Economic Growth in the Trump Economy Presented to State Data Center Conference William F. Fox, Director November 18, 2016
GDP Grows, Though Slowly 10.0 8.0 Percentage Change, Previous Qtr, SAAR 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0-10.0 November 2016 William F. Fox http://cber.haslam.utk.edu 2
Current Expansion is Getting Long (June-July Fiscal Year) FY19 FY18 FY17 History Months Sources: NBER and Moody s Analytics. November 2016 William F. Fox http://cber.haslam.utk.edu 3
Productivity Growth Has Been Much Lower for Four Decades Average Annual Growth Rates Decade Ending in Year Gordon, Robert J. The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War. November 2016 William F. Fox http://cber.haslam.utk.edu 4
Consumption Leads Economic Growth 8.0 Percentage Change, Previous Qtr, SAAR 6.0 4.0 2.0 0.0-2.0-4.0-6.0 November 2016 William F. Fox http://cber.haslam.utk.edu 5
Income Growth Slowing at All Levels Period Average Bottom Fifth Middle Fifth Top 1% 1947 1970 2.7% 3.0% 2.8% 1.4% 1970 2000 2.2% 1.4% 1.7% 4.5% 2000 2015 1.3% 0.1% 1.1% 2.3% Note: Growth rates are average annual incomes corrected for changes in the CPI. Sources: U.S. Bureau of Economic Analysis; U.S. Bureau of the Census; Immanueal Saez. Gordon, Robert J. The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War. November 2016 William F. Fox http://cber.haslam.utk.edu 6
Gasoline Prices Still Very Low $4.50 $4.00 Dollars Per Gallon $3.50 $3.00 $2.50 $2.00 $1.50 November 2016 William F. Fox http://cber.haslam.utk.edu 7
We are at the Front End of Population Aging 100.0% 90.0% 80.0% 12.6 12.4 13.0 14.9 19.7 Share of total population 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 61.9 61.9 62.9 62.2 56.8 25.6 25.7 24.0 22.9 23.6 1990 2000 2010 2015 2030 Under 18 years 18 to 64 years 65 years and over November 2016 William F. Fox http://cber.haslam.utk.edu 8
Population 65 Years and Older, Increasing Across the Country (2030) U.S. Average: 19.7% Less than 15.0% 15.0% to 16.9% 17.0% to 18.9% 19.0% to 19.7% Greater than 19.7% November 2016 William F. Fox http://cber.haslam.utk.edu 9
Consumer Debt Balance Rising Again 14.0 12.0 Other Student Mortgage 10.0 Trillions of Dollars 8.0 6.0 4.0 2.0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 November 2016 William F. Fox http://cber.haslam.utk.edu 10
Light Vehicles Sales at Expansion Level 20.0 18.0 Unit Sales (millions) 16.0 14.0 12.0 10.0 8.0 87Q3 88Q3 89Q3 90Q3 91Q3 92Q3 93Q3 94Q3 95Q3 96Q3 97Q3 98Q3 99Q3 00Q3 01Q3 02Q3 03Q3 04Q3 05Q3 06Q3 07Q3 08Q3 09Q3 10Q3 11Q3 12Q3 13Q3 14Q3 15Q3 16Q3 November 2016 William F. Fox http://cber.haslam.utk.edu 11
Creation of Housing Units has Slowed Dramatically 140.0 135.0 All Housing Units (in millions) 130.0 125.0 120.0 115.0 110.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD November 2016 William F. Fox http://cber.haslam.utk.edu 12
Households Formation Slowing Among the Young 35,000 Households (thousands) 30,000 25,000 20,000 15,000 10,000 5,000 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Young Adults (under 30) Older Adults (65+) November 2016 William F. Fox http://cber.haslam.utk.edu 13
Housing Sales Rising but Low for an Expansion 8.0 2.5 Units of Existing Homes (Millions) 7.0 6.0 5.0 4.0 3.0 2.0 Existing Home Sales Housing Starts 2.0 1.5 1.0 0.5 Housing Starts (Millions) 1.0 0.0 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 0.0 November 2016 William F. Fox http://cber.haslam.utk.edu 14
Housing Sales Also Rising in Tennessee 60.0 Realty Transfer Year-over-year growth (percentage) 40.0 20.0 0.0-20.0-40.0 Realty Mortgage -60.0 November 2016 William F. Fox http://cber.haslam.utk.edu 15
