2018 Annual Economic Forecast Dragas Center for Economic Analysis and Policy

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1 2018 Annual Economic Forecast Dragas Center for Economic Analysis and Policy

2 PRESENTING SPONSOR EVENT PARTNERS 2

3 The forecasts and commentary do not constitute an official viewpoint of Old Dominion University, its President, John R. Broderick, the Board of Visitors, the Strome College of Business, or the generous donors who support the activities of the Dragas Center for Economic Analysis and Policy and the Economic Forecasting Project.

4 2018 National and Virginia Economic Forecast Accelerating Growth, Increasing Risk Professor Robert McNab January 31, 2018

5 Current and Historical Expansions Expansion Duration In months Annual Employment Growth Annual Real GDP Growth October 1949 July % 6.14% May 1954 August % 3.67% April 1958 April % 4.86% February 1961 December % 4.68% November 1970 November % 4.60% March 1975 January % 4.01% December 1982 July % 3.81% March 1991 March % 3.45% November 2001 December % 2.66% June 2009 Present* % 2.14% Source: Bureau of Labor Statistics, Bureau of Economic Analysis, National Bureau of Economic Research, and Old Dominion University Economic Forecasting Project. Real GDP in chained 2009 dollars. CAGR = Compound Annual Growth Rate. Annual Real GDP CAGR derived from quarterly series. Annual employment CAGR derived from monthly series. Current expansion data ends in Q3. Average annual Real GDP CAGR of previous expansions = 4.21% while average annual employment CAGR from previous expansions = 2.92% 5

6 3.5% 3.0% Growth in Real Gross Domestic Product United States and Virginia, Q4 3.1% 3.2% 2.6% 2.5% 2.0% 1.5% 1.0% 1.5% 2.3% 1.6% 0.5% 0.0% Q1 United States Real GDP Virginia Real GDP Q2 Q3 Source: Bureau of Economic Analysis and Old Dominion University Economic Forecasting Project. Real GDP measured in chained 2009 dollars. U.S. Q4 and VA Q3 are advance estimates. VA Q4 is our forecast. Quarterly numbers are annualized rates of growth Q4 6

7 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Thousands of Jobs 150, ,000 Total Nonfarm Employment United States, January 2007 December Million Jobs 147, , , , , , ,000 Source: Bureau of Economic Analysis and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. Data for December are preliminary. Trough was February

8 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Thousands of Jobs 4,100 4,000 3,900 3,800 3,700 3,600 3,500 Total Nonfarm Employment Virginia, January December 3, ,400 Jobs 3, ,400 Source: Bureau of Economic Analysis and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. Data for December are preliminary. Trough is February

9 % 6% 4% 2% 0% -2% -4% -6% -8% Monthly Job Growth From Pre-Recession Peak Employment Virginia and the United States, % 4.69% Months Since Pre-Recession Peak United States Virginia Source: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Peak employment for the United States was January Peak employment for Virginia was April Seasonally adjusted data through December. December data are preliminary. Data measure the number of reported jobs by the Current Employment Statistics (CES) program. 9

10 12% 10% Headline Unemployment Rate (U3) Virginia and United States, January December 10.0% 8% 6% 4.6% 7.4% 4.1% 4% 2% 3.0% 3.7% 0% Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 United States Virginia Source: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted unemployment rates. December data are preliminary. 10

11 18% Alternative Measure of the Unemployment Rate (U6) Virginia and the United States, % 16% 14% 12% 10% 8% 10.1% 8.2% 12.9% 8.5% 6% 4% 2% 6.8% 6.0% 7.9% 0% United States Virginia Source: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. U-6 measures total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers. State level data based on 4-quarter moving average. Annual averages are presented. 11

