Zions Bank Economic Overview · “Chinese tariffs going up are hurting our business. Most of the...

Zions Bank Economic OverviewUnderstanding the Current Economic Environment

October 2, 2019

National Indicators

30%

35%

40%

45%

50%

55%

60%

65%

2001 2004 2007 2010 2013 2016 2019

ISM Manufacturing Purchasing Manager’s Index (PMI)

Manufacturing Sector Weakest Since June 2009

Source: Institute for Supply Management

Sept. 201947.8%

Below 50 signals contraction

Manufacturing Sector Weakest Since June 2009

Source: Institute for Supply Management, Wall Street Journal

Panel Respondents to the ISM Manufacturing Survey Show the Impact of Tariffs

Source: Institute for Supply Management

“Continued softening in the global automotive market. Trade-war impacts also have localized effects, particularly in select export markets. Seeing warehouses filling again after what appeared to be a short reduction of demand.” (Chemical Products)

“Chinese tariffs going up are hurting our business. Most of the materials are not made in the U.S. and made only in China.” (Food, Beverage & Tobacco Products)

“General market is slowing even more than a normal fourth-quarter slowdown.” (Fabricated Metal Products)

“We have seen a reduction in sales orders and, therefore, a lower demand for products we order. We have also reduced our workforce by 10 percent.” (Plastics & Rubber Products)

Source: Wall Street journal

Trade War Fears


Trade War Fears

Trade War Causes Shift in Imports

36.4%

22.5%

12.4%

6.9%

-12.3%

-20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0%

Vietnam

Taiwan

South Korea

Mexico

China

Change in US Imports From Year Before

Manufacturing Employment Hit Since Trade War

Trade war with China

Presidential Election

US implements firstChina-specific tariffs

Source: Bureau of Labor Statistics

-500

50100150200250300350

2016 2017 2018 2019

12-Month Change in Manufacturing Employment (thousands of persons)

World Manufacturing Slows vs U.S.

Source: IHS Markit

A Slowing Global Economy

China’s Economy is Struggling

6%7%8%9%

10%11%12%13%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

China Real GDP: Year-Over Percent Change

Source: National Bureau of Statistics

2019:Q26.2%

Germany

Economic Weakness Throughout World

Source: Wall Street Journal

United Kingdom

Economic Growth Slowed in Q2 2019

-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%

Q1-

2012

Q2-

2012

Q3-

2012

Q4-

2012

Q1-

2013

Q2-

2013

Q3-

2013

Q4-

2013

Q1-

2014

Q2-

2014

Q3-

2014

Q4-

2014

Q1-

2015

Q2-

2015

Q3-

2015

Q4-

2015

Q1-

2016

Q2-

2016

Q3-

2016

Q4-

2016

Q1-

2017

Q2-

2017

Q3-

2017

Q4-

2017

Q1-

2018

Q2-

2018

Q3-

2018

Q4-

2018

Q1-

2019

Q2-

2019

Gross Domestic Product

Personal Consumption Fixed Investment Net ExportsInventories Government Real GDP Growth

Source: Bureau of Economic Analysis

2.0%


Gross Domestic Product Components

Consumer Confidence Slipped in September

50

70

90

110

130

150

2013 2014 2015 2016 2017 2018 2019

Above 110 indicates economic prosperity

Source: The Conference Board

Sept. 2019125.1

Longest Economic Expansion on Record

3745

3924

10636

5892

12073

123

0 20 40 60 80 100 120 140

Oct-1945Oct-1949

May-1954Apr-1958Feb-1961Nov-1970Mar-1975Dec-1982Mar-1991Nov-2001

Jul-2009

Duration of Economic Expansion by Months

Source: National Bureau of Economic Research

107 Consecutive Months of Job Creation

-900

-700

-500

-300

-100

100

300

500

2007 2009 2011 2013 2015 2017 2019


Thou

sand

s of J

obs

U.S. Job Creation Slowing

130

0

50

100

150

200

250

300

350

Jan-

2017

Feb-

2017

Mar

-201

7Ap

r-20

17M

ay-2

017

Jun-

2017

Jul-2

017

Aug-

2017

Sep-

2017

Oct

-201

7No

v-20

17De

c-20

17Ja

n-20

18Fe

b-20

18M

ar-2

018

Apr-

2018

May

-201

8Ju

n-20

18Ju

l-201

8Au

g-20

18Se

p-20

18O

ct-2

018

Nov-

2018

Dec-

2018

Jan-

2019

Feb-

2019

Mar

-201

9Ap

r-20

19M

ay-2

019

Jun-

2019

Jul-2

019

Aug-

2019


Thou

sand

s of E

mpl

oyee

s

2017 Avg = 1792018 Avg = 223

2019 Avg = 158

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1955

1959

1963

1967

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

2011

2015

2019

Source: U.S. Bureau of Labor Statistics

4.5% - 5.0% = Full Employment

US Unemployment Rate Near Lowest Level in 50 Years

August 20193.7%

62%

63%

64%

65%

66%

67%

68%

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Labor Force Participation Rose in August

August 201963.2%


Fewer than One Unemployed Worker Per Job Opening

01234567

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Unemployed/Openings

July 20190.84


Wage Growth Moderating

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2007– 2019 Average: 2.5%

August 20193.2%


Inflation is Below the Fed’s 2% Goal


-2%

-1%

0%

1%

2%

3%

4%

5%

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Personal Consumption Expenditure Yearly Percent Change

July 20191.4%

Labor Productivity Rebounding?

