Legislative Economic Briefing February 16, 2017 Mississippi University Research Center Mississippi Institutions of Higher Learning Darrin Webb, State Economist dwebb@mississippi.edu (601)432-6556 To subscribe to our publications, including Mississippi s Business email Janna Taylor at jtaylor@mississippi.edu. Visit our website for this presentation www.mississippi.edu/urc/downloads/presentations/legislative_economic_briefing.pdf
Overview US economy has momentum at the start of 2017 Rebound in energy-sector capital spending Strong gains in single-family housing permits Orders and shipments of core capital goods are growing again January jobs gains were much improved Inflation is picking up signaling improved growth in the economy One temporary headwind however is continuation of inventory drawdown in the first half of the year Signals are more mixed in Mississippi Employment slowed considerably in the 4 th quarter Income growth appears to have likewise slowed in the 4 th quarter Transfers to GF have been weak, especially sales & income tax which are perhaps the revenue sources most closely connected to economic activity Building permits are improving Manufacturing workweek length remains high Initial unemployment claims continue to decline February 2017 MS University Research Center, IHL 2
Annualized quarterly Growth Annual Growth Growth in Real GDP in US 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% The swing from 3.5% in the 3 rd qtr to 1.9% in the 4 th was due largely to soybean export volatility. Without this volatility, growth would have been around 2.6% in the 3 rd and 4 th qtr. 1.4% 0.8% 2010q1 2011q1 2012q1 2013q1 2014q1 2015q1 2016q1 3.5% 1.9% 6.0% 4.0% 2.0% 4.1% 1.0% 1.8% 2.8% 3.8% 3.3% 2.7% 1.8% 2.5% 1.6% 2.2% 1.7% 2.4% 2.6% 1.6% 0.0% -2.0% -4.0% -0.3% -2.8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 February 2017 MS University Research Center, IHL 3
US Real GDP Growth is Slowing 25.0% 20.0% 15.0% 10.0% Growth during the last expansion (1992-2007) was 3.2% Average growth between 2010-2016 period was 2.1%. We have not experienced a 3.0% growth rate since 2005 Reasons: increased interdependence of international economies, high debt levels, aging population/demographic trends. Implications: more frequent recessions. 5.0% 0.0% -5.0% -10.0% -15.0% 1930 1940 1950 1960 1970 1980 1990 2000 2010 Annual Growth Avg. Growth During Expansion Yrs, By Decade February 2017 MS University Research Center, IHL 4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Millions of Units Millions of Units 2.5 2.0 1.5 1.0 0.5 0.0 US Housing Trends Starts 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Sales Single-Family Multi-Family 73% decline in # of Units between 2005 & 2009 2016 level is 43% below peak Weak recovery has been in single family units Tremendous improvement in 4 th qtr for this segment Existing Houses New Houses Both series are below pre-recession levels New home prices are above peak, Existing home prices are not; there remains a large inventory relative to household formation. February 2017 MS University Research Center, IHL 5
Housing Trends People are renting rather than buying Reflects modest income growth Household formation is down During boom years young adults were buying Fueled by stronger income growth & easy mortgages After bust young adults started living with others Due in part to high student load debt & decreased job opportunities At some point household formation will again track population growth & boost housing February 2017 MS University Research Center, IHL 6
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 86,000 234,000 238,000 206,000 157,000 100,000 126,000 153,000 43,000 262,000 254,000 344,000 321,000 272,000 239,000 237,000 225,000 176,000 124,000 164,000 157,000 297,000 291,000 249,000 227,000 1980 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 Average Monthly Gain By Year (422,333) (4,167) (177,000) (69,583) (143,917) (41,667) (297,250) 22,500 208,500 158,500 288,167 323,333 262,750 270,167 161,917 25,917 97,500 235,083 179,667 235,333 320,917 284,000 253,917 265,000 162,500 9,583 170,000 209,583 174,333 95,583 88,417 174,250 178,500 191,833 249,833 226,083 186,833 US Jobs Added By Month 400,000 Job growth improved between 2010-2014 but has declined in 2015 & 2016 300,000 200,000 100,000 - (100,000) (200,000) (300,000) (400,000) (500,000) 400,000 300,000 Job growth weakened toward the end of 2016 but improved in January 200,000 100,000 - February 2017 MS University Research Center, IHL 7
