY 2012 to FY 2021
Source: BCA2011,Budget Requests for FY14, CBO Sequestration Update Report and the Old Dominion University Economic Forecasting Project.
Good times are here again!! 350 Ships; Full Rate F-35; Growing the Army
and Marine Corps. National Defense Expenditures rise by 5% annually
450
500
550
600
650
700
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Billio
ns o
f d
ollars
Sequestration ATRA2012 BBA 2013 BBA 2015 forecast
10
Caps on Department of Defense Discretionary Spending, FY 2012 to FY 2021
Source: BCA2011,Budget Requests for FY14, CBO Sequestration Update Report and the Old Dominion University Economic Forecasting Project.
Remember the Good Times? Tax Reform, Infrastructure Crowd out
Defense Spending after first year. Possibility of BRAC.
450
500
550
600
650
700
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Bil
lio
ns
of
do
lla
rs
Sequestration ATRA2012 BBA 2013 BBA 2015 forecast
11
Caps on Department of Defense Discretionary Spending, FY 2012 to FY 2021
Source: BCA2011,Budget Requests for FY14, CBO Sequestration Update Report and the Old Dominion University Economic Forecasting Project.
Status Quo becomes the new Normal. Tax Reform, Infrastructure and
Defense all compete for attention. Congress continues to modify BCA caps.
12Source: U.S. Department of Defense , U.S. Department of Commerce, and the Old Dominion University Economic Forecasting Project
36.7%
39.2%
45.1%
48.8%49.5%
33.5%
0%
10%
20%
30%
40%
50%
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
e
2017
f
Hampton Roads Gross Regional Product Attributable to DOD Spending
1984-2017
Estimated Direct DOD Spending in Hampton Roads
Source: U.S. Department of Defense and the Old Dominion University Economic Forecasting Project. *Includes Federal Civilian and Military Personnel and Procurement
Bill
ion
s o
f $
13
10.0
19.5 19.618.7
19.2 19.1 19.4
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
Between 2000 and 2012, DOD spending in our region increased by an annual average of 5.8% . In 2017, it will be about 1% lower than its peak in 2012.
2000 to 2017
14
Estimated Average Compensation (Wages, Salaries and Fringe Benefits):Selected Categories
Hampton Roads: 2014 and 2015
Source: U.S. Bureau of Economic Analysis (BEA) and the Old Dominion University Economic Forecasting Project. * BEA calls compensation as earnings. Data updated on November 17, 2016
Earnings in 2014
Earnings in 2015
Percent change
2014 to 2015
Military $91,531 $91,283 -0.27%
Federal Civilian Govt. Employees
$103,583 $107,521 3.80%
State and Local Govt. Employees
$59,150 $60,088 3.28%
Private Nonfarm $41,279 $42,185 2.19%
15
Growth (CAGR) in Estimated Average Compensation (Wages, Salaries and Fringe Benefits) Selected Categories
Hampton Roads: 2001 to 2015
Source: U.S. Bureau of Economic Analysis (BEA) and the Old Dominion University Economic Forecasting Project. BEA refers to compensation as earnings.
Compound Annual Growth Rate
2001 to 2010
Compound Annual Growth Rate
2010 to 2015
Military 7.2% 0.7%
Federal Civilian Govt. Employees 4.5% 2.6%
State and Local Govt. Employees 3.6% 2.1%
Private Nonfarm 2.9% 2.0%
16
Old Dominion University 2016 Hampton Roads Scorecard
Source: Old Dominion University Economic Forecasting Project. Figures for calendar year 2016 include predicted values for December 2016. **Employment data for 2015 and 2016 will be revised by U.S. BLS in March /April 2017.
Actual Change
2016*
Predicted
Change 2016
Civilian
Employment**0.47% +0.94%
Unemployment
Rate**4.59% 4.30%
Annual Civilian Employment (Jobs) in Hampton Roads: 1999 to 2016
706.6
730.5737.5
749.9
775.5767.2
742.2 740.2746.8
765.4769.0
650
675
700
725
750
775
800
Source: U.S. Department of Labor CES data and the Old Dominion University Economic Forecasting Project. Not seasonally adjusted.
