U.S. & Rochester Area
Economic Outlook
Gary Keith – Vice President and Regional Economist
Commercial Planning & Analytics Department
January 31, 2020
2.1%2.0%
3.1%
1.1%
2.9%
3.5%
2.5%
3.5%
M&TBank
Seasonally Adjusted Annual Rate
U.S. Real Gross Domestic Product Growth
Source: U.S. Bureau of Economic Analysis
A Lot Has Changed in the Past 12 Months
Growth Has Decelerated...And Faces Multiple Headwinds
On an annualized basis, economic growth has averaged 2% over the
past four quarters—the slowest pace since mid-2016
3.1% average
2©2020 M&T Bank, Member FDIC
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2017 2018 2018 2018 2018 2019 2019 2019
2.0% average
Four Quarters Average
Four Quarters Average
-12%
-9%
-6%
-3%
0%
3%
6%
9%
12%
15%
-1.4%
©2020 M&T Bank, Member FDIC 3M&TBank
Growth in World Merchandise Trade
-3.2%November
World Merchandise Trade
U.S. Merchandise Exports
Sources: CPB World Trade Monitor, U.S. Commerce Dept. Data are three-month moving averages
11.7%
2013 2014 2015 2016 2017 2018 2019
Perhaps the Greatest Headwind
Drag From Declining Global Trade
Evolving U.S. trade and tariff policies, a strong dollar
and global uncertainty are hurting export demand
0%
5%
10%
15%
20%
25%
30%
35%
40%
1960s 1970s 1980s 1990s 2000s 2016
28.5%
©2020 M&T Bank, Member FDIC 4M&TBank
Exports Share of World Economic Output
Source: World Trade Organization
11.9%
United States
Worldwide Total
China 4.3% 19.7%
Euro Area 18.5% 44.3%
United Kingdom 20.2% 28.3%
Canada 17.0% 31.0%
1960 2016
Why Is This a Concern?
Foreign Trade Increasingly Drives the Global Economy
As a share of worldwide GDP, exports have more than doubled over the past fifty
years, putting countries—including the U.S.—at greater risk for trade disruptions
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The Case For Optimism? Solid Labor Fundamentals
©2020 M&T Bank, Member FDIC 5Source: U.S. Bureau of Labor Statistics
U.S. Private Sector Employment
105
110
115
120
125
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Dec.
129.7
Dec 2007
116.0
R
E
C
E
S
S
I
O
N
Job Creation Remains Remarkably Consistent
2 million new jobs have been
created annually since 2010,
pushing employment 12%
above the pre-recession peak
2013 2014 2015 2016 2017 2018 2019 Nov.
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5 Private Sector Job Openings
Millions
6.1
“Help Wanted” Signs
Are Still Abundant
Despite a slight pullback from
November 2018’s all-time high,
strong hiring plans set the stage for
further income & spending growth
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Seasonally Adjusted Year-Over-Year Percentage Change
U.S. Real Personal Consumption Growth
©2020 M&T Bank, Member FDIC 6Source: U.S. Bureau of Economic Analysis
2.4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
R
E
C
E
S
S
I
O
N
3.3% average
Jan 1990
to Dec 2007
2.2% average
July 2009
to Nov. 2019
1990s 2000s 2010s ‘19 Nov.
