Zions Bank Economic Overview Utah Bankers Association Emerging Bank Leaders Conference November 9, 2017
National Economic Conditions
Dow Breaks 23,000 The Trump Bump Dow Reaches New Heights Following U.S. Presidential Election Source: Federal Reserve Bank of St. Louis
Business Optimism Booms Post Election Source: Trading Economics, NFIB Small Business Optimism Index
Consumer Confidence Continues Higher 130 October 125.9 120 110 Above 110 indicates economic prosperity 100 90 80 70 60 50 Jun-12 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 Source: The Conference Board
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?
October Job Indicators Indicator Expectation Actual Total Nonfarm Payrolls 325,000 261,000 Unemployment Rate 4.2% 4.1% Private Payrolls 320,000 252,000 Monthly Average Hourly Wage Growth Yearly Average Hourly Wage Growth 0.2% -0.04% 2.7% 2.4% Labor Force Participation 63.0% 62.7% Sources: Wall street Journal and Bureau of Labor Statistics
85 Straight Months of Job Creation Employment Change in thousands 500 300 100-100 -300-500 -700 8.7 Million Jobs Lost 16.6 Million Jobs Recovered -900 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Labor Statistics
Thousands of Jobs 400 350 300 250 200 150 100 50 0-50 U.S. Labor Market Streak Continues 85 Months of Job Growth +261,000-100 Oct-2010 Oct-2011 Oct-2012 Oct-2013 Oct-2014 Oct-2015 Oct-2016 Oct-2017 Source: Bureau of Labor Statistics
Wide Swings in Food and Drinking Employment
National Employment Change Percent Change in National Employment by Industry: October 2016 to October 2017 Ntl. Res. & Mining 8.8% Construction 2.8% Prof. & Bus. Serv. 2.6% Ed. & Health Serv. 2.0% Financial Activity 1.8% Leisure & Hospitality 1.8% Manufacturing 1.3% Other Services 1.3% Trade, Trans., Utilities 0.4% Government Information -2.3% 0.2% Total: 1.4% -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: October 2016 to October 2017 Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Construction Financial Activity Manufacturing Trade, Trans., Utilities Ntl. Res. & Mining Other Services Government Information -64 103 58 74 53 153 156 187 284 464 528-100 0 100 200 300 400 500 600 Source: Bureau of Labor Statistics
Unemployment Lowest in 17 Years 11.0% 10.0% 9.0% 8.0% 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
Unemployment and Underemployment 18% 16% 14% 12% 7.1% 10% 8% 6% 3.8% 4% 2% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 U-6 (Underemployed) U-3 (Unemployment) Source: Bureau of Labor Statistics
Wage Growth in October Disappoints 4.0% 3.5% Oct 2017 2.4% 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: Federal Reserve Bank of St. Louis
68% Labor Force Participation Remains in a Tight Range 67% 66% 65% 64% Oct: 62.7% 63% 62% 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
Labor Force Participation Among Lowest Level in Almost 40 Years 68% 66% 64% 62% 60% 58% Apr 1978 63.0% Mar 2000 67.3% Oct 2017 62.7% 56% 1955 1957 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: U.S. Bureau of Labor Statistics
Prime Working Age Participation Increasing
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: Zions Bank Analysis of Federal Reserve Bank of St. Louis
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: Federal Reserve Bank of St. Louis
Standards of Living Best Ever
Fewer Unemployed Workers Per Job Opening 7 6 5 4 3 July 2017 1.1 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Unemployed/Openings Source: Federal Reserve Bank of St. Louis
