Zions Bank Economic Overview

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1 Zions Bank Economic Overview Utah Bankruptcy Lawyers Forum March 20, 2018

2 National Economic Conditions When Good News is Bad News Is Good News??

3 Dow Tops 26,000 Up 44% Since 2016 Election Source: Wall Street Journal

4 The Dow Experienced the Largest Point Decline in History Feb. 5, ,175 Source: Wall Street Journal

5 Why?

6 Business Optimism Booming Source: Trading Economics, NFIB Small Business Optimism Index

7 Consumer Confidence at Highest Level Since February Above 110 indicates economic prosperity Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Source: The Conference Board

8 Source: Trading Economics, NFIB Small Business Optimism Index Optimism Booming

9 US Tax Reform Overview Individual (Sunset in 2025) Small changes to tax rates Increase standard deduction Eliminate personal exemption Double child tax credit Lower mortgage interest deduction from $1m to $750k Cap deductions for state and local taxes at $10,000 Eliminate various itemized deductions Remove the health insurance mandate (permanent) Corporate (Permanent) Reduce corporate tax rate from 35% to 21% Pass-through income deduction of 20% Repatriation of foreign income at 15.5% (territorial tax system) Economic Impact Score of around $1.5 trillion Many US companies already increasing wages and bonuses Increase GDP by up to 0.5% Fed reaction?

10 Economic Growth Slowed at the End of 2017 but Remains Strong 6.0% 4.0% Q % 2.0% 0.0% -2.0% -4.0% Personal Consumption Fixed Investment Net Exports Inventories Government Real GDP Growth Source: Bureau of Economic Analysis

11 February Job Indicators Indicator Expectation Actual Total Nonfarm Payrolls 205, ,000 Unemployment Rate 4.0% 4.1% Private Payrolls 195, ,000 Monthly Average Hourly Wage Growth Yearly Average Hourly Wage Growth 0.2% 0.2% 2.9% 2.6% Labor Force Participation 62.7% 63.0% Sources: Wall street Journal and Bureau of Labor Statistics

12 500 February Marks 89 Straight Months of Job Growth Source: Bureau of Labor Statistics

13 But Employment Growth Rates Trending Down Source: Wall Street Journal

14 National Employment Change Percent Change in National Employment by Industry: February 2017 to February 2018 Ntl. Res. & Mining 8.9% Construction 3.7% Manufacturing 2.2% Trade, Trans., Utilities 0.9% Information -2.1% Financial Activity 1.7% Prof. & Bus. Serv. 2.4% Ed. & Health Serv. 2.0% Leisure & Hospitality 2.0% Other Services Government 0.2% 1.7% Total: 1.6% -4% -2% 0% 2% 4% 6% 8% 10% Source: Bureau of Labor Statistics

15 National Employment Change Total Change in Number of Jobs by Industry in Thousands: February 2017 to February 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activity Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government Source: Bureau of Labor Statistics

16 Unemployment Remains at 17-Year Low 11.0% 10.0% 9.0% 8.0% February % 7.0% 6.0% 5.0% 4.0% 5.0% = Full Employment 3.0% Source: Bureau of Labor Statistics

17 68% Labor Force Participation Rose Slightly in February 67% 66% 65% February % 63% 62% Source: Bureau of Labor Statistics

18 Annual Wage Growth Slowed in February 4.0% 3.5% February % 3.0% 2.5% Average 2.4% 2.0% 1.5% 1.0% Source: Bureau of Labor Statistics

19 Source: Wall Street Journal Wage Growth Lagging Job Growth

20 The Fed is Missing its Inflation Target of 2 Percent 3.50% 3.0% 2.50% 2.0% 1.50% Year-over change Jan Core CPI 1.8% 1.0% 0.50% Jan Core PCE 1.5% 0.0% U.S. Core CPI Sources: Bureau of Labor Statistics and Bureau of Economic Analysis; Note: Core CPI and Core PCE represent all items less food and energy U.S. Core PCE

