Economic Outlook Briefing with Dr. Harry Davis
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Transcript of Economic Outlook Briefing with Dr. Harry Davis
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On behalf of our Major Investorsand Briefing Sponsors, welcome!
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Anthony PuglieseChair
Chapel Hill-Carrboro Chamber of Commerce
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Join the Conversation
@carolinachamber#EOB2016
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Thank you, briefing sponsors!
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Our Presenting Sponsor
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Our Keynote Sponsor
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Our Q & A Sponsor
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Our Economic Forecast Sponsor
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Thank you to our 2016 Major Investors!Community Champions
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Thank you to our 2016 Major Investors!Community Investors
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Thank you to our 2016 Major Investors!Platinum Sponsors
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Thank you to our 2016 Major Investors!Platinum Sponsors
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Thank you to our 2016 Major Investors!Gold Sponsors
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Thank you to our 2016 Major Investors!Gold Sponsors
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Thank you to our 2016 Major Investors!Gold Sponsors
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Thomas MillerSenior Vice President, Private Financial Advisor at
SunTrust Investment Services, Inc.
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Our Presenting Sponsor
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Aaron NelsonPresident & CEO
Chapel Hill-Carrboro Chamber of Commerce
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Our Economic Forecast Sponsor
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Our Keynote Sponsor
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Dr. Harry DavisProfessor of Banking, Appalachian State University
Economist, North Carolina Bankers Association
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“How Long Can This Economic Recovery Last?”Presented to Carolinas Association of Chamber of
Commerce ExecutivesChapel Hill, NC
Presented byHarry M. Davis, Ph.D
[email protected] Professor of Banking and Economist
Appalachian State UniversityOctober 20, 2016
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The U.S. EconomyRecovery was 7 years old in June
This expansion is now the 4th longest in the post WWII period at 87 months in October 2016
GDP growth was 2.4% for 2015
GDP growth slowed to 0.8% and 1.4% for the first two quarters of this year, respectively
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The U.S. EconomyThis recovery is the slowest in the post WWII
period
Economic growth has been very slow but employment growth has been relatively strong in this recovery. Why?
In this expansion, productivity growth has been the slowest in 60 years
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The U.S. EconomyProductivity has been negative 3 consecutive
quarters through the 3rd quarter of 2016 – last time this occurred was in 1979
Business Investment has been anemic in this expansion
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Demographics and ProductivityRetirements are reducing the labor force
participation rate
A new study found retirement lower productivity due to lost experience
Output per hour drops with younger inexperienced workers
Experience peaks at 50 years of age
We need to raise the retirement age and use tax incentives to keep people in the labor force longer
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Consumers
Both the real personal income and consumer spending rates of growth have increased to almost 3% in the last 12 months as opposed to annual rates of approximately 2-2.5%
Real median household income has now risen to nearly the level it was 8 years ago
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U.S. Economy - Positive
The value of the dollar remains relatively high, which hurts the manufacturing sector
Corporate earnings have declined for the past 6 quarters
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U.S. Economy - PositiveWith interest rates at record low, corporations
borrow money to buy back stock and pay dividends
This action greatly increases the wealth of the wealthy
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Wealth
Wealth declined $13 trillion in “Great Recession”
Wealth has risen $30 trillion in last 5 years
Must own a house and/or be in the stock market
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HousingExisting home sales were 5.33M in August
New residential construction was the best in 2015 since 2007 and this year will be better than the last
Even so, home construction is only at recession levels
Inventories of unsold homes are at record lows, Charlotte at 1.9 months
Millennials – rent or buy
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Housing
Existing home prices are rising around 5.5% year over year
Home prices are just 2% below the peak reached in 2006
The home ownership rate(62.9%) is at its lowest since 1965
New single family home sales were above 600,000 in July and August
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HousingThe share of first time home purchasers remains at
a three decade low
Student loans and bad credit
Many are forced to rent
Renters and wealth
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U.S. Employment - Positive
The unemployment rate rose to 5.0% in September
Created an average of 229,000 new jobs per month in 2015
Created an average of 178,667 new jobs each month this year through September
The labor participation rate hit a 38-year low in 2015 and has risen slightly during 2016
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Employment
Bureau of Labor Statistics estimates that about 6.8 million jobs unfilled due in part to a lack of qualified workers
What jobs: computer software engineers, nurses, math and science teachers, truck drivers, machinists, welders
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North Carolina EmploymentNC needs to create 62,500 jobs per year to keep
up with projected population growth for the next 20 years
Almost 60% 0f all jobs created in NC since the “Great Recession” were created in: (1) Raleigh/Durham-RTP, and (2) Charlotte
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NC Employment SituationThe unemployment rate for August was 4.6%
Grew about 74,800 jobs in the last 12 months through August
NC job growth in the last year has been slightly better than that of the U.S.