-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%

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

Real output per hour

Perc

ent C

hang

e fro

m Q

uart

er O

ne Ye

ar A

go


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Fed Cuts Rates for Second Time in 2019

Federal Funds Target Rate = 1.75 - 2.00%

Source: Federal Reserve Board of Governors

Federal Funds Rate

0%

2%

4%

6%

8%

10%

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

Federal Funds Rate

The Fed Won’t Have Much Room to Cut in the Next Economic Downturn

Source: Board of Governors of the Federal Reserve System

Source: Board of Governors of the Federal Reserve

Federal Funds Rate Forecast(September 2019)

Fed Projections Signal Lower Rates

Source: Board of Governors of the Federal Reserve

2.9% 3.1% 3.1%2.8%

2.4% 2.6% 2.6% 2.8%2.4%

2.1%2.4% 2.5%

1.9% 1.9% 2.1%

2.4%2.5%

0%

1%

2%

3%

4%

5%

2019 2020 2021 2022 Longer run

Dec-18 Mar-19 19-Jun 18-Sep

Dollar Index Near All Time High

9095

100105110

115120125130

135

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Trade Weighted Dollar Index

Source:Fed Board of Governors

Inde

x 19

97 =

100

Student and Auto Loan Debt Make Up the Majority of Non-Housing Debt

$0.0 T$0.5 T$1.0 T$1.5 T$2.0 T$2.5 T$3.0 T$3.5 T$4.0 T

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Student Loan Auto Loan Credit Card Other

Recession

Student Loan$1.48

Auto Loan$1.30

Credit Card$0.87

Other$0.41

Source: Federal Reserve Bank of New York

Since the Start of the Great Recession Student Loan Debt Balances have Continued to Climb

0

50100

150

200

250300

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Student Loan Auto Loan Credit Card Other

Recession

Source: Zions Bank Analysis of Federal Reserve Bank of New York Data

Inde

x: Q

4 20

07 =

100

Student Loan+170%

Auto Loan+59%

Source: Congressional Budget Office

National Debt Levels Approaching All-Time Highs

RegionalEconomic Conditions

Percent Change: 2017 to 2018U.S. Rate = 0.6%

Loss

0.2% to 0.6%

1.5% +

0.0% to 0.1%

Utah Population 3rd Fastest Growing in U.S.

Source: U.S. Census Bureau

0.7% to 1.4%

DE1.1%

DC1.0%

-20,000-10,0000

10,00020,00030,00040,00050,00060,00070,00080,00090,000

0300,000600,000900,000

1,200,0001,500,0001,800,0002,100,0002,400,0002,700,0003,000,0003,300,0003,600,000

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

Net Migration Population Change

32,968

3,161,105

25,019

2018

Sources: U.S. Census Bureau

Tota

l Pop

ulat

ion

Components of Population Change

e = estimate, f = forecast

Utah Population and Components of Change

Utah PopulationGrowth Rates

By County2017 to 2018State Average = 1.9%


1.0% to 1.8%

0.0% to 0.9%

1.9% to 2.9%

Loss

3.0%+

Rich2.6%

Washington County PopulationGrowth Rates

By City2017 to 2018

State Average = 1.9%


1.0% to 1.8%

0.0% to 0.9%

1.9% to 2.9%

Loss

3.0%+

Washington County AARC

2010 to 2017

State Average = 1.7%


1.0% to 1.7%

0.0% to 0.9%

1.8% to 2.9%

Loss

3.0%+

Percent Change in Employment for States: August 2018 to August 2019U.S. Rate = 1.4% UT Rate = 2.8%


1.0% to 1.5%

0.0% to 0.9%

Loss

1.6% to 1.9%

2.0% +

Utah Employment Growth 2nd Highest in the Nation

NH1.9%

800900

1,0001,1001,2001,3001,4001,5001,600

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

Thou

sand

s of E

mpl

oyee

s

Total Nonfarm Employment

Source: U.S. Bureau of Labor StatisticsNote: Numbers rounded to nearest thousand

Utah Total Employment at New HighsGain of 393,500 jobs from low in

2010

Loss of 92,100 jobs from

2007-2010

1.1%2.8%

2.2%5.0%

4.7%2.7%

3.0%0.8%

4.7%5.4%

5.2%

-5% -3% -1% 1% 3% 5% 7%

GovernmentOther Services

Leisure & HospitalityEd. & Health Serv.Prof. & Bus. Serv.Financial Activity

InformationTrade, Trans., Utilities

ManufacturingConstruction

Ntl. Res. & Mining

Percent Change in Utah Employment by Industry: August 2018 to August 2019

Total: 3.0%

All Utah Industries Seeing Growth

Source: Utah Department of Workforce Services

2,500

1,2003,400

10,00010,200

2,4001,200

2,4006,300

5,800500

-3,000 -1,000 1,000 3,000 5,000 7,000 9,000 11,000

Government

Other ServicesLeisure & Hospitality

Ed. & Health Serv.Prof. & Bus. Serv.