21 Federal Funds Target Rate Sees 5th Increase in Over a Decade 6.0% 5.0% 4.0% 3.0% 2.0% Federal Funds Target Rate = 1.5% 1.0% 0.0% Source: U.S. Federal Reserve

22 December 2017 Fed Rate Increase Projections 4% 3% 2.7% 3.1% 3.0% 2% 1.4% 2.1% 1% 0% Longer run Source: Board of Governors of the Federal Reserve

23 Source: Wall Street Journal Markets Expect More Rate Increases

24 Fed Announces Plan to Reduce Balance Sheet $5.00T $4.50T $4.00T $3.50T $3.00T $2.50T $2.00T $1.50T $1.00T $0.50T Recession QE1 QE2 QE3 $0.00T Mortgage-Backed Securities U.S. Treasury Securities Federal Agency Debt Other Source: Federal Reserve Bank of St. Louis

25 Source: Wall Street Journal Is a Recession on the Way?

26 Source: Wall Street Journal Is a Recession on the Way?

27 Source: Wall Street Journal The Return of Market Volatility

28 Source: Wall Street Journal The Return of Market Volatility

29 Personal Savings Rate at Lowest Level Since % 16.0% 14.0% 12.0% 10.0% 8.0% Dec % 6.0% 4.0% 2.0% 0.0% Source: Bureau of Economic Analysis

30 Total Household Debt Reaches All-Time High $14.0 T $12.0 T $10.0 T $8.0 T $6.0 T Recession Q = $12.68 Trillion Q = $12.84 Trillion Non-Housing Debt $3.70 Housing Debt $9.14 $4.0 T Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Housing Debt Non-Housing Debt Source: Federal Reserve Bank of New York

31 Student and auto loan debt make up the majority of non-housing debt $4.0 T $3.5 T $3.0 T $2.5 T $2.0 T $1.5 T Recession Other $0.38 Credit Card $0.78 Auto Loan $1.19 $1.0 T $0.5 T $0.0 T Student Loan $1.34 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Student Loan Auto Loan Credit Card Other Source: Federal Reserve Bank of New York

32 Economic Protectionism Increases Costs Source: Federal Reserve Bank of St. Louis

33 Utah Economic Conditions

34 CA 0.6% OR 1.4% WA 1.7% NV 2.0% Utah Population 3 rd Fastest Growing in U.S. ID 2.2% UT 1.9% AZ 1.6% AK -0.2% MT 1.1% WY -1.0% CO 1.4% NM 0.1% Percent Change: 2016 to 2017 U.S. Rate = 0.7% ND 0.0% SD 0.9% NE 0.7% TX 1.4% KS 0.3% 0.2% OK 0.2% MN 0.9% IA 0.5% MO 0.4% AR 0.5% WI 0.4% LA 0.0% IL -0.3% MS 0.0% MI 0.3% IN 0.5% TN 1.0% AL 0.3% OH 0.3% KY 0.4% WV -0.7% VT 0.0% PA 0.1% NC 1.1% SC 1.3% GA 1.1% VA 0.7% FL 1.6% NH 0.6% NY 0.1% ME 0.4% DC 1.4% CT 0.0% DE 1.0% MD 0.5% MA 0.5% RI 0.2% NJ 0.4% 1.5% + 0.7% to 1.4% 0.2% to 0.6% 0.0% to 0.1% Loss HI -0.1% Source: U.S. Census Bureau

35 Utah Population and Components of Change Total Population 3,600,000 3,300,000 3,000,000 2,700,000 2,400,000 2,100,000 1,800,000 1,500,000 1,200, , , , ,101,833 22,587 34,886 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, ,000-20,000 Components of Population Change Net Migration Natural Increase Total Population Sources: U.S. Census Bureau e = estimate, f = forecast