Business Investment Has Been a Drag on Growth 40.0 Percentage Change, Previous Quarter, SAAR 30.0 20.0 10.0 0.0-10.0-20.0-30.0-40.0 November 2016 William F. Fox http://cber.haslam.utk.edu 16
Federal Deficits are a Low Share of GDP, but Unified Federal Budget Surplus (bil $) 400.0 200.0 0.0-200.0-400.0-600.0-800.0-1,000.0-1,200.0-1,400.0-1,600.0 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Fiscal Year November 17, 2016 William F. Fox Boyd Center for Business & Economic Research cber.haslam.utk.edu 17
Deficits Rise Rapidly in the Future (billion) November 2016 William F. Fox http://cber.haslam.utk.edu 18
The Strong Dollar is Raising the Trade Deficit -200.0 Exports - Imports, Billions of Chained 2009 Dollars -300.0-400.0-500.0-600.0-700.0-800.0-900.0 November 2016 William F. Fox http://cber.haslam.utk.edu 19
U.S. Oil Production Limits the Trade Deficit 4,000 4,000 Imports (Millions of Barrels) 3,500 3,000 2,500 2,000 1,500 3,500 3,000 2,500 2,000 1,500 Production (Millions of Barrels) 1,000 1,000 500 0 U.S. Imports of Crude Oil U.S. Field Production of Crude Oil 500 0 November 2016 William F. Fox http://cber.haslam.utk.edu 20
Interest Rates and Inflation Rates Low, but Rising 6.0 5.0 4.0 3.0 2.0 Rate 1.0 0.0-1.0-2.0-3.0 Federal Funds Rate, % per annum Inflation, year-over-year -4.0 November 2016 William F. Fox http://cber.haslam.utk.edu 21
State Economic Momentum (September 2016) Percentage Above National Avg Economic Performance (%) 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1.48 1.34 1.26 1.13 1.03 0.96 0.80 0.68 0.58 0.45 0.39 0.39 0.39 0.34 UT OR FL NV WA GA SC CO ID NC TN AZ CA HI MA Top 15 States Source: State Policy Reports, Vol.34, No. 18. 0.15 November 2016 William F. Fox http://cber.haslam.utk.edu 22
Tennessee Job Growth Exceeds the Nation 4.0 Percentage Change, Same Month Last Year 2.0 0.0-2.0-4.0-6.0 TN U.S. 2.2 1.7-8.0 November 2016 William F. Fox http://cber.haslam.utk.edu 23
TN has 170,000 More Jobs than the Previous Peak 3,100.0 Employment (thousands) 3,000.0 2,900.0 2,800.0 2,700.0 2980.1 2,600.0 2,500.0 November 2016 William F. Fox http://cber.haslam.utk.edu 24
Tennessee s Unemployment Rate Near Previous Lows 12.0 TN U.S. 10.0 Rate (%) 8.0 6.0 4.9 4.0 4.6 2.0 November 2016 William F. Fox http://cber.haslam.utk.edu 25
Labor Force Participation Rates Show Sign of a Turnaround Participation Rate (%) 68.0 67.0 66.0 65.0 64.0 63.0 62.0 61.0 60.0 recession TN U.S. Sep-16 62.9 Sep-16 60.3 59.0 58.0 Source: Bureau of Labor Statistics. November 2016 William F. Fox http://cber.haslam.utk.edu 26
Recent Labor Force Participation Patterns Similar by Gender 100.0 90.0 Total Men Women Participation Rate (%) 80.0 70.0 60.0 50.0 40.0 30.0 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Sep- 2016 November 2016 William F. Fox http://cber.haslam.utk.edu 27
Full Recovery from the Great Recession in Most Sectors (September 2016 as a Share of December 2007) Professional & Business Services Education & Health Services Leisure & Hospitality Total Nonfarm Other Services Financial Activities Government Trade, Transportation, Utilities Manufacturing Mining, Logging, Construction Information 125.3% 122.9% 112.6% 106.2% 105.9% 104.0% 101.9% 100.8% 91.6% 90.4% 89.8% Source: Bureau of Labor Statistics. 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% November 2016 William F. Fox http://cber.haslam.utk.edu 28
TN Metro Area Employment Growth Cleveland 6.1% Morristown Nashville-Davidson--Murfreesboro-- Franklin 3.3% 3.1% Clarksville TENNESSEE Knoxville Johnson City Kingsport-Bristol-Bristol, TN-VA Chattanooga Jackson 2.4% 2.2% 2.0% 1.6% 1.4% 1.2% 1.1% Memphis, TN-MS-AR 0.3% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Growth Rate (%) November 2016 William F. Fox http://cber.haslam.utk.edu 29