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 ISM Indices: above 50 is expanding Institute For Supply Management Indices An Index above 50 indicates expansion, below 50 a contraction 65.0 60.0 55.0 50.0 45.0 40.0 35.0 MFG Index has shown remarkable improvement. Both series are in a strong position which encourages optimism. 30.0 Manufacturing Index Nonmanufacturing Index February 2017 MS University Research Center, IHL 8
Monthly Sales Millions of 2004 $ Real US Retail Sales Adjusted for Inflation $370,000 $360,000 2010 3.8% 2011 4.1% 2012 2.7% 2013 2.4% 2014 2.3% 2015 2.2% 2016 1.7% $350,000 $340,000 $330,000 $320,000 $310,000 $300,000 $290,000 Retail sales in 2016 were low compared to the fairly modest growth of the past few years. Christmas sales struggled to meet expectations reaching near or only slightly above last year. This is a bit surprising given the increased optimism. Wage growth, while improving with a tightening labor force, remains relatively subdued $280,000 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 February 2017 MS University Research Center, IHL 9
Weekly US Regular Retail Gasoline Prices Dollars Per Gallon $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 After falling dramatically in mid-2014 prices stabilized in late 2016. We have seen a slight uptick in recent weeks, but prices remain low for relative to the past decade. February 2017 MS University Research Center, IHL 10
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 2019 2020 2021 2022 2023 2024 2025 Dollars Per Barrel Oil Prices WTI $120 $100 $80 $60 $40 $20 $0 Oil prices are expected rise gradually. Not expected to reach $100 per barrel until 2024-2025. Rig count has surged 76% since May suggesting a sharp rebound in energy sector investment. February 2017 MS University Research Center, IHL 11
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Millions of Units, SAAR US Light Vehicle Sales 23.00 21.00 19.00 17.00 Monthly Annual Average Sales have stabilized at about 17.5 million units. 15.00 13.00 11.00 9.00 Average sales for 2013 -- 15.5 million units Average sales for 2014 16.5 million units Average Sales for 2015 17.4 million units Average Sales for 2016 17.5 million units February 2017 MS University Research Center, IHL 12
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 US Consumer Sentiment Annual Average Monthly 120.0 120.0 100.0 100.0 80.0 80.0 60.0 60.0 40.0 20.0 Sentiment returned to the Pre-recession level in 2015. 40.0 20.0 January 2017 Index is at the highest level since January 2004. The Index was very close to this level in January 2015, but weakened over the course of the year. 0.0 0.0 Jan-14 Jan-15 Jan-16 Jan-17 February 2017 MS University Research Center, IHL 13
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 NFIB Optimism Index, 1986=100 110 National Federation of Independent Businesses Optimism Index 105 100 Small Businesses confidence has risen sharply in recent months, reaching the highest level since 2004 fueled by the prospects of lower taxes and reduced regulations. 95 90 85 80 February 2017 MS University Research Center, IHL 14
Mar-60 Mar-62 Mar-64 Mar-66 Mar-68 Mar-70 Mar-72 Mar-74 Mar-76 Mar-78 Mar-80 Mar-82 Mar-84 Mar-86 Mar-88 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16 Year-Over-Year Growth in Real Personal Income Less Transfer Payments: United States by Quarter 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Gray Areas Represent National Recessions Declines are characteristic of recessions. While the series weakened in 2015 & 2016, it remains well into positive territory. February 2017 MS University Research Center, IHL 15
Mar-01 Dec-01 Sep-02 Jun-03 Mar-04 Dec-04 Sep-05 Jun-06 Mar-07 Dec-07 Sep-08 Jun-09 Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13 Sep-14 Jun-15 Mar-16 Dec-16 US Employment Cost Index Wage and Salaries for All Civilian Workers Growth Over The Prior Year by Quarter 4.0% 3.5% 3.0% Despite gains in recent years, wage growth remains well below pre-recession levels. 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% February 2017 MS University Research Center, IHL 16