36 Utah Population Growth Rates By County 2015 to 2016 Box Elder 2.2% Tooele 3.1% Davis 1.9% Cache 2.2% Rich 1.0% Weber 1.7% Morgan 3.1% Summit Salt Lake 2.1% 1.5% Utah 3.0% Wasatch 4.7% Duchesne -2.1% Daggett -1.4% Uintah -3.7% State Average = 2.0% Juab 4.2% Carbon -0.2% 3.0%+ 1.8% to 2.9% 1.0% to 1.7% Millard 0.4% Beaver 1.9% Piute -2.5% Sanpete 2.1% Sevier 1.6% Wayne 0.0% Emery -1.3% Grand 0.9% 0.0% to 0.9% Loss Iron 3.4% Washington 3.1% Kane 3.0% Garfield -0.1% San Juan 7.6% Source: U.S. Census Bureau

Utah Has the Highest Employment Growth Percent Change in Employment for States: Jan. 2017 to Jan. 2017 U.S. Rate = 1.

37 Utah Has the Highest Employment Growth Percent Change in Employment for States: Jan to Jan U.S. Rate = 1.6% ; UT Rate = 3.1% 2.0% + 1.6% to 1.9% 1.0% to 1.5% 0.0% to 0.9% Loss Source: Bureau of Labor Statistics

38 Utah Industries Seeing Growth Percent Change in Utah Employment by Industry: January 2017 to January 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activity Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government Total: 3.1% 1.2% 1.2% 2.4% 1.0% 1.4% 2.7% 2.6% 2.8% 2.6% 6.3% 8.5% -13% -8% -3% 2% 7% 12% Source: Utah Department of Workforce Services

39 Utah Industries Seeing Growth Total Change in Utah Employment by Industry: January 2017 to January 2018 Ntl. Res. & Mining 100 Construction 7,500 Manufacturing 3,400 Trade, Trans., Utilities 7,000 Information Financial Activity 900 2,300 Total: 41,300 Prof. & Bus. Serv. 2,300 Ed. & Health Serv. 5,200 Leisure & Hospitality Other Services 400 8,700 Government 3,500-3,000-1,000 1,000 3,000 5,000 7,000 9,000 11,000 Source: Utah Department of Workforce Services

40 Utah Employment Change Rates By County January 2017 to January 2018 State Rate = 3.1% 5.0% + 3.3% to 4.9% 1.0% to 3.2% 0.0% to 0.9% Loss Source: Utah Department of Workforce Services

41 Utah Has the 10 th Lowest Unemployment Rate January 2018 U.S. Rate = 4.1%; UT = 3.1% VT 3.4% NH 4.4% MA 3.8% CT NJ 3.9% 2.7% RI 3.5% MD 2.6% DC 5.7% 6.0% + 5.5% to 5.9% 4.8% to 5.4% 4.0% to 4.7% 3.9% or less Source: Bureau of Labor Statistics

42 Utah Unemployment Rates By County January 2017 State Rate = 3.1% 7.0% + 6.0% to 6.9% 4.0% to 5.9% 3.2% to 3.9% 3.1% or lower Source: Utah Department of Workforce Services

43 UT Personal Income Growth 2 nd Highest in the Nation Percent Change in Personal Income : 2016 Q Q3 U.S. = 2.6%, UT = 3.3% ID = 4.6% OR 3.6% CA 3.8% WA 4.6% NV 2.2% AK 0.2% ID 4.6% UT 3.3% AZ 2.4% MT 3.5% WY 2.6% HI 2.4% CO 2.9% NM 0.5% Source: Bureau of Economic Analysis ND 0.5% SD 0.5% NE 1.3% KS 0.2% TX 2.8% OK 2.1% MN 2.3% IA -0.1% MO 2.2% AR 3.3% WI 1.2% LA 2.5% IL 1.3% MI 2.1% IN 2.2% TN 2.3% MS 1.8% AL 2.9% 4.0% or more 3.6% to 3.9% 2.0% to 3.5% 0.0% to 1.9% Decrease OH 2.0% KY 1.0% GA 3.2% WV 1.6% VT 1.3% PA 2.0% NC 3.8% SC 3.3% VA 2.7% FL 3.1% NH 3.0% NY 2.9% ME 1.7% DC 2.2% CT 1.2% DE 1.5% MD 2.7% MA 1.9% RI 1.0% NJ 1.4%