12 Individuals 25,000 20,000 15,000 10,000 5, ,000-10,000-15,000-20,000-25,000 3,770 Dec 2016 Month-to-Month Change in Labor Force Virginia, December 2016 to December 5,461 7,460 9,351 Jan Feb Mar 10,911 Apr 4,782 May 7,991 6,061 Jun Jul Source: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Local Area Unemployment Statistics. Seasonally adjusted data. December data are preliminary. 368 Aug 19,560 Sep 1,549 Oct 11,411 Nov 18,263 Dec 12

13 Jobs Month-to-Month Change in Employment Virginia, December 2016 to December 25,000 22,158 20,000 15,000 10,000 5, ,402 8,280 13,35813,836 10,304 4,697 8,438 5, ,000-10,000-15,000-20,000 Dec 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Source: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Local Area Unemployment Statistics. Seasonally adjusted data. December data are preliminary. 12,832 Nov 16,746 Dec 13

14 % 77.9% Civilian Labor Force Participation Rate United States, January 1980 December 75% 70% 65% 60% 55% 50% 45% 63.7% 51.5% 69.0% 62.7% 57.0% 40% Overall Men Women Source: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. 14

15 % 72% 70% Labor Force Participation Rate Virginia, January 1976 to December 71.5% 69.7% 68% 65.3% 66% 64% 62% 60% Source: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. 15

16 Federal Deficit in Billions of Dollars $400 $200 $236 $128 $0 -$200 -$400 -$600 $158 $378 $413 $318 $248 $161 $459 $485 $438 $585 $666 -$800 $680 -$1,000 -$1,200 $1,087 -$1,400 -$1,600 $1,294 $1,413 $1,300 Source: Office of Management and Budget and Old Dominion University Economic Forecasting Project. Federal deficits in nominal dollars. 16

17 % 10% 8% 6% Corporate Profits as Percent of GDP United States, 1950-* 6.52% 9.53% 4% 2% 0% Source: Bureau of Economic Analysis and Old Dominion University Economic Forecasting Project. Corporate Profits After Tax Without Inventory Adjustment. is through the 3 rd quarter. 17

18 Cyclically Adjusted Price/Earnings Ratio Standard and Poor s Composite Price Index January 1881 January Source: Robert Schiller, Irrational Exuberance. Prices and earnings are in January 2000 dollars. Data as of January 16 th, 2018 market close. For further information: 18

19 Growth in Real Gross Domestic Product Virginia and the United States, % 3.0% 2.5% 2.2% 2.6% 2.9% 2.2% 2.3% 3.0% 2.2% 2.0% 1.5% 1.7% 1.5% 1.7% 1.0% 0.5% 0.0% 0.6% 0.5% 0.0% 0.2% e 2018f United States Real GDP Virginia Real GDP Source: Bureau of Economic Analysis and Old Dominion University Economic Forecasting Project. Real GDP measured in chained 2009 dollars. US is an advance estimate. VA and 2018 are our forecasts. 19

20 Forecast Actual 2018 Forecast U.S. Real Gross Domestic Product 2.2% 2.3% 3.0% Civilian Job Growth 1.5% 1.2% 1.1% Unemployment Rate 4.7% 4.1% 3.8% Consumer Price Index 2.8% 2.2% 2.9% Core Consumer Price Index 2.4% 1.7% 2.2% 3-month Treasury Bill 1.3% 1.4% 2.0% 10-year Treasury Bill 3.2% 2.4% 3.2% 30-year Treasury Bill % 3.6% 30-year Conventional Mortgage 4.3% 4.0% 5.0% Federal Deficit --- -$655 Billion -$750 Billion Virginia Real GDP* 1.5% 1.7% 2.2% Virginia Employment Growth % 1.3% Source: data reflects the annual rate of growth, last month, or day business day of where appropriate. VA GDP is an estimate based on the first 3 quarters. Data are rounded to nearest tenth. 20

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2018 Annual Economic Forecast Dragas Center for Economic Analysis and Policy

2018 Annual Economic Forecast Dragas Center for Economic Analysis and Policy PRESENTING SPONSOR EVENT PARTNERS 2 The forecasts and commentary do not constitute an official viewpoint of Old Dominion University,