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 1960 = 100 Population Index 350 300 Population is indexed to 1960 to allow all three regions to appear on the same graph. Comparisons can then be made by the slope of each line. Both the US and SE are growing at a much faster pace than MS. Current projections show this trend continuing for the foreseeable future. 250 200 150 100 50 0 US SE (excl. MS) MS February 2017 MS University Research Center, IHL 17
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Millions of 2009 $ Annual Growth: 2008 4.1% 2009-4.1% 2010 0.5% 2011-1.4% 2012 2.2% 2013-0.2% 2014-0.9% 2015 0.5% $120,000 $100,000 Annual MS Real GDP 5% 4% Y/Y Growth By Qtr BEA s current estimates for 2016 show a rebound in Real GDP growth. $80,000 $60,000 3% 2% 1% $40,000 0% $20,000 After revisions to the data and methodology, 2015 Real GDP was below the 2008 level. -1% -2% $0-3% 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 February 2017 MS University Research Center, IHL 18
Index 2004=100 MS Index of Coincident Indicators 112 110 The MSCI stalled in 2016. The index is largely an indicator of the labor market for the state. 108 106 104 102 100 98 96 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 The Mississippi Index of Coincident Indicators reflects economic conditions existing in a given month. The index is constructed by the Federal Reserve Bank of Philadelphia and reindexed to 2004. The Index is based on changes in nonfarm employment, the unemployment rate, average manufacturing workweek length and wage and salary disbursements. February 2017 MS University Research Center, IHL 19
Index 2004=100 MS Index of Leading Indicators 115 110 105 100 95 90 85 The MSLI declined in the summer of 2016 before modestly improving in the last quarter. Much of this improvement can be attributed to national indicators rather than MS. We then do not expect any significant change in the State s economy in the short-term. 80 Jan-14 Jan-15 Jan-16 The Mississippi Index of Leading Indicators reflects economic conditions expected for the coming months. The index is constructed by the University Research Center and indexed to 2004. There are 7 components of the Index: MS Initial Unemployment Claims; MS Income Tax Withholdings; MS Value of Residential Building Permits; MS MFG Employment Intensity Index; ISM Index of US MFG Activity; US Consumer Expectations Index and US Retail Sales. February 2017 MS University Research Center, IHL 20
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 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 MS Unemployment Rate 12.0 10.0 The unemployment rate has fallen since reaching a peak during the depth of the recession and is below the pre-recession low. 8.0 6.0 4.0 2.0 0.0 February 2017 MS University Research Center, IHL 21
New Hampshire South Dakota Hawaii Colorado North Dakota Vermont Nebraska Utah Massachusetts Arkansas Idaho Iowa Maine Minnesota Virginia Wisconsin Kansas Maryland Montana Delaware Missouri Indiana Texas Tennessee New York United States Florida Kentucky Michigan New Jersey Ohio Oregon South Carolina North Carolina Oklahoma Arizona Connecticut California Georgia Rhode Island Wyoming Washington Pennsylvania Mississippi Illinois Nevada Alabama District of Columbia West Virginia Louisiana Alaska New Mexico Unemployment Rate 2016 Average 14% 12% MS annual average unemployment rate for 2016 was 5.7% The real unemployment rate was 10.9%. The real unemployment rate adds discouraged and other marginally attached workers and those working part time for economic reasons. 10% 8% 6% 4% 2% 0% Unemployment Rate as commonly reported Additions to Reported Unemployed The real unemployment rate combines the two series in the chart. February 2017 MS University Research Center, IHL 22
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 MS Initial Unemployment Claims 300,000 Annual Average 12,000 3-Month Moving Average Seasonally Adjusted 250,000 10,000 200,000 8,000 150,000 6,000 100,000 4,000 50,000 - Claims have trended down and are at historically low levels. 2,000 Claims fell in the last quarter. Declining claims mean fewer lay-offs. 0 Jan-14 Jan-15 Jan-16 February 2017 MS University Research Center, IHL 23