The HR economy added only 3,600 jobs in 2016. At the end of 2016, we will still be about 6,500 jobs below our pre- recession level.
In t
hou
san
ds
18
Net New Civilian Jobs Gained/Lost in Selected MSA’s, Virginia, and North Carolina
From 2007* to 2016
-6.5
108.5
19.541.3
76.748.7
105.1
152.5185.7
-50
0
50
100
150
200
Th
ou
san
ds
Source: U.S. Department of Labor CES seasonally unadjusted data and the Old Dominion University Economic Forecasting Project. * Peak employment in Raleigh, Durham, Northern Virginia, and Virginia occurred in 2008. Change for these areas is shown for 2008 through 2016. Data will be revised in March 2017
Rethink and Invest in Our Strengths
• REGION --not just individual cities and counties– Go Virginia has potential
• Traffic Problems– Not just roads, but also airports
• Diversification – HR Community Foundation Economic Competitiveness Initiative suggested:
– Advanced manufacturing --- Bio Sciences– Coastal Energy --- Cyber Security– Modelling and Simulation--- Unmanned Systems
• Entrepreneurship
Performance of Residential Housing Market During 2016
20
21
Value of Building Permits for One Unit Family Homes in Hampton Roads: 1991-2015
Source: U.S. Bureau of the Census and the Old Dominion University Economic Forecasting Project
Value of permits increased by 5.4% in 2016; Our forecast was an increase of 3.4%. It is 37% below its peak in 2005
$1,338
$846
0
200
400
600
800
1000
1200
1400
1600
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
20
01
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
20
13
20
14
201
5
201
6e
Mil
lions
of
$
22
Number of Existing and New Construction Homes Sold
Hampton Roads: 2002-2016
Year Existing Homes SoldNew Construction
Homes Sold
Percent New
Construction
2002 19,869 4,969 20.0%
2003 21,421 4,757 18.2%
2004 23,548 4,587 16.3%
2005 24,755 4,379 15.0%
2006 22,405 4,327 16.2%
2007 19,154 3,912 17.0%
2008 15,046 3,178 17.4%
2009 15,851 2,673 14.4%
2010 14,703 2,265 13.4%
2011 15,818 2,366 13.0%
2012 16,856 2,664 13.6%
2013 18,791 2,878 13.3%
2014 18,700 2,485 11.7%
2015 20,595 2,954 12.5%
2016 22,456 3,219 12.5%
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not
Guaranteed. Figures reported here represent only those properties that are listed through REIN by REIN members and may not represent all new
construction activity in our region.
41% decline
in sale of existing homes
from 2005 to 2010existing
homes Sales Have increased by 7,753
from 2010 to 2016
23
Median Sale Price of Existing Residential Homes
Hampton Roads: 2002-2016
Year Median Price Percent change year to year
2002 $116,900 7.3%
2003 $130,000 11.2%
2004 $156,500 20.4%
2005 $192,000 22.7%
2006 $214,900 11.9%
2007 $223,000 3.8%
2008 $219,000 -1.8%
2009 $207,000 -5.5%
2010 $203,900 -1.5%
2011 $180,000 -11.7%
2012 $185,000 +2.78%
2013 $190,000 +2.70%
2014 $193,205 +1.70%
2015 $203,000 +5.07%
2016 $210,000 +3.5%
90% increase from 2002-07
19% decreaseFrom 2007-11
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2007 2010 2015 2016
24
Estimated Inventory of Existing Residential Homes as Measured by Active Listings
Hampton Roads: 2007, 2010, 2015, and 2016
Source: Real Estate Information Network Inc. and the Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.
Average ( Jan. 1996 through December 2016) = 8,037
4.33
0
2
4
6
8
10
12
Estimated Months of Supply of All Existing Homes in Hampton Roads
Based on Average Sales in the Last 12 Months: January 1996 – December 2016
25Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.
Average (Jan 1996- December 2016) = 5.66 months
December 2016: 4.33Peak: 10.24 (November 2010)
Existing Residential Homes Sold and Average Days on the Market
Hampton Roads: 2000-2016
26Source: Real Estate Information Network Inc. and the Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed. Days on Market is calculated from the date listed to the date under contract date for existing homes sold.
