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The Chamber's Economic Outlook Briefing, Presentation by Dr. Michael Walden

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2019 Economic Forecast for the Chapel Hill area and Triangle Region

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The Chamber's Economic Outlook Briefing, Presentation by Dr. Michael Walden

  1. 1. ECONOMIC OUTLOOK 2019: THE LATE INNINGS OF GROWTH? Dr. Mike Walden Reynolds Distinguished Professor North Carolina State University 1
  2. 2. A REVIEW OF 2018: A GOOD YEAR GDP GROWTH: 3.2% 2.6 MILLION JOBS ADDED JOBLESS RATE: 3.9% INVEST. RT.: 17.7% 2
  3. 3. IN JUNE 2019, CURRENT EXPANSION WILL BE LONGEST IN HISTORY, BUT WILL IT GO ON? THREE VIEWS: 1. YES, BECAUSE THERE WAS A “RECESSION” IN 2015 2. YES, BECAUSE TAX CUTS AND DEREGULATION RE-CHARGED THE ECONOMY 3. NO – RECESSION IN 2020 3
  4. 4. WHAT COULD IGNITE A RECESSION? HOUSEHOLD DEBT BUSINESS DEBT ENERGY PRICES FEDERAL RESERVE TRADE WAR FOREIGN SHOCK STOCK MARKET 4
  5. 5. FEDERAL RESERVE HAS SHIFTED FOCUS FROM GROWTH TO INFLATION FED’S DUAL MANDATE “TAKE THE PUNCH BOWL AWAY” HAS BEEN GRADUALLY INCREASING INTEREST RATES IF MOVE TOO FAST, COULD SQUASH PRIVATE SPENDING SIGNAL OF A PAUSE IN HIKES? 5
  6. 6. TRADE WARS * NEW NAFTA: USMCA * EU TALKS * S. KOREA TREATY * JAPAN TALKS REMAINING BIG CHALLENGE – CHINA 0.4% HIT TO GDP GROWTH RATE IF FAIL 6
  7. 7. FOREIGN SHOCK CHINA’S CHALLENGES: SLOWING GROWTH HIGH DEBT WOBBLY FINANCIAL SECTOR TRADE WAR WITH U.S. – MEANS MORE TO CHINA ALSO – SLOWING GROWTH IN EUROPE AND JAPAN 7
  8. 8. STOCK MARKET MARKET WILL REACT TO: * FUNDAMENTALS *EMOTION DAILY EVALUATION OF THE ECONOMY 8
  9. 9. WHAT ABOUT THE NATIONAL DEBT? WE SLEEPWALKED THROUGH RECENT DEBT HIKES AS INTEREST RATES FELL BUT WITH HIGHER RATES AND FASTER DEBT GROWTH: INTEREST ON DEBT AS % OF BUDGET COULD DOUBLE FROM 7% TO 14% IN 2028 9
  10. 10. MANY STRUCTURAL CHALLENGES LABOR PRODUCTIVITY AGING POPULATION & SLOW LABOR FORCE GROWTH “INVISIBLE” UNEMPLOYMENT HOLLOWING-OUT OF LABOR MARKET URBAN/RURAL DIVIDE TECHNOLOGY AND UNEMPLOYMENT 10
  11. 11. OUTLOOK FOR 2019 GROWTH BUT SLOWER: GDP UP 2.5% COMPARED TO 3.2% IN 2018 JOBLESS RATE NOW 3.9%; POST WW II LOW IS 2.8% - KEY TO LOWER IS RAISING PARTICPATION RATE WATCH INFLATION AND FED 11
  12. 12. NORTH CAROLINA 12
  13. 13. STATE ECONOMY IMPROVED IN 2018 100,000 NET NEW JOBS – FASTER GROWTH RATE THAN NATION BUT SLOWER GDP GROWTH RATE THAN THE NATION 13
  14. 14. ALSO, PROGRESS ON THE TWO ECONOMIC DIVIDES FASTER GROWTH RATE IN MIDDLE-PAY JOBS THAN IN RECENT PAST FASTER GROWTH RATE IN RURAL AREA JOBS THAN IN RECENT PAST 14
  15. 15. NORTH CAROLINA LEADING ECONOMIC INDICATORS 15 70 75 80 85 90 95 100 105 2007feb 2007may 2007aug 2007nov 2008feb 2008may 2008aug 2008nov 2009feb 2009may 2009aug 2009nov 2010feb 2010may 2010aug 2010nov 2011feb 2011may 2011aug 2011nov 2012feb 2012may 2012aug 2012nov 2013feb 2013may 2013aug 2013nov 2014feb 2014may 2014aug 2014nov 2015mar 2015jun 2015sep 2015dec 2016mar 2016june 2016sep 2016dec 2017mar 2017june 2017sep 2017dec 2018mar 2018june 2018sep Source: calculations by Dr. Michael Walden NCSU INDEX OF NORTH CAROLINA LEADING ECONOMIC INDICATORS
  16. 16. ON-GOING CHALLENGES MORE GAINS IN K-12 COLLEGE COSTS AND OUTCOMES WORKFORCE: RE-TRAINING ROADS: FUNDING DEMOGRAPHICS: AGING – BATTLE OVER $ WITH YOUTH? 16
  17. 17. TRIANGLE ECONOMY JOB GROWTH RATES, 2018 U.S. 1.8% N.C. 2.0% Raleigh-Cary 3.2% Durham-CH 2.4% 17
  18. 18. SO, IN 2019, WILL THE ECONOMY: STRIKE OUT? OR HIT A HOME RUN? 18

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