Zions Bank Economic Overview - PDF Free Download

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

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

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

The Dow Experienced the Largest Point Decline in History Feb. 5, 2018-1,175 Source: Wall Street Journal

Why?

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

Consumer Confidence at Highest Level Since 2000 140 February 2018 130.8 130 120 110 Above 110 indicates economic prosperity 100 90 80 70 60 50 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

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

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?

Economic Growth Slowed at the End of 2017 but Remains Strong 6.0% 4.0% Q4 2017 2.5% 2.0% 0.0% -2.0% -4.0% 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 Personal Consumption Fixed Investment Net Exports Inventories Government Real GDP Growth Source: Bureau of Economic Analysis

February Job Indicators Indicator Expectation Actual Total Nonfarm Payrolls 205,000 313,000 Unemployment Rate 4.0% 4.1% Private Payrolls 195,000 287,000 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

500 February Marks 89 Straight Months of Job Growth 300 100-100 -300-500 -700-900 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Bureau of Labor Statistics

But Employment Growth Rates Trending Down Source: Wall Street Journal

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

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 -62 58 49 95 143 224 254 251 325 449 495-100 0 100 200 300 400 500 600 Source: Bureau of Labor Statistics

Unemployment Remains at 17-Year Low 11.0% 10.0% 9.0% 8.0% February 2018 4.1% 7.0% 6.0% 5.0% 4.0% 5.0% = Full Employment 3.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Labor Statistics

68% Labor Force Participation Rose Slightly in February 67% 66% 65% February 2018 63.0 64% 63% 62% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Bureau of Labor Statistics

Annual Wage Growth Slowed in February 4.0% 3.5% February 2018 2.6% 3.0% 2.5% 2007 2017 Average 2.4% 2.0% 1.5% 1.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Labor Statistics

Source: Wall Street Journal Wage Growth Lagging Job Growth

The Fed is Missing its Inflation Target of 2 Percent 3.50% 3.0% 2.50% 2.0% 1.50% Year-over change Jan. 2018 Core CPI 1.8% 1.0% 0.50% Jan. 2018 Core PCE 1.5% 0.0% 2005 2006 2007 2008 2009 2010 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 2011 2012 2013 2014 U.S. Core PCE 2015 2016 2017 2018

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% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: U.S. Federal Reserve

December 2017 Fed Rate Increase Projections 4% 3% 2.7% 3.1% 3.0% 2% 1.4% 2.1% 1% 0% 2017 2018 2019 2020 Longer run Source: Board of Governors of the Federal Reserve

Source: Wall Street Journal Markets Expect More Rate Increases

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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Mortgage-Backed Securities U.S. Treasury Securities Federal Agency Debt Other Source: Federal Reserve Bank of St. Louis

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

Source: Wall Street Journal The Return of Market Volatility

Personal Savings Rate at Lowest Level Since 2005 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% Dec. 2017 2.4% 6.0% 4.0% 2.0% 0.0% 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source: Bureau of Economic Analysis

Total Household Debt Reaches All-Time High $14.0 T $12.0 T $10.0 T $8.0 T $6.0 T Recession Q3 2008 = $12.68 Trillion Q2 2017 = $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

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

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

Utah Economic Conditions

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

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 1,200,000 900,000 600,000 300,000 0 3,101,833 22,587 34,886 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0-10,000-20,000 Components of Population Change 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2017 Net Migration Natural Increase Total Population Sources: U.S. Census Bureau e = estimate, f = forecast

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 = 1.6% ; 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

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

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

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

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

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

UT Personal Income Growth 2 nd Highest in the Nation Percent Change in Personal Income : 2016 Q3 2017 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%

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

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

Strong Consumer Sentiment 140 130 120 110 100 90 80 70 60 50 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: 130.8 Zions Bank Utah Consumer Attitude Index: 117.9 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

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

Source: Wall Street Journal Mortgage Rates Jumping

$275,000 $255,000 $235,000 $215,000 $195,000 $175,000 $155,000 $135,000 $115,000 $95,000 1996 Utah home values continue to rise 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Utah Dec. 2017 $262,200 2015 2016 U.S. Dec. 2017 $206,300 2017 United States Utah Source: Zillow Research

30,000 Utah Residential Construction Activity Continues to Rise 25,000 20,000 15,000 Forecast 10,000 5,000 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Single-Family Units Multifamily Total Source: Ivory-Boyer Construction Database, Kem C. Gardner Policy Institute

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

Millions of Dollars $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 1970 1972 Utah Value of New Residential Construction Increasing 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Residential Nonresidential Renovations Total Source: Ivory-Boyer Construction Database, Kem C. Gardner Policy Institute 2008 2010 2012 2014 2016 Forecast 2018

Utah Economic Indicators 2016-2019f Population Nonfarm Employment Unemployment Rate Personal Income Home Prices Retail Sales 0 1 2 3 4 5 6 7 8 9 2016 2017e 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. 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 Email: Robert.Spendlove@zionsbank.com Phone: 801-560-5394