17,058
18,924
24,755
19,154
15,046
14,703
18,79120,595
22,456
6761
27 28
65
83
102
8884
75
0
20
40
60
80
100
120
0
5,000
10,000
15,000
20,000
25,000
30,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Homes Sold Average Days on Market
27
Summary on Existing Homes Market since 2011
• Inventories have decreased substantially.
• Days on market have also decreased.
• Number of homes sold has increased.
• Estimated months of supply have declined substantially.
• But the median price of homes has increased only slightly
• The explanation lies in the size of the distressed market---which consists of short sales and bank-owned homes (REOs).
606
3,224
1,229
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Jun
-08
Sep
-08
Dec
-08
Mar
-09
Jun
-09
Sep
-09
Dec
-09
Mar
-10
Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12
Jun
-12
Sep
-12
Dec
-12
Mar
-13
Jun
-13
Sep
-13
Dec
-13
Mar
-14
Jun
-14
Sep
-14
Dec
-14
Mar
-15
Jun
-15
Sep
-15
Dec
-15
Mar
-16
Jun
-16
Sep
-16
Dec
-16
Number of Active Listings of Distressed Homes (REO & Short Sales)
Hampton Roads: June 2008 to December 2016
28Source: Real Estate Information Network (REIN) and the Old Dominion University Economic Forecasting Project.
December 2016: 1,229Peak: 3,224 (November 2010)
Number of Existing Short Sale and REOs Residential Homes Sold
Hampton Roads: 2006- 2016
29Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed.
Year All Sales Short SalesPercent
Short SalesREO Sales
Percent
REO Sales
2006 22,405 3 <1% 56 <1%
2007 19,152 40 <1% 223 1.2
2008 15,047 217 1.4 833 5.5
2009 15,849 598 3.8 2,271 14.3
2010 14,696 784 5.3 3,021 20.6
2011 15,817 1,127 7.1 4,213 26.62012 16,856 1,644 9.8 3,337 19.8
2013 18,791 1,769 9.4 3,178 16.9
2014 18,700 1,347 7.2 2,744 14.7
2015 20,592 1,230 6.0 2,542 12.3
2016 22,456 1,002 4.5 2,294 10.2
Housing Affordability
30
30-Year Fixed Mortgage Rate (Weekly, ending Thursday)July 7, 2016 to January 19, 2017
3.473.41
4.32
4.09
32
Housing Affordability: Monthly Payment for a Median Price Resale House as a Percent of Median Household Monthly Income
Hampton Roads and the U.S. : 1979 to 2016
38.336.3
28.0
34.4
27.3
21.5
19.0
22.8 22.5
36.0
31.1
20.6
30.6
27.8
22.2
18.4 19.5 19.3
0
5
10
15
20
25
30
35
40
45
1979 1989 1999 2006 2008 2010 2012 2014 2016
Pe
rce
nt
U.S.
Hampton Roads
Source: The Old Dominion University Economic Forecasting Project. Prevailing 30 year average mortgage rate is used for each year. For example rate used for 2015 is 3.85 percent and for 2016 it is 3.65 percent
33
Estimated House Rental and Principal, Interest, and Taxes for a House Payment
Hampton Roads: 2002-2016
YearMedian Monthly Rent for
a Three Bedroom House
PI&T Monthly for a
Median Priced
Existing House
Ratio of Monthly Rent
to PI&T
2002 911 861 1.06
2003 1,037 890 1.16
2004 1,044 1,073 0.97
2005 1,087 1,315 0.83
2006 1,118 1,533 0.73
2007 1,164 1,598 0.73
2008 1,247 1,507 0.83
2009 1,236 1,307 0.95
2010 1,277 1,233 1.04
2011 1,319 1,071 1.23
2012 1,454 1,015 1.43
2013 1,570 1,080 1.45
2014 1,562 1,118 1.40
2015 1,530 1,154 1.33
2016 1,601 1,163 1.38Source: H.U.D. and the Old Dominion University Economic Forecasting Project. It is assumed that real estate tax rate is 1% and the tax reduction received by home owners would compensate for home owners insurance and maintenance expenditures. Prevailing 30 year average mortgage rate is used for each year. For example rate used for 2015 is 3.85 percent and for 2016 it is 3.65 percent
34
Old Dominion University 2016 Hampton Roads Scorecard
Source: Virginia Department of Taxation, Smith Travel Research and the Old Dominion University Economic Forecasting Project.*Figures for calendar year 2016 include predicted values for December 2016.
