Joseph Von Nessen, Ph.D. Research Economist November 16, 2018 joey.vonnessen@moore.sc.edu
Post-WWII U.S. Economic Expansions by Length Date range of expansion (M/Y) 10/45-11/48 10/49-7/53 5/54-8/57 4/58/4/60 2/61-12/69 11/70-11/73 3/75-1/80 12/82-6/90 3/91-3/01 11/01-12/07 6/09+ 1960s 1990s Current 0 20 40 60 80 100 120 Months Source: U.S. Bureau of Economic Analysis
Dow Jones Industrial Average 29000 27000 25000 23000 21000 19000 17000 15000 13000 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18
Both the U.S. and S.C. economies are strong and stable overall
U.S. GDP Growth (Annualized) 6.0% 5.0% 3.5% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% q110 q310 q111 q311 q112 q312 q113 q313 q114 q314 q115 q315 q116 q316 q117 q317 q118 q318 Source: U.S. Bureau of Economic Analysis
Real Personal Consumption Expenditures Year/Year Change, in Billions $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $0.0 -$100.0 Source: U.S. Bureau of Economic Analysis
$300.0 Real Private Non-Residential Fixed Domestic Investment Year/Year Change, in Billions $250.0 $200.0 $150.0 $100.0 $50.0 $0.0 -$50.0 q111 q211 q311 q411 q112 q212 q312 q412 q113 q213 q313 q413 q114 q214 q314 q414 q115 q215 q315 q415 q116 q216 q316 q416 q117 q217 q317 q417 q118 q218 q318 Source: U.S. Bureau of Economic Analysis
Real Net Exports Year/Year Change, in Billions 100.00 50.00 0.00-50.00-100.00-150.00-200.00 q111 q211 q311 q411 q112 q212 q312 q412 q113 q213 q313 q413 q114 q214 q314 q414 q115 q215 q315 q415 q116 q216 q316 q416 q117 q217 q317 q417 q118 q218 q318 Source: U.S. Bureau of Economic Analysis
Keep your eye on the fundamentals... GDP = C + I + G + NX Which growth trend will dominate? Private Investment vs. Net Exports in 2019
Who are the beneficiaries of this expansion?
Pct. Job Creation Among Firms with Less than 100 Employees 68.1% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2002-2007 2010-2017 51.5% Small businesses are creating relatively fewer jobs in the current expansion period Source: U.S. Bureau of Labor Statistics; QCEW
Annual Employment Growth by Firm Size: 2010-2017 3.0% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 1.9% Less than 100 employees 100+ employees Source: U.S. Bureau of Labor Statistics; QCEW
120.0 U.S. Consumer Sentiment 110.0 100.0 90.0 80.0 70.0 60.0 50.0 2001-01-01 2001-08-01 2002-03-01 2002-10-01 2003-05-01 2003-12-01 2004-07-01 2005-02-01 2005-09-01 2006-04-01 2006-11-01 2007-06-01 2008-01-01 2008-08-01 2009-03-01 2009-10-01 2010-05-01 2010-12-01 2011-07-01 2012-02-01 2012-09-01 2013-04-01 2013-11-01 2014-06-01 2015-01-01 2015-08-01 2016-03-01 2016-10-01 2017-05-01 2017-12-01 2018-07-01 Source: University of Michigan
87.0 85.0 83.0 81.0 79.0 77.0 75.0 Labor Force Participation 1981 1982 1983 1984 1985 1986 1987 1988 1989 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 2018 25-54 All Ages 16+ 68.0 67.0 66.0 65.0 64.0 63.0 62.0 61.0 60.0 59.0 Source: U.S. Bureau of Labor Statistics
10-Year Treasury Constant Maturity Rate Less 2-Year Treasury Constant Maturity Rate 3.00 2.50 2.00 1.50 1.00 0.50 0.00-0.50-1.00 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Board of Governors of the Federal Reserve System
10-Year Treasury Constant Maturity Rate 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Board of Governors of the Federal Reserve System
2-Year Treasury Constant Maturity Rate (Yr/Yr Pct. Change) 150.0% 100.0% 50.0% 0.0% -50.0% -100.0% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Board of Governors of the Federal Reserve System
What about South Carolina?