North Dakota Iowa Nebraska Minnesota New Hampshire South Dakota Utah Wisconsin Colorado Kansas Maryland Vermont Wyoming Connecticut Alaska Missouri Illinois Indiana Massachusetts Virginia Rhode Island Idaho New Jersey Texas Washington Maine Montana Pennsylvania Oregon United States Hawaii Delaware Georgia Ohio California North Carolina Nevada Michigan Oklahoma Arizona New York Tennessee South Carolina Louisiana Florida Arkansas Kentucky New Mexico Alabama Mississippi West Virginia 53.2% 71.9% 69.9% 69.5% 69.1% 68.9% 68.9% 68.8% 68.4% 67.1% 67.1% 67.1% 67.1% 66.8% 66.1% 65.8% 65.8% 65.3% 64.9% 64.9% 64.3% 64.2% 63.9% 63.8% 63.7% 63.7% 63.4% 63.4% 63.3% 63.0% 62.8% 62.7% 62.6% 62.6% 62.6% 62.2% 61.7% 61.6% 61.4% 61.1% 60.4% 60.4% 60.3% 59.7% 59.3% 58.7% 58.4% 57.9% 57.9% 56.8% 56.0% Workforce Participation Rate, 2016 Percentage of Population 16 and over either working or actively looking for a job 75% 70% Has the second lowest workforce participation rate among the states. Only West Virginia is lower. 65% 60% 55% 50% February 2017 MS University Research Center, IHL 24
Workforce Participation Trends Participation has fallen in recent years for both the US and MS The gap between MS & US participation rate is highest among 16-19 year-olds & 45-65 year-olds MS lower participation rate due in a large part to higher incidence of disability Census shows 10% of working age population in MS is disabled & not in the work force; in the US the rate is 6%. The state s higher rate translates into over 70 thousand people. MS participation rate exceeds that of the US for 35-44 year-old women; only category where this is the case See appendix for charts reflecting the above as well as other trends February 2017 MS University Research Center, IHL 25
FL AL GA NC SC TN KY MS US FL AR OK TX LA AL AR GA KY MS NC SC TN US AL GA FL LA NC MS OK US LA OK AR TN SC AL AR KY TX MS LA AR AR AL GA FL LA KY NC SC OK MS AL LA KY MS LA OK AR AL MS OK MS AL US GA FL LA KY NC SC TN US AL OK KY LA OK KY MS KY TN AR AR GA NC TN SC US TX US TX NC US TX NC OK TN US FL NC TN SC TX SC TN GA SC TX FL GA GA TX TX FL FL Average Annual Growth in Employment 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Mississippi was not hit as hard in the recession as other states. However, the state s recovery has been much slower. MS s slower growth persisted into 2016-8.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 February 2017 MS University Research Center, IHL 26
North Dakota Texas Utah Colorado Washington Massachusetts California South Dakota Oregon New York Tennessee Florida Idaho South Carolina Georgia Nebraska Alaska United States North Carolina Minnesota Virginia Hawaii Delaware Montana Maryland Kentucky Oklahoma Iowa New Hampshire Indiana Vermont Michigan Louisiana Arkansas Wisconsin Pennsylvania Missouri Arizona Ohio Nevada Rhode Island Illinois Kansas New Jersey West Virginia Connecticut Alabama Mississippi New Mexico Maine Employment Relative to Pre-Recession December 2016 as a Percentage Above (Below) December 2007 25% 20% 15% 10% 5% MS is one of 8 states where the December 2016 employment was below that of December 2007. States rank from a high of 20.5% above to a low of 5.6 below. MS is 2.3% below. 4.9% 0% -5% -2.3% February 2017 MS University Research Center, IHL 27
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 Annual Average Nonfarm Employment, 1950-2016 1,400 160,000 1,200 1,000 800 600 400 200 MS grew at a relatively steady pace prior to 2000. Since 2000 the state has struggled to gain momentum or keep pace with the Nation. The Nation has especially outpaced the state since the 2008 recession. 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 0 MS US February 2017 MS University Research Center, IHL 28
Thousands Nonfarm Employment in MS 1,150 1,145 1,140 1,135 1,130 1,125 1,120 1,115 1,110 After fairly consistent gain in employment over the previous two years, employment weakened substantially in late 2016. Average annual growth for 2016 was 0.6%, half of the 1.2% growth observed in 2015. Growth for 2014 was 0.9% 1,105 1,100 Jan-14 Jan-15 Jan-16 February 2017 MS University Research Center, IHL 29