R
E
C
E
S
S
I
O
N
R
E
C
E
S
S
I
O
N
Consumer Spending Remains Robust
With personal consumption representing
70% of GDP, strong performance in this
sector puts a floor under economic growth
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
M&TBank
Forecast
©2020 M&T Bank, Member FDIC
1.99%
1.50%
7Sources: Federal Reserve, M&T Bank forecast
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Interest Rate ForecastDecember 31, 2019
10 Year Rate Overnight Rate
Monetary Policy Will Remain Accommodative
The Fed is expected to cut short-term rates one more time
(September 2020) while medium- and long-term rates are expected
to drift sideways, keeping an upward slope on the yield curve
1.9%2.3%
2.9%2.4%
1.6%
2.9%
3.8%3.5%
2.9%
1.9%
-0.1%
-2.5%
2.6%
1.6% 1.8%2.2% 2.5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Sources: U.S. Bureau of Economic Analysis, Blue Chip consensus forecast
FORECAST
8
3.0% annual average
from 1990-2007
©2020 M&T Bank, Member FDIC
The Expansion Should Continue For Another Year
The economy is expected to grow at a slightly slower rate in 2020—
with potential drags from a tightening labor market, evolving trade
policy and monetary and geopolitical uncertainty
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U.S. Real Gross Domestic Product Growth
9
National Association of Realtors
U.S. Housing Market Forecast
Source: Lawrence Yun presentation at Residential Real Estate Economic Issues and Trends Forum—November 8, 2019
M&TBank©2020 M&T Bank, Member FDIC 9
Rochester Area
Economic Trends &
Near-Term Outlook
#1 COLDEST CITY
ROCHESTER, N.Y.The corporate home to Eastman Kodak Company was the smallest major-metro region in the ranking, with barely one million population, and had the least dynamic labor market.
To determine the overall hottest and coldest labor markets, The Wall Street Journal looked at the 53 metro areas with more than 1 million people.
The Journal’s ranking is based on the following attributes:
• Average unemployment rate in 2018
• Labor-force participation rate in 2018
• Change in employment and change in labor force for the 4th quarter of 2018 from a year earlier
• Change in average weekly wage in the first half of 2018 from the first half 2017
March 1, 2019
11M&TBank
-1%
0%
1%
2%
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
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Year-Over-Year Percentage Change
Private Sector Employment Growth
1.5%
1.4%
UnitedStates
©2020 M&T Bank, Member FDIC 12
But Taking a Closer Look, a Much Better Picture Emerges
2019 Hiring Upswing Is Closing the “Gap” With the U.S.
While Rochester’s labor market performance remains volatile, job creation
has accelerated and finished the year nearly on par with the U.S. average
2017 2018 2019
RochesterMetro Area
Source: U.S. Bureau of Labor Statistics Note: figures are preliminary and subject to revision in March 2020
M&TBank
-1,200
-700
-600
-100
800
1,100
1,300
2,000Construction
Leisure & Hospitality
Private Health Care
Professional, Scientific
& Technical Services
Retail Trade
Financial Activities
Manufacturing
Admin. (“Back Office”) Business Services
©2020 M&T Bank, Member FDIC 13
Year-Over-Year Absolute Change
Rochester Area Job Growth—2019 Average
Construction
Job Creation
Led the Way
While back office
administrative and
manufacturing
losses offset gains
in other sectors
Source: U.S. Bureau of Labor Statistics Note: figures are preliminary and subject to revision in March 2020
9.3%
2.8%
1.4%
2.7%
-0.1%
-2.6%
-1.3%
-3.9%
Percentage
Change
14
Seasonally Adjusted
Rochester Area Unemployment Rate
3%
4%
5%
6%
7%
8%
9%
10%
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Dec.