Demographic Changes in the U.S. and South Carolina
South s Share of Population Growth is Increasing Years US Population Growth South s Population Growth South s Share of Population Growth 1910-1930 30,974,129 8,468,303 27% 1930-1950 28,123,128 9,339,455 33% 1950-1970 51,886,128 15,598,279 30% 1970-1990 45,497,947 22,650,563 50% 1990-2010 60,035,665 29,104,814 49% 2010-2017 15,961,073 8,638,224 54% Source: US Census, Annual Population Estimates & James H. Johnson
Population is Moving South and West 2016-2017 Midwest +0.3% Northeast +0.2% West +1.0% South +1.0% Source: US Census, Annual Population Estimates
Economic Development and Population Growth Cycle Right to work states, lower wages, lower costs of business, access to ports Shift of manufacturing employment Increased demand for transportation and support operations Additional employment and population gains Additional need for transportation and support functions
Population Drivers Driving force behind decisions to move: Search for jobs More affordable housing Baby Boomers seeking mild climate and lower cost of living
Population surpasses 5 million! +390,000 from 2010 to 2017 Source: US Census, Annual Population Estimates
Growth Accelerated Over Past 7 Years 5,100,000 5,000,000 4,900,000 4,800,000 4,700,000 +0.8% +1.0% +1.0% +1.2% +1.4% +1.4% +1.3% 4,600,000 4,500,000 4,400,000 2010 2011 2012 2013 2014 2015 2016 2017 Source: US Census, Annual Population Estimates
Population is Becoming More Urban
S.C. Population Growth 2010-2017 Growth greater than state avg. Growth positive but less than state avg. Growth negative Oconee Pickens Greenville Anderson McCormick Spartanburg Laurens Abbeville Greenwood Edgefield Cherokee Union Newberry Saluda Aiken Allendale York Chester Fairfield 12.2 % Lexington Richland Barnwell Bamberg Hampton Lancaster Kershaw Calhoun Orangeburg Colleton Sumter Dorchester Chesterfield Lee Darlington Berkeley Charleston Marlboro Florence Clarendon Williamsburg Dillon Marion Horry Georgetown Source: US Census Bureau, 2017 Population Estimates Jasper Beaufort SC Annual Growth: +1.2%
Population vs. Employment Growth Metro Area Population Growth Employment Growth Charleston 14.0% 20.6% Columbia 6.2% 14.2% Florence 0.1% 9.8% Greenville 7.2% 15.6% Hilton Head/Beaufort 12.7% 17.7% Myrtle Beach 18.7% 15.7% Charlotte 11.3% 22.2% Augusta 5.0% 8.7% South Carolina 7.0% 14.6% Source: U.S. Census Population Estimates & LAUS NSA Employment (2010-2017)
Population is Becoming Older
Total Population Growth by Age Range: 2010-2017 85 and over 65 to 74 55 to 59 35 to 44 20 to 24 10 to 14 Under 5 24.4% 36.1% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Median age in SC increased from 37.4 in 2010 to 38.8 in 2017 while the number of citizens over the age of 65 increased by 27.9% Source: US Census Bureau, 2017 Population Estimates
Annual Population Growth by Age Range: 2010-2017 Age Group Charleston Tri-County Region Statewide 30-34 +4.4% +3.7% +1.3% 35-39 +4.0% +3.3% +0.6% 60-64 +3.4% +3.5% +2.2% 65-69 +6.2% +6.3% +4.8% 70-74 +7.8% +8.0% +6.3% 75-79 +4.1% +5.3% +4.2% 80-84 +1.0% +3.0% +2.5% 85+ +2.5% +3.6% +2.9% Source: US Census Bureau, 2017 Population Estimates
In-Migration to Charleston, SC: 2011-2015 Source: US Census Bureau
What do these trends imply for S.C. economic growth?
