Northwest Economic Research Center College of Urban and Public Affairs Forecast Breakfast Economic Outlook

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1 Northwest Economic Research Center College of Urban and Public Affairs 2019 Forecast Breakfast Economic Outlook

2 1/10/2019 2

3 U.S. ECONOMY 1/10/2019 3

4 Gross Domestic Product Growth, U.S. Annualized Quarterly Percent Change, 1980Q1-2021Q2, dots indicate Fed forecasts 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% Source: FRED 1/10/2019 4

5 Components of Real GDP for 2018 for 3 rd Quarter Consumer Spending Durables but a lower rate Business Investment, but at lower rate Total Nonresidential structures driven by commercial and health care, power and communications, and mining and wells; but manufacturing Equipment lead by industrial equipment, and information processing equipment other than computers Housing After an okay 4Q 2017, continue weakening trend since 2018Q1 in both single and multifamily Net International Trade agricultural goods export 18.4% Government Fed spending Defense Nondefense Local and State 1/10/2019 Source: BEA 5

6 Annual Percentage Change in Real GDP (2009 Dollars) 2005

7 Total Nonfarm Employment: U.S., WA, OR, ID YoY Growth Rate, Monthly, January 1991-November % 8% 6% 4% US US WA WA OR US ORUSWA ID 4% 2% 2% 0% 0% -2% -2% -4% -4% -6% -6% -8% 1/10/2019 Source: BLS

8 Civilian Unemployment Rate Seasonally adjusted, Monthly, Jan 2007 November % 12% US WA OR ID 10% 8% 6% 4% 2% Nov 2018: US: 3.7% WA: 4.3% OR: 3.9% ID: 2.6% 0% /10/2019 Source: US BLS 8

9 Percent US and OR Civilian Labor Force Participation Rate Seasonally Adjusted, Monthly, Jan November % 68% 66% Recession US OR 64% 62% 60% 58% 56% 54% 52% Source: BLS 1/10/2019 9

10 Various Interest Rates Percent, Monthly, July 1954-December 2018 Sources: Freddy Mac, Board of Governors of the Federal Reserve System (via FRED) 1/10/

11 RIP: The Portland-Salem Consumer Price Index is Discontinued Average Annual Rates of Change Year US CPI-U Portland- Salem CPI-U West CPI-U % 1.2% 1.2% % 2.1% 1.9% % 4.2% 2.8% Source: BLS Average Annual Rates of Change from Half Year Year US CPI-U West CPI-U Pacific CPI-U* 1st Half % 3.3% 3.2% 1/10/

12 PCE Implicit Price Deflators Continuously Compounded Annual Rate of Change, Quarterly, Seasonally Adjusted, 2009 Q Q2 5% 4% 3% 2% 1% 0% -1% -2% Implicit Price Deflator Core Implicit Price Deflator Fed Target -3% Source: BEA 1/10/

13 US 2007Q1 to 2018Q4

14 How s Moving in Next Door? A quick look at demographics 1/10/

15 Population growth by selected time period 2.0% % 1.0% 0.5% 0.0% Total MSA Clackamas Clark Columbia Multnomah Skamania Washington Yamhill Source: Population Research Center, NERC 1/10/

16 Net Migration ,000 10,000 8,000 6,000 Clackamas Clark Columbia Multnomah Skamania Washington Yamhill Mult WA Clark Clack 4,000 2, Yam Col Skam -2,000 Source: Population Research Center 1/10/

19 In-migrants by Current and Previous Residence Previous Residence Portland Tri-County Current Residence Willamette Valley SW Oregon & Deschutes N. Coast & E. Oregon California 20% 24% 32% 19% Washington 18% 14% 8% 24% Rest of West Region 19% 24% 31% 33% Other U.S. Region 27% 22% 22% 20% Outside of U.S. 16% 16% 7% 5% Source: U.S. Census Bureau, year American Community Survey Public Use Microdata Sample Source: Population Research Center, PSU

Source: U.S. Census Bureau, Decennial Census, 2000-2010 and 2020 Oregon Office of

20 Source: U.S. Census Bureau, Decennial Census, and 2020 Oregon Office of Economic Analysis (2018Q3) Population Forecasts. Source: Population Research Center, PSU

21 1/10/

22 1/10/

23 1/10/

24 Housing 1/10/

25 U.S. Housing Permits by Type Thousands of Units, Monthly, Seasonally Adjusted, January 1990-November ,000 1,800 1,600 1,400 1,200 1, Multifamily Single Family Source: Census 1/10/

