Zions Bank Economic Overview Veteran Owned Business Conference May 11, 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
Why?
Business Optimism Booming Source: Trading Economics, NFIB Small Business Optimism Index
Consumer Confidence Remains High 140 April 2018 128.7 130 120 110 Above 110 indicates economic prosperity 100 90 80 70 60 50 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 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 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 but Remains Strong 6.0% 4.0% 2.0% Q1 2018 2.3% 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
April Job Indicators Indicator Expectation Actual Total Nonfarm Payrolls 191,000 164,000 Unemployment Rate 4.0% 3.9% Private Payrolls 190,000 168,000 Monthly Average Hourly Wage Growth Yearly Average Hourly Wage Growth 0.2% 0.1% 2.7% 2.6% Labor Force Participation 62.9% 62.8% Sources: Wall street Journal and Bureau of Labor Statistics
500 April Marks 91 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: April 2017 to April 2018 Ntl. Res. & Mining 8.8% Construction 3.7% Manufacturing 2.0% Trade, Trans., Utilities 1.1% Information -0.9% Financial Activity 1.5% Prof. & Bus. Serv. 2.5% Ed. & Health Serv. 1.9% Leisure & Hospitality 1.7% Other Services Government 0.0% 1.7% 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: April 2017 to April 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activity Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government -26 3 59 99 126 257 245 289 279 431 518-100 0 100 200 300 400 500 600 Source: Bureau of Labor Statistics
Unemployment Rate at Lowest-Level Since December 2000 11.0% 10.0% 9.0% 8.0% April 2018 3.9% 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 Fell Slightly in April 67% 66% 65% April 2018 62.8% 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 April. 2018 62.8 Source: Bureau of Labor Statistics
90% 80% Civilian Labor Force Participation Rate Men April. 2018 69.2% 70% 60% 50% 40% Women April. 2018 56.7% 30% 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 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 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
One Unemployed Worker Per Job Opening 7 6 5 4 3 March 2018 1.0 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 Declined in April 4.0% 3.5% April 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 2018 Source: Bureau of Labor Statistics
Source: Wall Street Journal Wage Growth Lagging Job Growth
5% Producer Price Index 4% 3% Mar. 2018 3.0% 2% 1% 0% -1% -2% Year-to-Year Change 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Labor Statistics
Inflation is Starting to Converge on the Fed s 2% Goal 5.0% 4.0% 3.0% Mar. 2018 PCE 2.0% 2.0% 1.0% 0.0% -1.0% Mar. 2018 Core PCE 1.8% -2.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 PCE Core PCE (Excludes Food and Energy) Source: Bureau of Economic Analysis
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 = 1.50-1.75% 1.0% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: U.S. Federal Reserve
March 2018 Fed Rate Increase Projections 4% 3% 2.7% 2.9% 3.1% 3.4% 2.8% 2.9% 2% 2.1% 2.1% 1% 0% 2018 2019 2020 Longer Run Dec-17 Mar-18 Source: Board of Governors of the Federal Reserve
Fed Rate Increase Projections
Source: Wall Street Journal Is a Recession on the Way?
Source: Wall Street Journal Oil Prices Rising
Source: Wall Street Journal Which is Causing Gas Prices to Rise
Economic Protectionism Increases Costs Source: Federal Reserve Bank of St. Louis
Economic Impact of Trade Wars - Cattle Source: Federal Reserve Bank of St. Louis
Economic Impact of Trade Wars - Hogs Source: Federal Reserve Bank of St. Louis
Source: Federal Reserve Bank of St. Louis Economic Impact of Trade Wars - Cars
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
Utah is Tied for the Fastest Employment Growth Percent Change in Employment for States: Mar. 2017 to Mar. 2018 U.S. Rate = 1.5% UT Rate = 3.3% 2.0% + 1.6% to 1.9% 1.0% to 1.5% 0.0% to 0.9% Loss Source: Bureau of Labor Statistics
Utah Total Employment at New Highs Thousands of Employees 1,500 1,400 1,300 1,200 1,100 1,000 900 Loss of 92,000 jobs from 2007-2010 Gain of 333,100 jobs from low in 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: March 2017 to March 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activity Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government Total: 3.3% -1.2% -0.5% 5.0% 3.2% 4.2% 2.6% 2.5% 3.5% 3.5% 5.0% 1.6% -13% -8% -3% 2% 7% Source: Utah Department of Workforce Services
Utah Industries Seeing Growth Total Change in Utah Employment by Industry: March 2017 to March 2018 Ntl. Res. & Mining Construction Manufacturing Trade, Trans., Utilities Information Financial Activity Prof. & Bus. Serv. Ed. & Health Serv. Leisure & Hospitality Other Services Government -100-200 1,000 2,100 4,600 4,100 3,900 7,000 7,000 7,200 11,400 Total: 48,000-3,000-1,000 1,000 3,000 5,000 7,000 9,000 11,000 13,000 Source: Utah Department of Workforce Services
Utah Employment Change Rates By County March 2017 to March 2018 State Rate = 3.3% 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 March 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 February 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
Utah Consumer Confidence Hits New High 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: 127.7 Zions Bank Utah Consumer Attitude Index: 129.5 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Sources: Conference Board and Cicero Group
Utah Inflation Higher Than US 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% Sep-2011 Dec-2011 Mar-2012 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 Dec-2017 Mar-2018 United States CPI: +2.4% Zions Bank Wasatch Front CPI: +2.6% 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
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
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