Transportation Occupations in S.C. Approximately 143,000 employed in Transportation and Material Moving occupations Does not include other support and peripheral functions such as: logistics, construction, engineering, and management Largest occupations within sector include: Laborers and Freight, Stock, and Material Movers (50,000) Heavy and Tractor-Trailer Truck Drivers (26,500) Light Truck or Delivery Services Drivers (13,400)
60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Occupation Employment Growth 13.3% All Occupations 21.9% Transp. & Material Moving Transportation sector occupations have grown faster than the state s average occupation growth rate throughout the current expansion Source: BLS Occupational Employment Statistics, 2017 56.6% Laborers 34.6% Heavy Truck Driving 15.7% Light Truck Driving
Putting South Carolina s Economy into Perspective
Stages of Economic Development Low-Cost Economy (Agriculture) Investment-Driven Economy (Capital Investment) Innovation-Driven Economy (Technology/Talent)
A Competitive Challenge Emerges in the 1980s Globalization trends begin to move manufacturing overseas millions of lost jobs across the U.S. After China joins the WTO in 2001, imports from China double within 4 years; Mexico took 12 years to achieve this same level of activity after NAFTA
U.S. Manufacturing Emp. (in thousands) 20,000 19,000 18,000 17,000 16,000 China joins the WTO 15,000 14,000 13,000 12,000 11,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: U.S. Bureau of Labor Statistics, QCEW
360.0 S.C. Manufacturing Employment 340.0 320.0 300.0 280.0 260.0 240.0 220.0 200.0 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 Source: U.S. Bureau of Labor Statistics, QCEW
S.C. Textile Manufacturing Employment 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: U.S. Bureau of Labor Statistics, QCEW
What Does S.C. Do Now? Learn the economic lessons of trade and creative destruction 42
U.S. Light Weight Vehicle Sales 21.5 19.5 17.5 15.5 13.5 11.5 9.5 7.5 Source: U.S. Bureau of Economic Analysis
North American Auto Assembly Source: Thomas Klier, Federal Reserve Bank, Chicago (2013)
Similar Histories Generate Similar Strategies Regensburg, Germany Spartanburg, South Carolina 45
What about South Carolina?
3.5% South Carolina Employment Growth 3.0% 2.5% 2.0% +1.3% 1.5% 1.0% 0.5% 0.0% 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 May-18 Sep-18 Source: U.S. Bureau of Labor Statistics
S.C. Employment Growth 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2016/2017 2017/2018 Source: U.S. Bureau of Labor Statistics
S.C. Employment Growth 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2016/2017 2017/2018 Source: U.S. Bureau of Labor Statistics
S.C. Construction Markets
12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Construction Emp. Growth vs. SC Average Jan-11 May-11 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 May-18 Sep-18 Construction South Carolina Source: U.S. Bureau of Labor Statistics
S.C. Construction Emp. Growth Components 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% Construction of Buildings Heavy and Civil Engineering Specialty Trade Contractors Source: U.S. Bureau of Labor Statistics
Random Lengths Framing Lumber Composite Index 625 575 525 475 425 375 325 275 U.S. Commerce Dept. Places Higher Import Tariffs on Canadian Lumber Index up 21% since January 2017
Housing Demand is Strong Sales Activity Permit Activity Inventory
Tradeoffs! Increasing builder costs vs. High demand due to steady employment & wage growth
