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ECONOMIC OUTLOOK: HOW FAR WILL THE RECORD EXTEND?
Dr. Mike Walden
Reynolds DistinguishedProfessor
North CarolinaStateUniversity
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ECONOMIC HEADLINES
GROWTH GOES IN TO 11TH YEAR
DEATH OF THE PHILLIPS CURVE
TRADE TENSIONS
FED CUTS RATES DURING AN EXPANSION
CHANCE OF A RECESSION
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REAL GROSS DOMESTIC PRODUCT GROWTH RATE (%, ANNUALIZED)
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UNEMPLOYMENT RATE IS AT A NEAR 50 YEAR LOW
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BUT LABOR FORCE PARTICIPATION STILL HAS ROOM TO IMPROVE
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LABOR PRODUCTIVITY HAS PICKED UP
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AND WAGE GROWTH HAS BEEN IMPROVING
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WHY DOES THE PHILLIPS CURVE APPEAR TO BE DEAD?
GLOBALIZATION
LOGISTICS
WEAK UNIONS
AUTOMATION
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WITH NO RUN-UP IN THE INFLATION RATE(annualized rates)
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EVALUATING POTENTIAL THREATS TO THE ECONOMY
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HOUSEHOLDS ARE ABLE TO CARRY THEIR DEBT
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HOUSEHOLD DEBT DELINQUENCY RATES AREIN GOOD SHAPE
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RELATIVE BUSINESS DEBT IS ALSOHISTORICALLY LOW
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RATIO OF PRIVATE DEBT TO GDP HASACTUALLY FALLEN – A GOOD SIGN
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ALTHOUGH HOME PRICES HAVE RISEN, THE GAINS ARE BASED ON LACK OF SUPPLY
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BUT SERVICING THE NATIONAL DEBT IS TAKING A BIGGER SHARE OF THE ECONOMY
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ALSO, RELATIVE SIZE OF CONSUMER SPENDING HAS MODERATED
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BUSINESS INVESTMENT HAS RECENTLY FALLEN
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STOCK MARKET HAS MOVED WITHNEWS ON CHINA TRADE DISPUTE
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IF A RECESSION DOES OCCUR
ORIGIN WILL BE ON BUSINESS SIDE
LOWER EARNINGS AND MARGINS – LEADING TO CUTBACKS AND DECLINING VALUES
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TRADE WARS
* NEW NAFTA: USMCA, BUT PENDING
* EU TALKS* S. KOREA TREATY* JAPAN TALKS
REMAINING BIG CHALLENGE – CHINA
MAY HAVE ALREADYREDUCED GDP GROWTH BY 0.6% POINTS
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POSSIBILITY OF FOREIGN RECESSIONS
ECONOMIC GROWTH IS SLOWING IN EUROPE TO 0% -BREXIT
JAPAN’S GROWTH RATE IS UNDER 1%
CHINA’S GROWTH RATE IS 6%, BUT LOWEST IN 25 YEARS
HOWEVER, TRADE IS A MINOR PART OF THE US ECONOMY
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THE FEDERAL RESERVE BLINKED ANDREVERSED THE “PUNCH BOWL POLICY”
STANDARD POLICY: GO COUNTER TO TRENDS IN THE ECONOMY IN ORDER TO PROMOTE STEADY GROWTH
RECOVERY- RAISE RATES(REMOVE PUNCH BOWL)
RECESSION – CUT RATES(RETURN PUNCH BOWL)
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FEDERAL FUNDS RATE
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WHAT IS THE FED’S POLICY, & WHY?
OVER-TIGHTENED, SO CORRECTING NOW?
NO WORRIES ABOUT INFLATION
BUT TOOLS FOR NEXT RECESSION?
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YIELD CURVE HAS BECOME MORE NORMALIZED(10 YEAR T-YIELD MINUS 2 YEAR T-YIELD)
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OTHER CHANGES
1. EMERGENCE OF U.S. AS AN OIL PRODUCER
2. IMPLICATIONS OF AGING POPULATION, FALLING BIRTH RATE, ANDIMMIGRATION ON LABOR SUPPLY
3. TECHNOLOGY, JOBS, AND RE-TRAINING
4. THE FUTURE OF TRANSPORTATION – MODES AND FINANCING
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NORTH CAROLINA
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GROWTH ALSO CONTINUES
MOST RECENT DATA – ADDING JOBS AT FASTER RATE THAN NATION
SLOWDOWN IN MANUFACTURINGAND TRADE ISSUES FOR FARMERSHAVE HURT
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SOME OTHER GOOD NEWS
NON-METRO COUTIES ARE SHARING INJOB GROWTH
TECH SECTOR BOOMING
MIDDLE-PAYING JOBS GROWING
FEWER COUNTIES DEPOPULATING30
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LEADING INDICATORS SUGGESTDECELERATION IN NC’S GROWTH
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Source: calculations by Dr. Michael Walden
NCSU INDEX OF NORTH CAROLINA LEADING ECONOMIC INDICATORS
OUTLOOK
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WHAT I SEE COMING
1. NO RECESSION (CONSENSUS IS NOW ONE-THIRD CHANCE
2. “SMALL” CHINA TRADE DEAL MADE3. FED HAS “PAUSED” IN RATE CUTS4. CONTINUED SUPER-LOW INFLATION5. DUE TO SLOW LABOR FORCE GROWTH,
2% ANNUAL GROWTH IS NEAR NORMAL
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FINANCING ISSUES
MOVEMENT AWAY FROM GAS AND GAS TAX
PREDICTIONS OF LOWER VEHICLE OWNERSHIP
OPTIONS: MILEAGE TAX, TOLLS, TAXING PROPERTY BENEFITING FROM TRANSIT IMPROVEMENTS
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MOBILITY MODE ISSUESECLIPSE OF THE PRIVATE AUTO?
WHAT KIND OF MASS TRANSIT?- BUS, RAIL, RIDE-SHARE
IMPACT OF WORKING AT HOME
OTHER: PORTS – AIR AND WATER
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THANKS – QUESTIONS?
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