Thousands MS Employment for Major Sectors 300 250 MS s slow growth over the past two decades has coincided with a movement away from manufacturing. That shift began in the 90s but was less apparent due to growth in the casino industry. More people work in Government than any other major sector which has shown no upward momentum since the Great Recession 200 150 100 50 Manufacturing Retail Trade Health Care and Social Assistance Leisure and Hospitality Government February 2017 MS University Research Center, IHL 30
Where are the Jobs? Mississippi added an average 7,358 jobs in 2016 over 2015 Trade, Transportation & Utilities Leisure & Hospitality Education & Health Services Government Manufacturing Construction Information Other Services Mining & logging Financial Activities Professional Services -733-1,092-3,600-225 -375 2,225 1,842 1,100 350 3,642 4,225-4,000-3,000-2,000-1,000 0 1,000 2,000 3,000 4,000 5,000 February 2017 MS University Research Center, IHL 31
Employment Gained (Lost) By County, 2015-2016 Greater than 500 251 to 500 Up to 250 Decline No change February 2017 MS University Research Center, IHL 32
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MS Residential Building Permits Number of Units 18000 16000 Annual 700 3-Month Moving Average Seasonally adjusted 14000 600 12000 500 10000 400 8000 6000 300 4000 2000 0 Between 2007 and 2011 there was a 73% decline in activity. Despite 5 years of gain, we remain 56% below Peak 200 100 The momentum of 2015 did not continue into 2016. Permits fell through much of the year before improving in the last quarter. 0 Jan-14 Jan-15 Jan-16 Graph may understate building activity as permits are not required in the county. February 2017 MS University Research Center, IHL 33
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 MS Construction Employment 70.0 Annual Average 54.0 Monthly Seasonally Adjusted 60.0 52.0 50.0 50.0 40.0 48.0 30.0 46.0 20.0 10.0 After strong growth in the 90s, employment has generally trended downward. The notable exceptions are the period following Katrina & during large projects of 2013-2014. 44.0 42.0 Employment improved in much of 2016 but fell sharply in the last quarter. 0.0 40.0 Jan-14 Jan-15 Jan-16 February 2017 MS University Research Center, IHL 34
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 MS Manufacturing Employment 300.0 Annual Average 145.0 Monthly Seasonally Adjusted 250.0 144.0 143.0 200.0 142.0 150.0 141.0 140.0 100.0 50.0 0.0 MFG employment generally declined between 1994 and 2010. Since 2010 the state has experienced modest gains. In 2016, manufacturing employment rose 0.8% or 1,100 jobs 139.0 138.0 137.0 136.0 Much of the growth that took place in 2015 disappeared in 2016. The state ended the year with a substantial decline in December. 135.0 Jan-14 Jan-15 Jan-16 February 2017 MS University Research Center, IHL 35
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 MS MFG Workweek Length 42.5 42.0 Annual Average 43 3-Month Moving Average Seasonally Adjusted 41.5 42.5 41.0 42 40.5 41.5 40.0 39.5 39.0 41 40.5 38.5 38.0 37.5 Workweek length has been especially strong in recent years. 40 39.5 Despite a slowdown during much of 2016, workweek length ended the year on a strong note. 39 Jan-14 Jan-15 Jan-16 February 2017 MS University Research Center, IHL 36
10% Two Measures of Income Growth by Qtr Y/Y Growth by Qtr, Adjusted for Inflation 8% 6% 4% The two series generally move together. The withholdings data are more volatile but are more timely. For the past couple of years BEA series has indicated stronger income growth. Both series show gradual improvement in 2015, which peaked in the 1 st qtr of 2016. Withholdings show a significant slowdown in 4 th qtr of 2016 2% 0% -2% -4% Withholdings, DOR Wage Disbursements, BEA Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 February 2017 MS University Research Center, IHL 37
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Bar Graph: Millions of Dollars Line Graph: Annual % CHG MS Gaming Revenue $3,500 $3,000 20.0% 15.0% $2,500 10.0% $2,000 5.0% $1,500 0.0% $1,000-5.0% $500-10.0% $0-15.0% Coast River Total % CHG Total February 2017 MS University Research Center, IHL 38