Actual Change 2016*
Predicted Change 2016
Taxable Sales +1.97% +3.60%
Hotel Revenue
+6.72% +4.20%
35Source: Virginia Department of taxation and the Old Dominion University Economic Forecasting Project. *Figures for calendar year 2016 include predicted values for December 2016.
20.56 20.98 22.21
0
5
10
15
20
25
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6e
$ B
illio
ns
Taxable sales increased by 3.8% during 2015 and an estimated 2.0% during 2016.
Taxable Sales, Hampton Roads: 1996 to 2016
The Performance of the Hotel Industry in Hampton Roads
36
37
4.8%
6.2%6.7%
3.2%
5.8%
8.2%
0%
2%
4%
6%
8%
10%
12%
14%
USA Virginia Hampton Roads
REVENUE
REVPAR
Source: STR Trend Report January 24, 2017 and the Old Dominion University Economic Forecasting Project.
Percent Change in Hotel Revenue and REVPAR 2015 to 2016
38
Hotel Revenue in Hampton Roads 1996-2016
Source: STR Trend Report January 24, 2017 and the Old Dominion University Economic Forecasting Project.
708.3
804.7
0
100
200
300
400
500
600
700
800
900
Mil
lio
ns o
f $
Hotel Revenue grew by 5.9 % during 2015 and by another 6.7 % during 2016.
Available Hotel Rooms and Rooms Occupied in Hampton Roads (000s): 1991-2016
32,015
36,76739,614 36,978
18,237
22,107
22,142
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
Available
Occupied
Source: STR Trend Report January 24, 2017 and the Old Dominion University Economic Forecasting Project.
40
Percent Change in Hotel Revenue within Hampton Roads: 2015 to 2016
Source: STR Trend Report January 24, 2017 and the Old Dominion University Economic Forecasting Project.
0.46%
11.85%
3.83%4.71%
7.34% 6.72%
0%
2%
4%
6%
8%
10%
12%
14%
Performance of the Port of Virginia
41
42
Operating Income/Loss for the Port of Virginia (In Million $)
-$20.7 -$20.1
-$11.1 -$16.9
$13.6
$4.8
-25
-20
-15
-10
-5
0
5
10
15
20
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Fiscal Year 2006 through Fiscal Year 2016 (ending June 30)
Source: Virginia Port Authority Comprehensive Annual Financial Report for Fiscal year 2015 and Fiscal Year 2016, and the Old Dominion University Economic Forecasting Project.
Mil
lion
$
Port of Virginia’s Operating Income from January to October 2016 was $14.6M compared to $9.6M for the same time period in 2015.
43
Twenty-Foot Equivalent Container Units (TEUs) at the Port of Virginia: 1991 to 2016
Source: Virginia Port Authority and Old Dominion University Economic Forecasting Project.
TEUs increased by 4.2% in 2016; we had forecasted a 4.8% increase. Loaded TEUs increased by 4.8%,; empty TEUs increased by only 1.2%.
2,128.4
2,655.7
0
500
1,000
1,500
2,000
2,500
3,000
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
Th
ou
san
ds
44
General Cargo Tonnage at the Port of Virginia: 1991 to 2016
Source: Virginia Port Authority and Old Dominion University Economic Forecasting Project.
General Cargo Tonnage increased by 4.5% in 2016; we forecasted a 2.7% increase.
17.73
20.87
0
5
10
15
20
25
199
1
199
2
19
93
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
20
02
200
3
200
4
200
5
200
6
20
07
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
20
16
Millio
ns o
f To
ns
45
Movement of Containers at the Port of Virginia by Type of Transportation: 2011 to 2016
Source: Virginia Port Authority and the Old Dominion University Economic Forecasting Project
Mill
ion
s o
f C
on
tain
ers 1.10
1.21 1.271.37 1.45 1.50
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2011 2012 2013 2014 2015 2016
Rail
Barge & Truck
TOTAL
Percent of containers moved by rail has gradually increased from 31.9% in 2012 to 36.7% in 2016.
