Zions Bank Economic Overview Kenworth National Dealers Conference November 8, 2018 1
National Economic Conditions 2
Volatility Returns to the Stock Market 27,000 Dow Jones Industrial Average October 10, 2018 Dow falls 832 points 3 rd largest decline in history 25,000 23,000 November 8, 2016 Presidential Election 21,000 19,000 17,000 15,000 February 5, 2018 Dow falls 1,175 points largest decline in history Jan-2016 Apr-2016 Jul-2016 Oct-2016 Jan-2017 Apr-2017 Jul-2017 Oct-2017 Jan-2018 Apr-2018 Jul-2018 Oct-2018 Source: Federal Reserve Bank of St. Louis
Business Optimism Near All-Time High Source: Trading Economics, NFIB Small Business Optimism Index
Consumer Confidence Remains High 150 140 130 120 110 100 90 80 70 60 50 Above 110 indicates economic prosperity Oct. 2018 137.9 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-18 Oct-18 Source: The Conference Board
Optimism Booming Source: Trading Economics, NFIB Small Business Optimism Index 6
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? 7
CBO Projections Show a Spike Followed by a Slowdown in Economic Growth Source: Congressional Budget Office
7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% Economic Growth Improving in 2018 Gross Domestic Product 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 Source: Bureau of Economic Analysis Personal Consumption Fixed Investment Net Exports Inventories Government Real GDP Growth
October Job Indicators Indicator Expectation Actual Total Nonfarm Payrolls 190,000 250,000 Unemployment Rate 3.7% 3.7% Private Payrolls 181,000 246,000 Monthly Average Hourly Wage Growth Yearly Average Hourly Wage Growth 0.2% 0.2% 3.0% 3.1% Labor Force Participation 62.8% 62.9% Sources: Wall street Journal and Bureau of Labor Statistics
500 October Marks 97 Consecutive Months of Job Growth in the U.S. 300 Thousands of Jobs 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 92 106 111 120 0 20 40 60 80 100 120 140 Source: National Bureau of Economic Research
National Employment Change Percent Change in National Employment by Industry: October 2017 to October 2018 Ntl. Res. & Mining 9.4% Construction 4.7% Manufacturing 2.4% Trade, Trans., Utilities 1.1% Information -0.5% Financial Activities 1.4% Prof. & Bus. Serv. 2.5% Ed. & Health Serv. 2.1% Leisure & Hospitality 1.6% Other Services Government 0.3% 1.3% Total: 1.7% -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 2017 to October 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activities Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government -15 65 78 66 115 330 296 312 254 516 499-100 0 100 200 300 400 500 600 Source: Bureau of Labor Statistics
11.0% US Unemployment Rate Remains Historically Low 10.0% 9.0% 8.0% October 2018 3.7% 7.0% 6.0% 5.0% 4.0% 4.5-5.0% = 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
Unemployment Hits Lowest Level Since 1969 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 4.5% - 5.0% = Full Employment 3.0% 2.0% 1.0% 0.0% 1952 1958 1964 1970 1976 1982 1988 1994 2000 2006 2012 2018 Unemployment Rate Source: Bureau of Labor Statistics
Source: Wall Street Journal Low Unemployment Leads to Recessions
18% 16% Unemployment and Underemployment Remain Low 14% 12% 7.1% 10% 8% 6% 3.7% 4% 2% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Underemployment: 7.6% Unemployment: 3.8% 2015 2016 2017 2018 Source: Bureau of Labor Statistics
68% Labor Force Participation Rose in October 67% 66% 65% October 2018 62.9% 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 Oct. 2018 62.9% Source: Bureau of Labor Statistics
90% 80% Civilian Labor Force Participation Rate Men Aug. 2018 68.8% 70% 60% 50% 40% Women Aug. 2018 57.0% 30% 1948 1950 1952 1954 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 Men Women 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 2018 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% 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 U.S. Labor Force Participation Rate Participation Rate Ages 16-19 Source: Bureau of Labor Statistics
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Standard of Living Best Ever 25
Fewer than One Unemployed Worker Per Job Opening 7 6 5 4 3 August 2018 0.8 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
Job openings continue to outpace job hires Level in Thousands 7,000 6,000 5,000 4,000 3,000 2,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Hires Openings Source: Bureau of Labor Statistics
Highest Annual Wage Growth Since 2009 4.0% 3.5% October 2018 3.1% 3.0% 2.5% 2007 2018 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
Wage Growth Lagging Job Growth Source: Wall Street Journal 29