Per Capita Income is Lower than the U.S. Average in All But Four Counties Tennessee: $40,457 United States: $46,049 2014 Less than $27,000 $27,000 to $33,250 $33,500 to $40,450 $40,451 to $46,048 Greater than $46,048 November 2016 William F. Fox http://cber.haslam.utk.edu 30
Tennessee is a Very Low Tax State U.S. =10.5% Tennessee = 8.0% Less than 8.0% (1) 8.0% to 10.4% (33) 10.5% to 12.9% (12) 13.0% and greater (4) November 2016 William F. Fox http://cber.haslam.utk.edu 31
State Budget Highly Dependent on Transactions Taxes, FY2016-17 Sales Tax 55 All Other Taxes 10 Insurance & Banking 6 Motor Vehicle 2 Franchise & Excise 14 Gasoline Taxes 6 Gross Receipts & Privilege 5 Income & Inheritance 2 November 2016 William F. Fox http://cber.haslam.utk.edu 32
Tennessee Tax Revenues Rising, but Not as a Share of Income 16,500 6.0 14,500 5.5 Tax Revenues (in millions) 12,500 10,500 8,500 6,500 4,500 Tax Revenues as Share of PI Tax Revenues 5.0 4.5 4.0 3.5 3.0 Tax Revenues as Share of PI (%) 2,500 2.5 November 2016 William F. Fox http://cber.haslam.utk.edu 33
Real Sales Tax Revenue Growth Fastest in Decades 10.0 8.0 6.0 4.0 % Growth, real 2.0 0.0-2.0-4.0-6.0-8.0-10.0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Fiscal Year November 2016 William F. Fox http://cber.haslam.utk.edu 34
Tennessee Sales Taxes Grow Very Fast January March, 2015 to 2016 U.S.: 2.4% Tennessee: 9.1% Less than 2.4% (21) 2.4% to 5.9% (14) Greater than 5.9% (10) n.a. (5) November 2016 William F. Fox http://cber.haslam.utk.edu 35
Sales Tax Collections by Category of Sales (Quarter Ending September 2015 to September 2016) Building Materials 7.5% Auto Dealers and Service Stations Total Services Furniture & Home Furnishings 5.7% 5.6% 5.9% Miscellaneous Retail Stores GRAND TOTAL Eating & Drinking Places 3.8% 4.5% 4.2% Apparel & Accessory Stores Total Non-Retail Non-Services General Merchandise Food Stores 2.7% 2.6% 2.5% 2.3% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Growth November 2016 William F. Fox http://cber.haslam.utk.edu 36
Revenue Growth has been Good Despite Recent Tax Cuts Gift tax Inheritance tax Lower rate for food Elimination of the Hall Income Tax November 2016 William F. Fox http://cber.haslam.utk.edu 37
Tennessee s Fiscal Condition is Strong Revenue growth has been outstanding Revenue estimates have been very conservative Reserves and balances are in very good shape, though TN could not sustain a significant recession without significant cuts TennCare spending has grown rapidly This year likely to see significant new revenues for higher ed and a salary increase Imagine significant non-recurring expenditures as well November 2016 William F. Fox http://cber.haslam.utk.edu 38
Rainy Day Fund Rising and State has Significant Other Reserves 800 $750 700 $668 600 $557 $568 Millions of dollars 500 400 300 $453 $284 $306 $356 $456 $491 200 100 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17* *Estimated November 2016 William F. Fox http://cber.haslam.utk.edu 39
Continued Importance of Education Apparent Unemployment Rate (%) Median Weekly Earnings ($) Less than a high school diploma 8.0 Less than a high school diploma $493 All workers $860 High school diploma 5.4 High school diploma $678 Some college, no degree 5.0 Some college, no degree $738 Associate's degree 3.8 Associate's degree $798 Bachelor's degree 2.8 Bachelor's degree $1,137 Master's degree 2.4 Master's degree $1,341 Professional degree 1.5 All workers 4.3% Professional degree $1,730 Doctoral degree 1.7 Doctoral degree $1,623 Source: Bureau of Labor Statistics. 0.0 2.0 4.0 6.0 8.0 10.0 $0 $1,000 $2,000 November 2016 William F. Fox http://cber.haslam.utk.edu 40
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