Zions Bank Economic Overview Logan Rotary Club June 28, 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 Correction Territory Down More than Ten Percent Jan 26, 2018 26,616 Source: Wall Street Journal
Volatility Returns to the Stock Market Dow Jones Industrial Average 27,000 26,000 25,000 24,000 23,000 22,000 21,000 20,000 19,000 Jan-2017 Feb-2017 Mar-2017 Apr-2017 May-2017 Jun-2017 Jul-2017 Aug-2017 Sep-2017 Oct-2017 Nov-2017 Dec-2017 Jan-2018 Feb-2018 Mar-2018 Apr-2018 May-2018 Jun-2018
Why?
Business Optimism Booming Source: Trading Economics, NFIB Small Business Optimism Index
Consumer Confidence Remains High 140 June 2018 126.4 130 120 110 Above 110 indicates economic prosperity 100 90 80 70 60 50 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Source: The Conference Board
Source: Trading Economics, NFIB Small Business Optimism Index Optimism Booming
Trumponomics Repeal and replace the Affordable Care Act Tax Reform Increase spending on infrastructure and military Reduce government regulations Renegotiate trade deals But can they get it done?
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 Start of 2018 6.0% 4.0% Q1 2018 2.2% 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 Personal Consumption Fixed Investment Net Exports Inventories Government Real GDP Growth 2017 2018 Source: Bureau of Economic Analysis
500 May Marks 92 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
The US is Currently in the 2 nd Longest Economic Expansion on Record Duration of Economic Expansion by Months July 2009 November 2001 March 1991 December 1982 March 1975 November 1970 February 1961 April 1958 May 1954 October 1949 October 1945 24 36 37 39 45 58 73 92 107 106 120 0 20 40 60 80 100 120 140 Source: NBER
National Employment Change Percent Change in National Employment by Industry: May 2017 to May 2018 Ntl. Res. & Mining 8.6% Construction 4.1% Manufacturing 2.1% Trade, Trans., Utilities 1.3% Information -0.7% Financial Activity 1.5% Prof. & Bus. Serv. 2.4% Ed. & Health Serv. 1.9% Leisure & Hospitality 1.6% Other Services Government 0.1% 1.1% Total: 1.6% -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: May 2017 to May 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activity Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government -19 21 58 97 125 259 262 286 350 483 441-100 0 100 200 300 400 500 600 Source: Bureau of Labor Statistics
US Unemployment Rate at Lowest-Level Since April 2000 11.0% 10.0% 9.0% 8.0% May 2018 3.8% 7.0% 6.0% 5.0% 4.0% 5.0% = Full Employment 3.0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Bureau of Labor Statistics
68% Labor Force Participation Fell Slightly in May 67% 66% 65% May 2018 62.7% 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
Labor Force Participation Among Lowest Level in Almost 40 Years 68% 66% 64% 62% 60% 58% 56% Apr. 1978 63.0% Mar. 2000 63.7% 1956 1958 1960 1962 1964 1966 1968 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 May 2018 62.7% Source: Bureau of Labor Statistics
Baby Boomers Head for Retirement 68% 38% U.S. Participation Rate 67% 66% 65% 64% 63% 62% 61% 36% 34% 32% 30% 28% 26% 24% 22% Share of 55+ 60% 20% 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 2017 U.S. Participation Rate Age 55+ Share of Working Age Pop Source: Bureau of Labor Statistics
Long-Term Decline of the Teenage Workforce 70% 65% 60% 55% 50% 45% 40% 35% 30% 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 U.S. Labor Force Participation Rate Participation Rate Ages 16-19 Source: Bureau of Labor Statistics
Standard of Living Best Ever
Fewer than One Unemployed Worker Per Job Opening 7 6 5 4 3 April 2018 0.9 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Unemployed/Openings Source: Bureau of Labor Statistics
Annual Wage Growth Rose in May 4.0% 3.5% May 2018 2.7% 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 2018 Source: Bureau of Labor Statistics
Source: Wall Street Journal Wage Growth Lagging Job Growth
Inflation is slowly rising 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% Fed s Preferred Level May 2018 2.8% -3.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Bureau of Labor Statistics
Federal Funds Target Rate Sees 6th Increase in Over a Decade 6.0% 5.0% 4.0% 3.0% 2.0% Federal Funds Target Rate = 1.50% to 1.75% 1.0% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: U.S. Federal Reserve
Federal Funds Target Rate Sees 7th Increase in 3 Years 6.0% 5.0% Recession 4.0% 3.0% Federal Funds Target Rate = 1.75% 2.0% 2.0% 1.0% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Federal Funds Target Rate Source: Federal Reserve Board of Governors and BEA
June 2018 Fed Rate Increase Projections 4% 3% 2% 2.1% 2.4% 2.9% 3.1% 3.4% 3.4% 2.9% 2.9% 1% 0% 2018 2019 2020 Longer run Mar-18 18-Jun Source: Board of Governors of the Federal Reserve
3.0% Yield Curve Declines to Lowest-Level Since 2007 10-year minus 2-year spread 2.50% 2.0% 1.50% 1.0% 0.50% 0.0% -0.50% -1.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Federal Reserve Bank of St. Louis