R
E
C
E
S
S
I
O
N
4.4%
RochesterMetro Area
The Local Jobless
Rate is Near a
Two-Decade Low
while the U.S. rate is
at a 50-year low
Housing demand is
highly correlated with
unemployment trends
14M&TBank©2020 M&T Bank, Member FDIC
R
E
C
E
S
S
I
O
N
3.5%
UnitedStates
Source: U.S. Bureau of Labor Statistics
Rochester data seasonally adjusted by M&T
$19.0
$19.5
$20.0
$20.5
$21.0
$21.5
$22.0
$22.5
Billions of Constant 2019 Dollars
Rochester Area Real Private Sector Wages
$22.2
Net Result
Payroll Income & Spending
Power Climb to a New High
Adjusted for inflation, average payroll
wages for Rochester area private
sector workers rose 1.6% last year
and are up 10.7% since 2013
06 07 08 09 10 11 12 13 14 15 16 17 18 19est
RochesterMetro Area
M&TBank15
Recession
©2020 M&T Bank, Member FDIC Sources: U.S. Census Bureau, Bureau of Economic Analysis, M&T Bank forecast for Q3 & Q4 2019
16
12,95113,134
13,982
15,25815,047
14,77214,773
2013 2014 2015 2016 2017 2018 2019
Rochester Regional Housing Market*
Closed & Pending Sales of Existing Homes
Total Closed Sales Pending Sales (At Year End)
Healthy Labor Market Continues to Drive Sales Activity
Although existing home sales were flat in 2019, they remain high by historic
standards, supported by favorable labor, income and consumer confidence
fundamentals and mortgage rates that remain affordable
Source: Greater Rochester Realtors Association M&TBank©2020 M&T Bank, Member FDIC
* Monroe, Cayuga, Allegany, Genesee, Livingston, Ontario, Orleans, Seneca, Steuben, Wayne, Wyoming and Yates counties
16
12,772
13,256
14,363
15,19615,050
14,708
15,043
2013 2014 2015 2016 2017 2018 2019
17
22,860 22,622
23,958
22,545
20,808
20,297 20,107
Rochester Regional Housing Market*
Inventory of Existing Homes For Sale
New Listings
Supply Constraints Remain a Major Challenge
Inventory pressures intensified yet again in 2019—
will we start to see some relief in the coming year?
M&TBank©2020 M&T Bank, Member FDIC 17Source: Greater Rochester Realtors Association
* Monroe, Cayuga, Allegany, Genesee, Livingston, Ontario, Orleans, Seneca, Steuben, Wayne, Wyoming and Yates counties
2013 2014 2015 2016 2017 2018 2019
5,446
5,0114,842
3,636
3,033
2,703 2,429
Inventory of Homes For SaleAt the End of the Year
2013 2014 2015 2016 2017 2018 2019
18
-0.8%
2.8%
-1.2%
4.0%
7.7%
5.6%
Rochester Regional Housing Market*
Median Price of Existing Homes Sold
Annual Change in Median Price
Net Result: Economics 101
Solid Demand + Limited Supply = Positive Pricing Power
Tight inventories should support moderate price increases again in 2020
M&TBank©2020 M&T Bank, Member FDIC 18Source: Greater Rochester Realtors Association
* Monroe, Cayuga, Allegany, Genesee, Livingston, Ontario, Orleans, Seneca, Steuben, Wayne, Wyoming and Yates counties
2014 2015 2016 2017 2018 2019
$124,000$123,000
$126,500$125,000
$130,000
$140,000
$147,817
Median Sales Price
2013 2014 2015 2016 2017 2018 2019
19
`
7%
14%
18%
24%
26%
11%21 to 28 years
29 to 38 years
39 to 53 years
54 to 63 years
64 to 72 years
73 to 93 years
26 years
34 years
45 years
59 years
68 years
76 years
Median Age
Age Distribution of U.S. Home Buyers
37%
Source: 2019 NAR Home Buyer and Seller Generational Trends
Demographic Trends Are Favorable For Housing Demand
The 21-38 year old age group, which now makes up the largest
segment of the U.S. workforce, continues to increase in size—
providing strong support for new and existing home sales in 2020
M&TBank 19©2020 M&T Bank, Member FDIC
20
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Relative Change Since 2007
Population 25 to 34 Years Old
RochesterMetro Area
United
States
+9.8%
+20.6%
07 08 09 10 11 12 13 14 15 16 17 18
Rochester Metropolitan Area
Population 25 to 34 Years Old
07 08 09 10 11 12 13 14 15 16 17 18
142,856
118,477
Growth in Rochester’s “Millennial” Population
Should Support Further Housing Demand
Source: U.S. Census Bureau M&TBank 20©2020 M&T Bank, Member FDIC
Rochester’s Population
Growth Since 2007…
The 25-34 year old age group
has increased by nearly
25,000 over the past decade
…Has Been Double
the U.S. Average
Planting the seeds for strong
spending and housing demand
over the next few years
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