15.0% FHFA House Price Index 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% q110 q210 q310 q410 q111 q211 q311 q411 q112 q212 q312 q412 q113 q213 q313 q413 q114 q214 q314 q414 q115 q215 q315 q415 q116 q216 q316 q416 q117 q217 q317 q417 q118 q218 Source: Federal Housing Finance Agency South Carolina Charleston Columbia Gville/Spt. Hilton Head
E/P Ratio Employment (D) Permits (S) A Demand to Supply Ratio
Charleston 3.5 3 2.5 2 1.5 1 0.5 0-0.5 2010 2011 2012 2013 2014 2015 2016 2017 2018 Greenville 3.5 3 2.5 2 1.5 1 0.5 0-0.5 2010 2011 2012 2013 2014 2015 2016 2017 2018 Charlotte E/P Ratio Increases 2010-2018 Columbia 3 3.5 2.5 2 2.5 1.5 1 1.5 0.5 0.5 0-0.5-0.5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: U.S. BLS & U.S. Census Bureau
Total Employment Growth: 2010-2018 30.0% 27.3% 25.7% 25.0% 20.0% 16.6% 18.9% 17.1% 15.0% 10.0% 5.0% 0.0% Charlotte Charleston Columbia Greenville South Carolina Source: U.S. Bureau of Labor Statistics
How are tariffs affecting manufacturing in South Carolina? Short-run Increased production costs Lower demand (-1.9%) Long-run USMCA to replace NAFTA? Adjust global production strategies a possible benefit for South Carolina
8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% -12.0% Source: U.S. Bureau of Labor Statistics Growth in S.C. Employment Services Jan.'15 Jul.'15 Jan.'16 Jul.'16 Jan.'17 Jul.'17 Jan.'18 Jul.'18
S.C. Total Employment Growth (w/ Auto Losses) 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 2.7% 2.1% 1.9% 1.7% 1.5% 0.0% 2013-2017 (Annualized) 2017 Total 2018 Projected 2018 Projected (w/ 3,415 job loss) 2018 Projected (w/ 5,692 job loss) Source: U.S. Bureau of Labor Statistics & Peterson Institute for International Economics
USMCA May Benefit the S.C. Automotive Sector 75% of a vehicle s value must be produced in North America 40% of a vehicle must be made by workers earning at least $16/hour We will allocate more U.S. production for the U.S. market Harald Kruger, BMW CEO Moving away from export-oriented manufacturing?
Unemployment Rates 14.0% 12.0% 10.0% US: 3.7% 8.0% SC: 3.3% 6.0% 4.0% 2.0% 0.0% Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Aug-17 Jan-18 Jun-18 SC US Source: U.S. Bureau of Labor Statistics
4.0% Average Hourly Earnings of all U.S. Employees 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: U.S. Bureau of Economic Analysis
12.0% 10.0% 8.0% 6.0% 4.0% Annualized Growth in Employer Costs per Hour Worked (2011-2017) 2.8% 2.6% 7.4% 10.7% 2.0% 0.0% Total Compensation Wages & Salaries Supplemental Pay Non-Productivity Bonuses Source: U.S. Bureau of Labor Statistics
Spotlight on Millennials & igen
Total S.C. Population by Age 1,200,000 1,000,000 915,372 1,008,405 918,345 991,136 860,084 800,000 600,000 400,000 331,027 200,000 0 <15 15-29 30-44 45-59 60-74 75+ Source: American Community Survey
Average Daily Spending by U.S. Adults $120 $100 $80 $60 $40 $20 $0 $108 $110 $93 $95 $95 $74 $75 18-29 30-49 50-64 65+ 2008 2016 $78 Source: Gallup; August 2017
$6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 S.C. vs. U.S. Student Loan Debt per Capita SC US Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax
Average Homeownership by Age 30 Group Homeownership by Age 30 No College 22% Associate s Degree, Student Debt 24% Associate s Degree, No Student Debt 31% Bachelor s Degree or higher, Student Debt 33% Bachelor s Degree or higher, No Student Debt 40% Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax & National Student Clearinghouse
The Bottom Line Strong national economic growth w/ steady employment and wage gains Tariffs Broad-based growth across most South Carolina sectors Labor shortages Consumer spending experiencing consistent growth Interest rates
joey.vonnessen@moore.sc.edu