Financial ActivityInformation

Trade, Trans., UtilitiesManufacturing

Construction

Ntl. Res. & Mining

Total: 45,900

All Utah Industries Seeing GrowthTotal Change in Utah Employment by Industry: August 2018 to August 2019


Utah Manufacturing Appears to Defy Downturn

-2.0%

0.0%

2.0%

4.0%

6.0%

2017 2018 2019

Manufacturing Employment: Year-over-year percent change

Utah US Indiana Wisconsin Michigan

4.3%


Utah EmploymentChange Rates

By CountyAugust 2018 to

August 2019State Rate = 3.0%

1.0% to 3.2%

0.0% to 0.9%

5.0% +

3.3% to 4.9%

Loss


Morgan8.3%


Utah has 6th Lowest Unemployment Rate August 2019 U.S. Rate = 3.7%, UT Rate = 2.8%

6.0% +

5.5% to 5.9%

4.8% to 5.4%

4.0% to 4.7%

3.9% or less

DC5.6%

Utah Unemployment

RatesBy County

August 2019

State Rate = 2.8%


4.0% to 5.9%

6.0% to 6.9%

3.1% or lower

3.2% to 3.9%

7.0% +

Wasatch Front Inflation Bounced in August

-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%

2012 2013 2014 2015 2016 2017 2018 2019

Year-over-year percent change

United States CPI: +1.7% Zions Bank Wasatch Front CPI: +3.1%

Sources: U.S. CPI from National Bureau of Labor Statistics and Wasatch Front CPI from Cicero Group

Utah3.1%

US1.7%


Utah Personal Income Growth2nd Highest in the Nation

Percent Change in Personal Income : 2017 - 2018U.S. = 4.5%, UT = 6.3% ID = 5.4% WY = 4.5%

4.6% to 5.0%4.1% to 4.5%

5.1% or more

3.6% to 4.0%3.5% or less

DC$85,750

NH$81,346

MA$86,345

CT$72,812NJ

$74,146

MD$86,223


Utah 9th Highest Median Household Income2018 U.S. = $63,179, UT. = $77,067

$60,000 – 69,999 $50,000 to $59,999

$70,000 +

$45,000 to $49,999

$44,999 or less

HI$77,765

RI$66,266

DE$65,012

VT$65,361


Utah has the 6th Lowest Poverty Rate2017 U.S. Rate = 13.4%, UT = 9.7%

18.1% +

15.1% to 18.0%

12.1% to 15.0%

10.1% to 12.0%

x

Utah Home Values

$0$50,000

$100,000$150,000$200,000$250,000$300,000$350,000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

All homes

Utah Home Values U.S. Home Values

June 2009$229,400

Source: Zillow Research

Aug 2019$229,600

Aug 2019$344,400

Utah Home Value Appreciation is Moderating

-12%-8%-4%0%4%8%

12%16%20%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Year-over-year percent change

Utah: 8.1% US: 4.9%

Aug 2019Utah8.1%

Aug 2019US

4.9%

Source: Zillow Research

Home Price Growth Continues to Slow Across the USand in Top Markets

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2014 2015 2016 2017 2018 2019

12-Month Percent Change in Home Values

Idaho Nevada Washington Florida Utah United States

Source: Zillow Research, Home Value Index

Economic Summary• National and international uncertainty• US economic expansion longest in US history• Job growth above expectations• Wage growth and inflation continue to disappoint• Labor productivity looking good• Manufacturing activity and trade wars drag on growth• Interest rate cuts on the way?• Regional employment growth remains strong• Labor shortages in the West are becoming more pronounced

Robert SpendloveEconomic and Public Policy Officer

Email: [email protected]: 801-560-5394

Zions Bank, A Division of ZB, N.A. Member FDIC.

Content is offered for informational purposes only and should not be construed as tax, legal, financial or business advice. Please contact a professional about your specific needs and advice. Content may contain trademarks or trade names owned by parties who are not affiliated

with ZB, N.A. Use of such marks does not imply any sponsorship by or affiliation with third parties, and ZB, N.A. does not claim any ownership of or make representations about products and services offered under or associated with such marks.

Zions Bank Economic Overview · “Chinese tariffs going up are hurting our business. Most of the...

Documents

Transcript of Zions Bank Economic Overview · “Chinese tariffs going up are hurting our business. Most of the...