Labor productivity has declined since strong growth during late 1990 s and early 2000 s Percent Change from Quarter One Year Ago 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Real output per hour Source: Bureau of Economic Analysis
Growth in Consumer Spending Under Par 5% Personal Consumption Expenditure Yearly Percent Change 4% 3% Oct 1.6% 2% 1% 0% -1% -2% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Economic Analysis
Real GDP Growth 6.0% 4.0% Q3 2017 3.0% 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 Source: Bureau of Economic Analysis
Federal Funds Target Has Risen Four Times in the Last Decade 6 5 4 3 2 Federal Funds Target Rate = 1.25 1 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: U.S. Federal Reserve
September 2017 Fed Projections Point to Higher Rates Source: Board of Governors of the Federal Reserve
Markets Expect Rate Increase in 2017
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
Bond Spreads Tightening
Regional Economic Conditions Source: U.S Census Bureau
CA 0.7% OR 1.7% WA 1.8% NV 2.0% ID 1.8% AK 0.6% UT 2.0% AZ 1.7% Utah Population Fastest Growing in U.S. MT 1.0% WY -0.2% CO 1.7% NM 0.0% Percent Change: 2015 to 2016 U.S. Rate = 0.7% ND 0.1% SD 0.9% NE 0.7% TX 1.6% KS 0.3% 0.0% OK 0.4% MN 0.7% IA 0.4% MO 0.3% AR 0.3% WI 0.2% LA 0.3% IL -0.3% MS 0.0% MI 0.1% IN 0.3% TN 0.9% AL 0.2% OH 0.1% KY 0.3% WV -0.5% VT -0.2% PA -0.1% NC 1.1% SC 1.4% GA 1.1% VA 0.5% FL 1.8% NH 0.4% NY 0.0% ME 0.2% DC 1.6% CT -0.2% DE 0.8% MD 0.4% MA 0.4% RI 0.1% NJ 0.1% 1.5% + 0.7% to 1.4% 0.2% to 0.6% 0.0% to 0.1% Loss HI 0.2% 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 3,051,217 25,412 34,997 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 Net Migration Natural Increase Total Population 2015 2017f 2018f Sources: U.S. Census Bureau; Data from 2014 on from State of Utah Revenue Assumptions Working Group 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
CA 1.7% Utah Has the Highest Employment Growth in the Nation OR 2.3% WA 2.2% NV 2.5% Percent Change in Employment for States: Sept. 2016 to Sept. 2017 U.S. Rate = 1.2% AK 0.2% ID 2.1% UT 2.5% AZ 1.3% MT 1.6% WY -1.1% HI 1.2% CO 1.6% NM 1.0% ND 1.4% SD 0.7% NE 1.5% KS -0.4% TX 2.1% OK 1.1% MN 1.8% IA 0.9% MO 1.3% AR 2.0% WI 1.2 LA 0.7% IL 0.1% MS 0.6% MI 1.4% IN 1.0% TN 1.5% AL 1.5% OH 1.1% KY 1.6% GA 1.9% VT 1.0% WV 0.4% PA 1.1% NC 1.4% SC 1.4% VA 1.1% FL 0.7% NH 1.3% NY 1.0% ME 0.6% DC 0.9% CT 0.2% DE 0.6% MD 2.4% MA 1.7% RI 0.9% NJ 0.7% 2.0% + 1.6% to 1.9% 1.0% to 1.5% 0.0% to 0.9% Loss Note: Seasonally Adjusted Source: Bureau of Labor Statistics
Most Utah Industries Seeing Growth Percent Change in Utah Employment by Industry: September 2016 to September 2017 Construction Prof. & Bus. Serv. Other Services Leisure & Hospitality Trade, Trans., Utilities Ed. & Health Serv. Manufacturing Government Financial Activity Information Ntl. Res. & Mining -4.6% -6.0% 5.0% 4.3% 4.0% 3.1% 2.3% 2.2% 1.7% 1.7% 1.1% Total: 2.4% -13% -8% -3% 2% 7% Source: Utah Department of Workforce Services
Utah Employment Change Rates By County September 2016 to September 2017 State Rate = 2.4% Box Elder 1.4% Tooele 0.1% Juab -2.1% Cache 2.8% Rich 1.8% Weber 1.6% Da1is 4.5% Salt Lake 2.4% Morgan 4.0% Utah 4.8% Summit 2.4% Wasatch 5.2% Duchesne 5.8% Carbon 2.3% Daggett 2.3% Uintah 2.3% 5.0% + 3.3% to 4.9% 1.0% to 3.2% Millard 1.9% Beaver 2.9% Piute 5.2% Sanpete 0.7% Sevier 2.6% Emery 2.1% Wayne 1.7% Grand 3.1% 0.0% to 0.9% Loss Iron 2.2% Garfield 5.3% San Juan 1.8% Washington 4.9% Kane 2.6% Source: Utah Department of Workforce Services; Not seasonally adjusted