Oil Prices and Production on the Rise Oil Rig Count 1,700 1,500 1,300 1,100 900 700 $120 $100 $80 $60 $40 Oil Prices US Oil Rigs Oil (WTI Crude) 500 $20 300 2011 2012 2013 2014 2015 2016 2017 2018 $0 Sources: Baker Hughes and Federal Reserve Bank of St. Louis
HolyFrontier Fire Affecting Gas Prices Across Intermountain West Salt Lake City Date of Fire Source: Gas Buddy
Economic Protectionism Increases Costs Source: Federal Reserve Bank of St. Louis
Source: Federal Reserve Bank of St. Louis Trade Wars Hurt Growth
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 Counties Growth Outpacing Nation Percent Change: 2016 to 2017 U.S. Rate = 0.7% 1.5% + 0.7% to 1.4% 0.2% to 0.6% 0.0% to 0.1% Loss 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 2016 to 2017 State Average = 1.9% 3.0%+ 1.8% to 2.9% 1.0% to 1.7% 0.0% to 0.9% Loss Source: U.S. Census Bureau
Cache County Average Growth Rates 2010 to 2017 State Average = 1.7% 3.0%+ 1.8% to 2.9% 1.0% to 1.7% 0.0% to 0.9% Loss Source: U.S. Census Bureau
Utah has the Fastest Employment Growth Percent Change in Employment for States: May 2017 to May 2018 U.S. Rate = 1.7% UT Rate = 3.4% NH 1.9% MA 1.6% 2.0% + 1.6% to 1.9% 1.0% to 1.5% HI 1.7% 0.0% to 0.9% Loss Source: Bureau of Labor Statistics
Utah Total Employment at New Highs 1,600 1,500 Gain of 339,700 jobs from low in 2010 Thousands of Employees 1,400 1,300 1,200 1,100 1,000 900 Loss of 92,000 jobs from 2007-2010 800 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: U.S. Bureau of Labor Statistics Note: Numbers rounded to nearest thousand Total Nonfarm Employment
Utah Industries Seeing Growth Percent Change in Utah Employment by Industry: May 2017 to May 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activity Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government -3.5% Total: 3.5% 0.3% 0.5% 1.6% 2.9% 3.1% 4.5% 4.4% 3.6% 4.0% 7.6% -13% -8% -3% 2% 7% 12% Source: Utah Department of Workforce Services
Utah Industries Seeing Growth Total Change in Utah Employment by Industry: May 2017 to May 2018 Ntl. Res. & Mining Construction -300 7,400 Manufacturing 3,700 Trade, Trans., Utilities 12,400 Information Financial Activity 100 2,600 Total: 51,900 Prof. & Bus. Serv. 9,100 Ed. & Health Serv. 7,000 Leisure & Hospitality Other Services 200 5,700 Government 4,000-3,000-1,000 1,000 3,000 5,000 7,000 9,000 11,00013,00015,000 Source: Utah Department of Workforce Services
Changes and Differences Between US and Utah Economies Source: Kem C. Gardner Policy Institute Analysis of BEA National and Product Account Data
Changes in Utah s Tax base Source: Kem C. Gardner Policy Institute analysis of Utah office of Legislative Research and General counsel data
Utah Employment Change Rates By County May 2017 to May 2018 State Rate = 3.4% 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 11 th Lowest Unemployment Rate May 2018 U.S. Rate = 3.8%; UT = 3.0% 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 April 2018 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
Utah Personal Income Growth 3 rd Highest in the Nation Percent Change in Personal Income : 2016-2017 U.S. = 3.1%, UT = 4.4% ID = 4.7% VT 3.4% NH 4.4% MA 3.8% CT NJ 3.9% 2.7% RI 3.5% MD 2.6% DE 2.5% DC 5.7% 4.0% or more 3.6% to 3.9% 2.0% to 3.5% 0.0% to 1.9% Decrease Source: Bureau of Labor Statistics
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
Strong Consumer Sentiment 140 130 120 110 100 90 80 70 60 50 Jul-12 Above 110 indicates economic prosperity Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 U.S. Consumer Confidence Index: 126.4 Zions Bank Utah Consumer Attitude Index: 111.9 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Sources: Conference Board and Cicero Group
Year-over-year percent change 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% Utah Inflation Hits Highest-Level Recorded Jul-2011 Oct-2011 Jan-2012 Apr-2012 Jul-2012 Oct-2012 Jan-2013 Apr-2013 Jul-2013 Oct-2013 Jan-2014 Apr-2014 Jul-2014 Oct-2014 Jan-2015 Apr-2015 Jul-2015 Oct-2015 Jan-2016 Apr-2016 Jul-2016 Oct-2016 Jan-2017 Apr-2017 Jul-2017 Utah 5.0% US 2.8% Oct-2017 Jan-2018 Apr-2018 United States CPI: +2.8% Zions Bank Wasatch Front CPI: +5.0% Source: U.S. CPI from National Bureau of Labor Statistics and Wasatch Front CPI from Cicero Group
$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
Household Creation Surpasses Housing Units Source: Kem C. Gardner Policy Institute Population Projections and Ivory Boyer Construction Database
Home Prices Increasing Faster Than Wages Source: Wall Street Journal
Source: Wall Street Journal Multigenerational Households on the Rise
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
Economic Overview Negatives Potential trade wars Potential of overheating economy National and international uncertainty Trumponomics success? Unsure inflation outlook Skills mismatch Low productivity growth Positives Strong consumer and business confidence Trumponomics pro growth agenda The Western US has: Strong population growth Strong employment growth Low unemployment Strong income growth
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