44 Utah Poverty Rate 7 th Lowest in the Nation CA 14.3% WA 11.3% OR 13.3% NV 13.8% AK 9.9% ID 14.4% UT 10.1% AZ 16.3% 2016 U.S. Rate = 14.0%, Utah Rate = 10.1% MT 13.3% WY 11.3% HI 9.3% CO 11.0% NM 19.8% ND 10.6% SD 13.3% NE 11.4% KS 12.1% TX 15.6% OK 16.3% MN 9.9% IA 11.8% MO 14.0% AR 17.1% WI 11.8% LA 20.1% IL 13.0% MS 20.8% 18.1% + MI 15.0% IN 14.1% TN 15.8% AL 17.1% 15.1% to 18.0% 12.1% to 15.0% 10.1% to 12.0% 10.0% or less OH 14.6% KY 18.5% WV 17.8% VT 11.9% PA 12.9% VA 11.0% NC 15.4% SC 15.3% GA 16.0% FL 14.6% NH 7.2% NY 14.6% ME 12.5% DC 18.6% CT 9.8% DE 11.6% MD 9.6% MA 10.4% RI 12.8% NJ 10.4% Source: U.S. Census Bureau, Annual Community Survey 1-year estimate

45 Source: Federal Reserve Bank of St. Louis Utah Debt Load Low

46 Strong Consumer Sentiment Jul-12 Above 110 indicates economic prosperity Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 U.S. Consumer Confidence Index: Zions Bank Utah Consumer Attitude Index: Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Sources: Conference Board and Cicero Group

47 Strong Inflation in Utah 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% United States CPI: +2.1% Zions Bank Wasatch Front CPI: +3.3% Sep-11 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 Source: U.S. CPI from National Bureau of Labor Statistics and Wasatch Front CPI from Cicero Group

48 Source: Wall Street Journal Mortgage Rates Jumping

49 $275,000 $255,000 $235,000 $215,000 $195,000 $175,000 $155,000 $135,000 $115,000 $95, Utah home values continue to rise Utah Dec $262, U.S. Dec $206, United States Utah Source: Zillow Research

50 30,000 Utah Residential Construction Activity Continues to Rise 25,000 20,000 15,000 Forecast 10,000 5, Single-Family Units Multifamily Total Source: Ivory-Boyer Construction Database, Kem C. Gardner Policy Institute

51 Household Creation Surpasses Housing Units Source: Kem C. Gardner Policy Institute Population Projections and Ivory Boyer Construction Database

52 Millions of Dollars $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ Utah Value of New Residential Construction Increasing Residential Nonresidential Renovations Total Source: Ivory-Boyer Construction Database, Kem C. Gardner Policy Institute Forecast 2018

53 Utah Economic Indicators f Population Nonfarm Employment Unemployment Rate Personal Income Home Prices Retail Sales e 2018f 2019f Sources: State of Utah Revenue Assumptions Working Group, Moody s Economy.com, IHS Global Insights e = estimate f = forecast

Zions Bank, A Division of ZB, N.A. Member FDIC. Content is offered for informational purposes only and should not be construed as tax, legal, financial or business advice.

54 Zions Bank, A Division of ZB, N.A. Member FDIC. Content is offered for informational purposes only and should not be construed as tax, legal, financial or business advice. Please contact a professional about your specific needs and advice. Content may contain trademarks or trade names owned by parties who are not affiliated with ZB, N.A. Use of such marks does not imply any sponsorship by or affiliation with third parties, and ZB, N.A. does not claim any ownership of or make representations about products and services offered under or associated with such marks. Robert Spendlove Economic and Public Policy Officer Robert.Spendlove@zionsbank.com Phone:

Zions Bank Economic Overview

Zions Bank Economic Overview Intermountain Credit Education League May 10, 2018 Dow Tops 26,000 Up 48% Since 2016 Election Jan 26, 2018 26,616 Oct 30, 2016 17,888 Source: Wall Street Journal Dow Around