Year-over-year percent change 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% Inflation Remains Above 2% Consumer Price Index Fed s Preferred Level Sept 2018 2.3% -3.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Bureau of Labor Statistics
Federal Funds Target Rate Sees 8th Increase in 3 Years 6.0% 5.0% Recession 4.0% 3.0% Federal Funds Target Rate = 2.00% 2.25% 2.0% 1.0% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Federal Funds Target Rate PCE (core) Inflation Source: Federal Reserve Board of Governors and BEA
Fed Rate Increase Projections for 2018 FOMC meetings 4% 3% 2% 3.4% 3.1% 3.1% 2.9% 2.4% 2.4% 2.1% 3.4% 3.4% 3.4% 2.9% 2.9% 3.0% 1% 0% 2018 2019 2020 2021 Longer run March June September Source: Board of Governors of the Federal Reserve
Economic Protectionism Increases Costs Source: Wall Street Journal 33
Trade Wars Hurt Growth Source: Wall Street journal 34
Trade Wars Hurt Growth Source: Wall Street Journal 35
The Dollar is Strengthening After a Decline in 2017 130 Trade Weighted Dollar Index 125 120 115 110 105 100 95 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Index 1997 = 100 Source: Federal Reserve Bank of St. Louis
Oil Prices $160 $140 $120 $100 $80 $60 $40 $20 Nov. 2, 2018 $63.12 $0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Federal Reserve Bank of St. Louis
Regional Economic Conditions 38
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
Western 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 40
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 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 3,101,833 22,587 34,886 2010 2015 2017 2018f 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 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
Utah is has the 2nd Fastest Employment Growth Percent Change in Employment for States: September 2017 to September 2018 U.S. Rate = 1.7% UT Rate = 3.6% NH 4.4% NJ 2.7% MA 3.8% 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 354,700 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: September 2017 to September 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activity Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government Total: 3.6% -1.2% 0.0% 1.2% 2.5% 3.6% 4.2% 3.8% 4.1% 3.4% 4.6% 4.4% -13% -8% -3% 2% 7% Source: Utah Department of Workforce Services
Utah Industries Seeing Growth Total Change in Utah Employment by Industry: September 2017 to September 2018 Ntl. Res. & Mining Construction -100 3,600 Manufacturing 5,400 Trade, Trans., Utilities 12,800 Information Financial Activity 0 3,700 Total: 53,200 Prof. & Bus. Serv. 7,900 Ed. & Health Serv. 8,300 Leisure & Hospitality Other Services 500 4,900 Government 6,200-3,000-1,000 1,000 3,000 5,000 7,000 9,000 11,00013,00015,000 Source: Utah Department of Workforce Services
Utah Employment Change Rates By County September 2017 to September 2018 State Rate = 3.6% 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 14 th Lowest Unemployment Rate September 2018 U.S. Rate = 3.7%; UT = 3.2% 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 September 2018 State Rate = 3.2% 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 50
Utah Poverty Rate 7 th Lowest in the Nation CA 14.3% WA 11.3% OR 13.3% NV 13.8% 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% CO 11.0% NM 19.8% ND 10.6% SD 13.3% NE 11.4% KS 12.1% OK 16.3% MN 9.9% IA 11.8% MO 14.0% AR 17.1% WI 11.8% IL 13.0% MS 20.8% MI 15.0% IN 14.1% TN 15.8% AL 17.1% OH 14.6% KY 18.5% WV 17.8% VT 11.9% PA 12.9% NC 15.4% SC 15.3% GA 16.0% NH 7.2% NY 14.6% VA 11.0% ME 12.5% DC 18.6% CT 9.8% DE 11.6% MD 9.6% MA 10.4% RI 12.8% NJ 10.4% AK 9.9% TX 15.6% LA 20.1% 18.1% + 15.1% to 18.0% FL 14.6% HI 9.3% 12.1% to 15.0% 10.1% to 12.0% 10.0% or less Source: U.S. Census Bureau, Annual Community Survey 1-year estimate
Year-over-year percent change 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% Dec-2011 Mar-2012 Utah Inflation Near All-Time Highs Jun-2012 Sep-2012 Dec-2012 Mar-2013 Jun-2013 Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar-2017 Jun-2017 Sep-2017 Utah 4.8% Dec-2017 US 2.3% Mar-2018 Jun-2018 Sep-2018 United States CPI: +2.3% Zions Bank Wasatch Front CPI: +4.8% Source: U.S. CPI from National Bureau of Labor Statistics and Wasatch Front CPI from Cicero Group
Strong Consumer Sentiment 150 140 130 120 110 100 90 80 70 60 50 Jun-12 Above 110 indicates economic prosperity Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 U.S. Consumer Confidence Index: 137.9 Zions Bank Utah Consumer Attitude Index: 120.5 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Sources: Conference Board and Cicero Group
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 54
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