Oregon, Washington, and Idaho Cities and MSAs Single Family Building Permits Percent Change 2016-2017 2016 2017 Spokane WA Seattle MSA WA Salem OR Portland MSA OR Eugene MSA

26 Oregon, Washington, and Idaho Cities and MSAs Single Family Building Permits Percent Change Spokane WA Seattle MSA WA Salem OR Portland MSA OR Eugene MSA OR Bend OR Boise ID 1,819 1,791 9,425 9, ,397 6, ,817 1,741 5,383 6,250-40% -20% 0% 20% Source: U.S. Census Bureau; National Association of Home Builders

27 Housing Price Index Percent Change Year over Year ( Q3) 30% 25% WA OR ID 20% 15% 10% 5% WA ID OR 0% -5% -10% -15% Source: Federal Reserve Bank of St. Louis Economic Research

28 Case-Shiller Index for Select Areas YoY Percent Change, Monthly, January 2000 October % 20% U.S. Portland Seattle 15% 10% 5% 0% -5% -10% -15% -20% 1/10/

29 Portland MSA Housing Permits, Historical and Forecast Total Permits, Quarterly, 2004Q1 2026Q4 4,000 3,500 3,000 2,500 2,000 1,500 1, Single Family Multifamily 0 Source: Census, NERC 1/10/

30 Economic Outlook: 1/10/

31 Portland MSA Outlook: Northwest Economic Research Center Regional Economic and Population Forecast ( Go to Projects, scroll to Year 2017) Ten-year forecast of: Population Income Employment Housing In the seven Portland counties: Clackamas Clark (WA) Columbia Multnomah Skamania (WA) Washington Yamhill 1/10/

32 Wall Street Journal Forecast Consensus October 2018 Forecast WSJ Forecast 2018 Q Q Q Q Q Q Q4 GDP Growth (Quarterly) 4.2% 3.5% 2.5% 2.4% 2.5% 2.3% 2.1% WSJ Forecast Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Oil Prices $45.41 $57.83 $59.21 $59.85 $59.43 $60.02 $60.42 WSJ Forecast Housing Starts (millions) Actual Change in Home Prices 6.2% 6.7% 5.6% 3.9% 3.2% Forecast

33 Wall Street Journal Forecast Consensus (Continued) October 2018 Forecast WSJ Forecast Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 CPI Growth 2.2% 2.1% 2.3% 2.2% 2.1% 2.2% 2.2% Unemployment 3.9% 3.6% 3.6% 3.7% 3.8% 4.0% 4.1% 10 Year Note 2.68% 3.23% 3.35% 3.40% 3.38% 3.35% 3.36% Fed. Funds Rate 2.38% 2.70% 2.89% 2.93% 2.90% 2.83% 2.82% Actual Forecast

34 Short term Employment Outlook YoY Growth Rate, January 2000-December /10/

35 Portland Counties Construction Employment Indexed to 2005Q1, Forecasted from 2018Q3-2028Q4 160 Ska Clac Mul Clr Col Clackamas Clark Columbia Multnomah Skamania Washington Yamhill 1/10/ Sources: OED, BLS, NERC

36 Headwinds and Tailwinds 1/10/

37 Recession Hazard Zone

38 How Do We Know a Recession is Coming? Leading Index for US and Oregon Philly Fed Leading Economic Activity Index October US Oregon Conference Board Leading Economic Index YoY% Up 0.2% in November following a 0.3% decline in October, and a 0.6% increase in September. Interest Rate Yield Curve 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity 2017 Jan. 9: 1.17; 2018 Jan. 8: 0.53; 2019 Jan. 8: 0.15 ISM Manufactures Index, Building Permits New Private Units, Stock prices, all trending down. There is no sure way to foresee if a recession is coming until we are in it. 1/10/

39 Short Term and a Few Long Term + and Risks An Incomplete List: Dimmer Prospects or Rosier Outlook? International China Growth Geopolitical Risks (Name your part of the world ) Tariffs: Let s Make a Deal Immigration regulation US Domestic Fiscal and Monetary Policies, Regulation (Infrastructure Spending, Tax Cuts, Dodd-Frank, Health Care, ) Energy Prices (oil prices dropped since Oct with slight firming past 2 weeks) Public Pension Funds Income Disparity, Cyber Attacks, Climate Change Closer to Home Oregon Budget Minimum Wage Housing 1/10/

40 Contact Follow NERC Northwest Economic Research Center (NERC) /10/

The Global Economy: Sustaining Momentum

The Global Economy: Sustaining Momentum David J. Stockton Senior Fellow Peterson Institute for International Economics Chief Economist Monetary Policy Analytics October 5, 2017 What s Driving the Global