Millions Transfers to the General Fund From Sales Tax Collections, by Qtr $700 $600 $500 $400 $300 $200 $100 $0 Growth in FY 2015: 4.1%; in 2016: 1.4% in FY 2017 through January: -1.2%. This was largely due to a very weak 1 st qtr (-3.5%); the 2 nd qtr was improved but modest (1.3%). January was a decline of 3% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% $ value, Left Axis Y/Y % Chg, Right Axis February 2017 MS University Research Center, IHL 39
Millions Transfers to the General Fund From Personal Income Tax Collections, by Qtr $800 40.0% $700 30.0% $600 20.0% $500 10.0% $400 0.0% $300-10.0% $200-20.0% $100 $0 Growth in FY 2015: 4.6%; in 2016: 1.5%; FY 2017 transfers are essentially flat with a decline of -0.1%. January was an improvement with a gain of 4.1% -30.0% -40.0% $ value, Left Axis Y/Y % Chg, Right Axis February 2017 MS University Research Center, IHL 40
Millions Transfers to the General Fund $7,000 15% $6,000 $5,000 $4,000 10% 5% $3,000 $2,000 $1,000 0% -5% $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Additional Transfers from settlements, WCSR Fund, budget reduction, etc., Left Axis Transfers from DOR and "Other than DOR" Left Axis Y/Y % Chg in Tota GF, Right Axis -10% February 2017 MS University Research Center, IHL 41
Despite Sluggishness, MS Economy is Expanding: Real Income Less Transfer Payments 8.0% 6.0% A negative Y/Y growth in real Income less transfer payments is historically a good indication of contracting economy. This was seen in the great recession and again in 2013 and 2014. The series is positive in 2016 and stronger than in 2015. 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% 2007:1 2008:1 2009:1 2010:1 2011:1 2012:1 2013:1 2014:1 2015:1 2016:1 Income less Trans. Pymt Y/Y growth Real GDP Y/Y Growth February 2017 MS University Research Center, IHL 42
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 2018-2.8% -0.1% -0.3% 1.0% 1.9% 1.8% 1.8% 1.6% 1.7% 1.6% 2.7% 2.7% 2.8% 2.7% 2.5% 2.2% 2.4% 2.6% 2.3% 2.7% 3.6% 3.3% 4.0% 3.8% 4.5% 4.4% 4.1% 3.8% 4.7% Growth In Real US GDP Historical and IHS Markit Baseline Projections 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% The US economy has begun 2017 on a strong note. There has been a sharp rebound in energy-sector capital spending, improved housing market, high levels of optimism, increased orders and shipment of nondefense capital goods; and signs of rising price inflation. Early 2017 may still feel the affects of inventory correction, but this should dissipate in the second half. February 2017 MS University Research Center, IHL 43
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 2018-0.9% -1.4% -0.9% -0.2% 0.4% 0.9% 0.5% 0.5% 2.2% 2.0% 1.6% 1.6% 3.2% 2.7% 2.7% 2.6% 2.8% 2.2% 2.5% 2.2% 2.4% 1.9% 4.1% 4.1% 5.8% 5.5% 6.3% Growth In Real MS GDP Historical and University Research Center Projections 8.0% 6.0% The growth in 2016 reflects BEA s preliminary estimate for the first 3 quarters of 2016. These estimates reflect a 2.6% growth in 2016 through the 3 rd qtr. We believe growth slowed to a 1.4% Y/Y growth in the 4 th qtr. 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Much of the growth in 2016 was due to a surge in the ag sector which was primarily in the first half of the year. Growth was more widely dispersed in the 3rd qtr. Growth in 2017 & 2018 is more modest but reflects broader participation. -4.1% February 2017 MS University Research Center, IHL 44
Recap: US Economy has momentum in 2017 Risk of recession remains low MS has struggled since the great Recession. 2016 is the 1 st time the state has experienced 2 years of consecutive growth since the recession The strong headline growth of 2016 was driven by ag volatility which will shave off growth in 2017 Growth in 2017 however will be more widespread and will continue into 2018 at a modest pace. Despite a modest forecast, revenues have disappointed in FY 2017. February 2017 MS University Research Center, IHL 45
APPENDIX February 2017 MS University Research Center, IHL 46