46
Average TEUs per Container Vessel Call 2011 to 2016
Source: Virginia Port Authority and the Old Dominion University Economic Forecasting Project
Nu
mb
er
of
TEU
s
1,158 1,2011,307 1,341 1,410 1,512
0
200
400
600
800
1,000
1,200
1,400
1,600
2011 2012 2013 2014 2015 2016
Average TEU capacity of the largest 10 percent of Container Vessels calling at the port has increased from 5,691 TEUs in 2009 to 9,067 TEUs in 2014 or by 59% and this trend is continuing.
Forecast for 2017
47
Old Dominion University 2017 Forecast for Hampton Roads MSA
2016* 2017 % Change
*Figures for calendar year 2016 include predicted values for Dec. 2016. ** Base year is 2009 48
Nominal Gross Regional
Product$98.96B $103.17B
Real Gross Regional
Product**$86.73B $87.95B +1.41%
Civilian Employment 768,975 772,820 +0.50%
Unemployment Rate 4.59% 4.40%
Taxable Sales $22.21B $22.79B +2.60%
Hotel Revenue $804.70M $840.11M +4.40%
General Cargo Tonnage 20.87M 21.43M +2.70%
Housing Permit Value $846.38M $868.39M +2.60%
49
2017 Regional Summary
• Look for regional economic growth to be below its half-century annual average of 2.6 percent and also below that of the nation.
• The port, health-care industries, and tourism are likely to help the region’s moderate economic expansion in 2017
• Single-family home prices in 2017 are likely to continue to increase at a moderate pace.
– Inventories, sale volume, and days-on-market are all moving in the right direction. Months of supply of existing homes are lower than their historic average.
– Slightly higher Mortgage Rates
• Lingering distressed home volume remains a concern
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Center for Economic Analysis and Policy, Strome College of Business at Old Dominion University
Old Dominion University2017 National Economic Forecast
January 25, 2017
Larry “Chip” FilerAssociate Professor of Economics
Strome College of Business
www.odu.edu/forecasting
Real GDP Growth United States and Virginia
1.6
1.6 0.5
3.5
-4
-3
-2
-1
0
1
2
3
4
5
6
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Q1
20
16
Q2
20
16
Q3
20
16
Q4
Virginia United States
Source: Bureau of Economic Analysis and Center for Economic Analysis and Policy Forecasts
Total Nonfarm Payroll Employment
129,774
145,303
120,000
125,000
130,000
135,000
140,000
145,000
150,000
1/1
/08
5/1
/08
9/1
/08
1/1
/09
5/1
/09
9/1
/09
1/1
/10
5/1
/10
9/1
/10
1/1
/11
5/1
/11
9/1
/11
1/1
/12
5/1
/12
9/1
/12
1/1
/13
5/1
/13
9/1
/13
1/1
/14
5/1
/14
9/1
/14
1/1
/15
5/1
/15
9/1
/15
1/1
/16
5/1
/16
9/1
/16
+ 15.5 Million Jobs
Source: Bureau of Labor Statistics
Percentage Growth in Total Nonfarm EmploymentUnited States and Virginia
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
U.S. VA
Source: Bureau of Labor Statistics
Monthly Net Job Creation For Virginia During 2016
-600
14,800
2,800
-10,600
-4,500
7,700 8,400
11,800 11,900
3,500
-9,700
14,100
4,858
-15,000
-10,000
-5,000
-
5,000
10,000
15,000
20,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Bureau of Labor Statistics and Center for Economic Analysis and Policy Calculations
Rate of Headline Unemployment (U3)United States and Virginia
0
1
2
3
4
5
6
7
8
9