Utah Unemployment 10 th lowest in the Nation OR 4.2% CA 5.1% WA 4.6% NV 4.9% ID 2.8% UT 3.4% AZ 4.7% MT 3.9% WY 4.0% CO 2.5% NM 6.2% September 2017 U.S. Rate = 4.2% ND 2.4% SD 3.4% NE 2.8% KS 3.8% OK 4.5% MN 3.9% IA 3.2% MO 3.8% AR 3.5% WI 3.5% IL 5.0% MS 5.2% MI 4.3% IN 3.8% TN 3.0% AL 3.8% OH 5.3% KY 5.2% GA 4.5% WV 5.1% VT 2.9% PA 4.8% NC 4.1% SC 3.9% VA 3.7% NH 2.7% NY 4.9% ME 3.7% DC 6.5% CT 4.6% DE 4.9% MD 3.3% MA 3.9% RI 4.2% NJ 4.7% 6.0% + 5.5% to 5.9% AK 7.2% TX 4.0% LA 5.1% FL 3.8% 4.8% to 5.4% 4.0% to 4.7% 3.9% or less HI 2.5% Source: Bureau of Labor Statistics
Utah Unemployment Rates By County August 2017 State Rate = 3.5% Box Elder 3.3% Tooele 3.7% Juab 3.5% Cache 2.8% Weber 3.7% Morgan Davis 3.2% 3.1% Salt Lake 3.2% Utah 3.0% Rich 3.1% Summit 3.1% Wasatch 3.3% Duchesne 5.6% Carbon 5.2% Daggett 5.7% Uintah 6.0% 7.0% + 6.0% to 6.9% 4.0% to 5.9% Millard 3.3% Beaver 3.9% Piute 5.6% Sanpete 4.1% Sevier 4.1% Emery 5.2% Grand 5.3% Wayne 7.4% 3.2% to 3.9% 3.1% or lower Iron 4.2% Garfield 7.3% San Juan 7.2% Washington 3.5% Kane 3.6% Source: Utah Department of Workforce Services
Source: Bureau of Economic Analysis UT, ID, and WA Personal Income Growth Tied for the Highest in the Nation CA 4.8% WA 4.9% OR 3.8% NV 4.8% AK 1.6% Percent Change in Personal Income : 2016 Q1 2017 Q1 U.S. = 3.7%; ID = 4.9% ID 4.9% UT 4.9% AZ 3.8% MT 3.7% WY -0.5% HI 3.0% CO 4.4% NM 2.2% ND 1.0% SD 2.5% NE 1.2% KS 2.5% TX 3.2% OK 1.2% MN 3.6% IA 1.9% MO 3.5% AR 3.1% WI 3.1% LA 3.0% IL 2.2% MS 2.4% MI 4.4% IN 4.0% TN 4.4% AL 3.2% 4.0% or more 3.6% to 3.9% 2.0% to 3.5% 0.0% to 1.9% Decrease OH 3.6% 3.8 2.6% WV 1.9% GA 3.8% VT 1.6% PA 3.9 % NC 4.4% SC 4.6% VA 4.4% FL 4.6% NH 3.1% NY 3.0% ME 2.9% DC 4.4% CT 2.5% DE 3.6% MD 4.9% MA 3.8% RI 3.0% NJ 3.5%
Inflation Surging 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: +2.2% Zions Bank Wasatch Front CPI: +3.5% Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Source: U.S. CPI from National Bureau of Labor Statistics and Wasatch Front CPI from Cicero Group
Consumer Sentiment on the Rise 130 120 Above 110 indicates economic prosperity 110 100 90 80 70 60 50 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 U.S. Consumer Confidence Index: 125.9 Zions Bank Utah Consumer Attitude Index: 125.4 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Sources: Conference Board and Cicero Group
Real Estate and Construction
$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 2015 2016 Utah July 2017 $252,600 U.S. July 2017 $200,700 2017 United States Utah Source: Zillow Research
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Utah Maintains Lower Percentage of Foreclosures than Nation Percentage of total homes in foreclosure process 2008 2009 2010 2011 2012 2013 2014 2015 2016 U.S. Utah Source: Graphiq.com
Utah Residential Construction Activity Continues to Rise 30,000 25,000 20,000 15,000 10,000 5,000 Forecast 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016e 2018f Single-Family Units Multifamily Total Source: State of Utah Revenue Assumptions Group, Moody s Economy.com, and HIS Global Insight
Utah Value of New Residential Construction Increasing $8,000 Millions of Dollars $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 Forecast $1,000 $0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016e 2018f Residential Nonresidential Renovations Total
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 Utah inflation is strong Economic Overview Negatives National and international uncertainty Trumponomics success? Depressed business investment Unstable inflation outlook Skills mismatch Low productivity growth Overregulation from Washington
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