Connecticut Massachusetts New Jersey New York Alaska Wyoming Maryland North Dakota New Hampshire California Virginia Washington Colorado Minnesota Illinois Rhode Island Pennsylvania Vermont Nebraska Hawaii United States South Dakota Delaware Kansas Texas Wisconsin Iowa Oklahoma Florida Oregon Ohio Louisiana Michigan Maine Missouri Tennessee Indiana Nevada Montana North Carolina Georgia Utah Arizona Kentucky Idaho South Carolina Arkansas Alabama New Mexico West Virginia Mississippi $62,603 $59,949 $58,670 $56,147 $56,081 $55,972 $55,950 $55,905 $53,741 $52,052 $51,898 $50,899 $50,871 $50,295 $50,018 $49,745 $48,587 $48,544 $48,288 $48,112 $47,881 $47,633 $47,161 $46,947 $45,914 $45,902 $45,573 $44,429 $43,783 $43,566 $42,947 $42,812 $42,799 $42,300 $42,094 $41,940 $41,889 $41,809 $40,759 $40,306 $39,308 $39,156 $38,588 $38,392 $38,302 $38,252 $38,030 $37,938 $36,758 $34,771 $68,704 Per Capita Personal Income 2015 Per capita income is total personal income divided by total population. $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 $30,000 February 2017 MS University Research Center, IHL 47
Connecticut North Dakota Massachusetts Wyoming South Dakota Nebraska New Hampshire Alaska New Jersey Minnesota Kansas Iowa Maryland Virginia New York Rhode Island Pennsylvania Oklahoma Washington Illinois Colorado Wisconsin Ohio Texas United States Vermont California Missouri Louisiana Delaware Tennessee Indiana Michigan Florida North Carolina Montana Oregon Maine Georgia Arkansas Kentucky Alabama Nevada South Carolina West Virginia Hawaii Idaho Arizona Utah Mississippi New Mexico $63,147 $61,148 $58,453 $58,296 $54,410 $53,581 $53,142 $53,119 $52,357 $52,122 $51,997 $50,833 $50,745 $50,733 $50,709 $50,677 $50,657 $50,580 $49,998 $49,945 $49,901 $49,158 $48,786 $48,599 $48,112 $48,011 $47,812 $47,315 $46,988 $46,745 $46,667 $45,886 $45,496 $44,832 $44,448 $44,383 $44,225 $44,077 $43,811 $43,717 $43,504 $43,314 $42,875 $42,323 $41,348 $41,342 $41,105 $40,618 $40,524 $40,105 $39,935 Per Capita Personal Income Adjusted for Cost of Living, 2015 Per capita income is total personal income divided by total population. $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 $30,000 February 2017 MS University Research Center, IHL 48
Maryland Alaska New Jersey Connecticut Hawaii Massachusetts New Hampshire Virginia California Minnesota Washington Utah Colorado Delaware New York Wyoming Illinois North Dakota Rhode Island Vermont United States Pennsylvania Wisconsin Texas Iowa Nebraska Kansas Nevada Oregon South Dakota Arizona Georgia Michigan Ohio Maine Indiana Missouri Idaho Florida Montana Oklahoma North Carolina South Carolina Tennessee Louisiana New Mexico Kentucky Alabama West Virginia Arkansas Mississippi $74,551 $72,515 $72,093 $70,331 $69,515 $68,563 $66,779 $65,015 $61,818 $61,492 $61,062 $60,727 $60,629 $60,509 $59,269 $58,840 $57,574 $57,181 $56,852 $55,176 $53,889 $53,599 $53,357 $53,207 $53,183 $52,997 $52,205 $51,847 $51,243 $50,957 $50,255 $49,620 $49,576 $49,429 $49,331 $49,255 $48,173 $47,583 $47,507 $47,169 $46,879 $46,868 $45,483 $45,219 $45,047 $44,963 $43,740 $43,623 $41,751 $41,371 $39,665 $80,000 $75,000 $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 Median Household Income 2015 Median household income is the level of income at which 50% of households are above and 50% are below. February 2017 MS University Research Center, IHL 49
Alaska Maryland Connecticut Massachusetts New Hampshire Virginia Minnesota New Jersey Utah North Dakota Wyoming Hawaii Colorado Delaware Iowa Washington Nebraska South Dakota Rhode Island Kansas Illinois Wisconsin Ohio Texas California Pennsylvania Vermont Georgia Indiana United States Missouri Nevada Michigan Arizona Oklahoma Oregon New York North Carolina Idaho Maine South Carolina Tennessee Montana Alabama Kentucky Louisiana Florida New Mexico Arkansas West Virginia Mississippi $68,605 $67,589 $64,642 $64,018 $63,478 $63,367 $63,004 $62,963 $62,605 $62,493 $61,164 $59,516 $59,440 $59,381 $58,896 $58,827 $58,496 $57,906 $57,601 $57,558 $57,174 $57,127 $55,352 $55,080 $54,998 $54,581 $54,522 $53,935 $53,889 $53,889 $53,885 $53,068 $52,684 $52,132 $52,030 $51,761 $51,226 $51,110 $50,945 $50,804 $50,257 $50,132 $50,073 $49,685 $49,312 $49,286 $47,938 $47,329 $47,281 $46,964 $45,750 $75,000 $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 Median Household Income Adjusted for Cost of Living, 2015 Median household income is the level of income at which 50% of households are above and 50% are below. February 2017 MS University Research Center, IHL 50