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SC Employment SituationThe unemployment rate dropped in August to
5.1%, which is the 4th consecutive monthly drop
Grew 54,553 jobs over the last 12 months
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What To Do?!Regulation Czar – moratorium on new
regulations
Build Infrastructure – regulations
Immigration reform
Simplify and flatten the tax code for businesses and individuals
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The FEDIn a box
All Central Bankers are looking for one thing which is not around – a 2% rate of inflation
FED should forget about raising rates until the 10-year bond rate rises above 2.2% and stays there for more than 30 days
The FED has over-estimated economic growth 13 out of the last 15 years - Why?
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The Outlook
While GDP growth has been growing slightly above 2% each year, it is now expected to grow less than 2% this year and the next
The US, NC, and SC unemployment rates should remain around 5.0%
The value of the dollar will continue to cause headaches for manufacturing
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The Outlook
Wage and salary growth will remain at about 3% and consumer spending growth will increase to 3%
Housing will continue to be a bright spot - with a slight shift in construction to single family homes
The FED may raise rates later this year by .25%
Interest rates will remain at very low levels for years
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Our Q & A Sponsor
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Dr. Bill IngramPresident
Durham Technical Community College
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Our Q & A Sponsor
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Aaron NelsonPresident & CEO
Chapel Hil-Carrboro Chamber of Commerce
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2016 Economic Conditions Survey Results
(Q3 2016 - 77 responses)
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How Has the Current State of the Economy Effected Your Organization
Q4 2008 Q2 2009 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q3 20160.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
43.6%
56.4%
22.4%
8.1%
50.4% 49.9%
35.2%
6.1%
27.6%
56.5%
Negatively Not Much Positively
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Good Growth
Moderate Growth
Remain Flat
Decline
14.5%
61.3%
22.6%
1.6%
Given the state of the local economy, how do you expect your organization to perform over the next 12
months
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Increase No Change Decrease0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
68.9%
23.0%
8.2%
How do you expect your organization's sales to change during the next 12 months
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Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q3 20160.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
35.8%39.7%
29.8%
39.7%46.1%
5.3%14.0%
0.0% 0.0% 1.5%
58.9% 58.9%
70.2%
60.3%52.3%
Do You Have Plans to Increase or Reduce Your Workforce in the next 12 Months?
Add workers Reduce WorkforceNo reduction or addition
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Very Pro-Business
Somewhat Pro-Business
Neutral on Business
Somewhat Anti-Business
Very Anti-Business
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%
10.5%
42.1%
21.1%
22.8%
3.5%
Thinking About the Local Business Climate, Would You Say the Local Government Here is
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innovate
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deliver value
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Upcoming Events
Performance Golf Classic Nov. 7, 8:30 a.m.-5 p.m.Chapel Hill Country Club
PRIMETIME Business Expo4-7:30 p.m., Nov. 10,
UNC Friday Center
www.carolinachamber.org/events
Salute to Community Heroes presented by AT&TDec. 8, 6-8 p.m.University Place
Submit nominations by Monday, Oct. 24
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You’re invited to SUPERPOWER our economy at Orange County’s largest business expo: PRIMETIME
PRIMETIME Business Expo4:00-7:30 p.m., Thursday, Nov. 10 at the UNC Friday Center
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Thank you