1/1/12 7/1/12 1/1/13 7/1/13 1/1/14 7/1/14 1/1/15 7/1/15 1/1/16 7/1/16
United States Virginia
Source: Bureau of Labor Statistics
Labor Force Participation Rates Are Starting to Stabilize
56.0
58.0
60.0
62.0
64.0
66.0
68.0
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
20
24
Labor Force Participation BLS Projection
Source: Bureau of Labor Statistics
Labor Force Flows from Prior Month
0
1000
2000
3000
4000
5000
6000
1/1
/10
4/1
/10
7/1
/10
10
/1/1
0
1/1
/11
4/1
/11
7/1
/11
10
/1/1
1
1/1
/12
4/1
/12
7/1
/12
10
/1/1
2
1/1
/13
4/1
/13
7/1
/13
10
/1/1
3
1/1
/14
4/1
/14
7/1
/14
10
/1/1
4
1/1
/15
4/1
/15
7/1
/15
10
/1/1
5
1/1
/16
4/1
/16
7/1
/16
10
/1/1
6
Emp. To NLF Unem. To NLF
Source: Bureau of Labor Statistics
Virginia Labor Force Participation Rates
69.8
64.8
61.0
62.0
63.0
64.0
65.0
66.0
67.0
68.0
69.0
70.0
71.0
1/1
/06
6/1
/06
11
/1/0
6
4/1
/07
9/1
/07
2/1
/08
7/1
/08
12
/1/0
8
5/1
/09
10
/1/0
9
3/1
/10
8/1
/10
1/1
/11
6/1
/11
11
/1/1
1
4/1
/12
9/1
/12
2/1
/13
7/1
/13
12
/1/1
3
5/1
/14
10
/1/1
4
3/1
/15
8/1
/15
1/1
/16
6/1
/16
11
/1/1
6
Source: Bureau of Labor Statistics
The Fed in 2017
• There is an expectation of 3 rate increases during 2017 (75 basis points total). This would leave the Fed Funds Target at the range 1.25% to 1.50% by December.
• Meeting dates in 2017:• Jan/Feb• March• May• June• July• Sept/Oct• December
Fed Dot Chart versus Taylor Rule
Source: Janet Yellen, Speech to Stanford Institute for Economic Policy Research on January 19, 2017.
Treasury Yield Curves
Jan. 2014
Jan. 2015
Jan. 2017
0
0.5
1
1.5
2
2.5
3
3.5
4
1m 3m 6m 1y 2y 3y 5y 7y 10y 20y 30y
Source: US Department of the Treasury
The Trump Administration
• Very difficult to forecast. Campaign rhetoric is always more political and ideological than actual policy proposals.
• A few things we know (or don’t know):
• Repeal of ACA
• Infrastructure Bill
• Immigration reform
• Repeal of Dodd-Frank
• Renegotiation of Trade Agreements
Trump’s Trade Conundrum
-900,000
-800,000
-700,000
-600,000
-500,000
-400,000
-300,000
-200,000
-100,000
-
100,000
0
20
40
60
80
100
120
140
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
$ M
illio
ns
19
97
=10
0
Source: Bureau of Economic Analysis and Board of Governors of the Federal Reserve System
$ Appreciation Trade Deficits
The Current National Recovery
Recession End Expansion Duration
October 1945 80 months
February 1961 106 months
March 1991 120 months
November 2001 73
June 2009 91 (ongoing)
Source: National Bureau of Economic Research
Real GDP Growth ForecastsUnited States and Virginia
1.6
2.2
1.5
2.42.6
1.6
2.2
0.6 0.70.4
0.02
1.4
0.8
1.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2011 2012 2013 2014 2015 2016E 2017F
United States
Virginia
Source: Bureau of Economic Analysis and Center for Economic Analysis and Policy Forecasts
2016 2017
Forecast Actual Forecast
Real Gross Domestic Product 2.03% 1.60% est. 2.2%
Employment Growth 1.50% 1.74% 1.5%
Unemployment Rate 5.1% 4.9% 4.7%
Consumer Price Index 1.34% 1.28% 2.80%
CPI - Core 2.03% 2.21% 2.40%
3-Month Treasury Bill 1.25% 0.32% 1.31%
10-Year Treasury Bond 3.15% 1.84% 3.15%
30-Year Conventional Mortgage Rate 4.25% 3.65% 4.25%
National Economic Outlook for 2017