North Dakota Wyoming Montana Vermont Iowa Idaho Maine Minnesota Utah South Dakota New Hampshire Nebraska Wisconsin Colorado Kansas Washington Oregon Alaska West Virginia Pennsylvania Missouri Hawaii Indiana Virginia Oklahoma Illinois Massachusetts Arizona Michigan Kentucky Ohio United States Connecticut Nevada Arkansas Florida New Jersey Tennessee California North Carolina Delaware Rhode Island New Mexico Texas Maryland New York South Carolina Alabama Georgia Louisiana Mississippi 7.8% 8.4% 8.7% 9.0% 9.3% 9.5% 9.6% 9.6% 9.6% 9.7% 9.8% 9.9% 10.0% 10.2% 10.2% 10.2% 10.5% 11.2% 11.4% 12.0% 12.1% 12.2% 12.3% 12.3% 12.4% 12.6% 12.6% 12.7% 12.7% 12.8% 12.8% 13.0% 13.0% 13.0% 13.2% 13.3% 13.4% 13.4% 13.6% 13.6% 13.8% 13.9% 14.1% 14.3% 14.5% 14.8% 15.0% 15.1% 15.3% 16.6% 18.6% Female Headed Household as a share of all Households, 2015 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% February 2017 MS University Research Center, IHL 51
Connecticut New Hampshire Massachusetts New Jersey Colorado North Dakota Texas Minnesota Illinois South Dakota Nebraska Utah California Wisconsin Kansas Washington Pennsylvania Indiana Iowa Nevada Wyoming United States Florida New York Idaho Georgia Oklahoma Virginia Maryland Tennessee Michigan Ohio Missouri Louisiana Rhode Island Delaware Montana Oregon Arizona Vermont North Carolina Maine Arkansas South Carolina Alabama Hawaii* Kentucky Alaska* Mississippi West Virginia New Mexico 12.8% 8.8% 14.4% 8.7% 14.8% 14.2% 13.3% 12.6% 14.7% 15.8% 15.4% 14.8% 14.6% 13.6% 15.4% 17.4% 15.5% 15.2% 19.2% 19.6% 17.2% 17.1% 12.6% 17.3% 20.0% 17.3% 18.6% 17.7% 17.5% 13.6% 13.9% 20.6% 21.5% 20.1% 20.1% 20.3% 20.2% 20.0% 18.7% 20.2% 21.1% 20.9% 20.1% 22.6% 24.0% 22.8% 23.2% 15.7% 24.7% 15.9% 26.3% 28.2% 24.1% 9.5% 10.3% 11.7% 12.4% 10.6% 9.8% 10.4% 11.5% 12.0% 13.1% 12.3% 10.7% 12.6% 13.3% 9.5% 9.0% 11.5% 11.6% 16.2% 11.9% 9.3% 12.5% 11.2% 12.2% 12.6% 16.6% 16.7% 10.2% 9.7% 11.1% 11.4% 11.3% 11.5% 11.7% 13.1% 11.7% 11.4% 12.6% 13.7% 12.1% 11.2% 13.8% 13.7% 22.1% 13.6% 23.3% 14.3% 13.2% 17.6% Government Dependence Share of Total Personal Income From Transfer Payments and Government Earnings, 2015 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 40.6% of Income in MS comes from the Government. 26.3 percent is from transfer payments and 14.4% is from government earnings. Only WV & NM are more dependent on the government. MS has the highest share of income from transfer payments. These sources tend to grow slow and in the case of earnings have decreased in recent years. February 2017 MS University Research Center, IHL 52
Workforce Participation by Age, 2016 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 16 to 19 years 20 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over MS US 0.0-2.0-4.0-6.0-8.0-10.0-12.0-11.4 MS-US Gap in Workforce Participation Rate by Age -5.6-3.6-1.4-10.6-10.7 16 to 19 years 20 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and The larger gap is due in part to higher incidence of over disability. -4.6 February 2017 MS University Research Center, IHL 53
Workforce Participation, Men 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 20 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over MS US 0.0% -5.0% -10.0% MS-US Gap in Workforce Participation Rate, Men -3.7% -4.9% -4.6% -10.1% -13.0% -6.1% -15.0% 20 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over February 2017 MS University Research Center, IHL 54
Workforce Participation, Women 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 20 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over MS US 5.0% 0.0% -5.0% -10.0% MS-US Gap in Workforce Participation Rate, Women 1.9% -7.0% -1.7% -10.6% -8.4% -3.3% -15.0% 20 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over February 2017 MS University Research Center, IHL 55
Workforce Participation In MS, 2016 By Gender and Age By Race and Gender 100% 70% 90% 80% 70% 60% 50% 55.7% 56.5% 60.8% 51.7% 62.2% 58.3% 49.5% 54.9% 60% 50% 40% 40% 30% 30% 20% 10% The participation rate is higher for men for all age cohorts 20% 10% There is very little difference between white and nonwhite. The lowest participation rate is among white women. 0% 20 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over 0% Men Women February 2017 MS University Research Center, IHL 56