Arbor US Economic Overview 2018 Q3

ARBOR.COM • 1.800.ARBOR.10
U.S. Economic Overview
Q3 2018

U.S. Economic Overview Q3 2018
ARBOR.COM • 1.800.ARBOR.10 1
Economic Projections of the Federal Reserve Board
As of September 2018, Central Tendency
Source: Board of Governors of the Federal Reserve System
2018 2019 2020 2021 Longer run
Change in Real GDP 3.0% to 3.2% 2.4% to 2.7% 1.8% to 2.1% 1.6% to 2.0% 1.8% to 2.0%
June Projection 2.7% to 3.0% 2.2% to 2.6% 1.8% to 2.0% N/A 1.8% to 2.0%
Unemployment Rate 3.7% 3.4% to 3.6% 3.4% to 3.8% 3.5% to 4.0% 4.3% to 4.6%
PCE Inflation 2.0% to 2.1% 2.0% to 2.1% 2.1% to 2.2% 2.0% to 2.2% 2.0%
June Projection 2.0% to 2.1% 2.0% to 2.2% 2.1% to 2.2% N/A 2.0%
Core PCE Inflation 1.9% to 2.0% 2.0% to 2.1% 2.1% to 2.2% 2.0% to 2.2%
June Projection 1.9% to 2.0% 2.0% to 2.2% 2.1% to 2.2% N/A
Federal Funds Rate 2.1% to 2.4% 2.9% to 3.4% 3.1% to 3.6% 2.9% to 3.6% 2.8% to 3.0%
“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal
funds rate to 2 to 2-1/4%. In determining the timing and size of future adjustments to the target range for the federal funds rate, the
Committee will assess realized and expected economic conditions relative to its maximum %nt objective and its symmetric 2% inflation
objective.”
- Board of Governors of the Federal Reserve System’s Monetary Policy Release, September 26, 2018

U.S. Recession
-900.0
-600.0
-300.0
0.0
300.0
600.0
Sep-03 Mar-05 Sep-06 Mar-08 Sep-09 Mar-11 Sep-12 Mar-14 Sep-15 Mar-17 Sep-18
Monthly Change 12-Month Moving Average
Source: U.S. Bureau of Labor Statistics; National Bureau of Economic Research
Employment Growth
United States, All Employees, Total Nonfarm, Seasonally Adjusted
The unemployment rate declined to 3.7% in September, and total nonfarm payroll employment increased by 134,000, the U.S. Bureau of
Labor Statistics reported. Job gains occurred in professional and business services, in health care, and in transportation and warehousing.

Mining and
Logging
0.5%
Construction
5.0%
Manufacturing
8.5%
Trade,
Transportation,
and Utilities
18.5%
Information
1.8%
Financial
Activities
5.7%
Professional
and Business
Services
14.2%
Education and
Health Services
15.9%
Leisure and
Hospitality
10.9%
Other Services
3.9%
Government
15.1%
Source: U.S. Bureau of Labor Statistics
Employment By Industry
United States, Thousands, September 2018
Employment Growth By Industry
United States, 12-Month Percent Change, September 2018
Mining and Logging
Construction
Manufacturing
Trade, Transportation, and
Utilities
Information
Financial Activities
Professional and Business
Services
Education and Health Services
Leisure and Hospitality
Other Services
Government
Total Nonfarm
-2.0% 2.0% 6.0% 10.0%

Employment Growth by Metropolitan Area
Total Nonfarm, Not Seasonally Adjusted, 12-Month % Change, August 2017 to August 2018
In August, 60 metropolitan areas had over-
the-year increases in nonfarm payroll
employment and 328 were essentially
unchanged.
The largest over-the-year employment
increases occurred in New York-Newark-
Jersey City, NY-NJ-PA (+136,100), Dallas-
Fort Worth-Arlington, TX (+114,900), and
Houston-The Woodlands-Sugar Land, TX
(+110,200).
The largest over-the-year percentage gains
in employment occurred in Midland, TX
(+9.2%), Manhattan, KS (+8.2%), and
Atlantic City-Hammonton, NJ (+6.9%).

U.S. Recession
-3.0%
-1.0%
1.0%
3.0%
5.0%
7.0%
Consumer Price Index (%) Federal Funds Inflation Target (%)
Consumer Price Index
United States, All Items, Seasonally Adjusted, 12-Month % Change, 1982-84=100
The Consumer Price Index for All Urban Consumers (CPI-U) rose 2.3% for the 12 months ending in September, a smaller increase than the
2.7% increase for the 12 months ending in August. The energy index rose 4.8% over the last year, a smaller increase than the 10.2%
increase for the 12 month period ending in August.

U.S. Recession
-3.0%
-1.0%
1.0%
3.0%
5.0%
7.0%
CPI All Items Owners' Equivalent Rent of Residences Rent of Primary Residence
Consumer Price Index for Rent and Rent Equivalence
United States, All Items, Seasonally Adjusted, 12-Month % Change, 1982-84=100
The Consumer Price Index for All Urban Consumers (CPI-U) rose 2.3% for the 12 months ending in September, a smaller increase than the
2.7% increase for the 12 months ending in August. The shelter index continued to rise and accounted for over half of the seasonally
adjusted monthly increase in the all items index.

U.S. Recession
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18
Average Hourly Earnings
Average Hourly Earnings
United States, All Employees, Total Private, Seasonally Adjusted, 12-Month % Change
Real average hourly earnings increased 0.5%, seasonally adjusted, from September 2017 to September 2018. The change in real average
hourly earnings combined with the 0.6% increase in the average workweek resulted in a 1.1% increase in real average weekly earnings
over this period.

U.S. Recession
-10.0%
-6.0%
-2.0%
2.0%
6.0%
10.0%
3Q03 3Q04 3Q05 3Q06 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18
Gross Domestic Product (%) 15-Year Average
Source: U.S. Bureau of Economic Analysis; National Bureau of Economic Research; Retrieved from FRED, Federal Reserve Bank of St. Louis
Gross Domestic Product
United States, Quarterly Change from Preceding Period, Seasonally Adjusted at Annual Rates, Based on Chained 2009 Dollars
Real gross domestic product (GDP) increased 3.5% in the third quarter of 2018, according to the “advance” estimate released by the
Bureau of Economic Analysis. In the second quarter of 2018, real GDP increased 4.2%.

U.S. Recession
0.0
200.0
400.0
600.0
800.0
1,000.0
1Q54
1Q56
1Q58
1Q60
1Q62
1Q64
1Q66
1Q68
1Q70
1Q72
1Q74
1Q76
1Q78
1Q80
1Q82
1Q84
1Q86
1Q88
1Q90
1Q92
1Q94
1Q96
1Q98
1Q00
1Q02
1Q04
1Q06
1Q08
1Q10
1Q12
1Q14
1Q16
1Q18
Corporate Profits Compensation of Employees
Source: U.S. Bureau of Economic Analysis; National Bureau of Economic Research; Retrieved from FRED, Federal Reserve Bank of St. Louis
Corporate Profits and Compensation of Employees
Includes Gross Domestic Product: Implicit Price Deflator; Index 1954=100; Seasonally Adjusted Annual Rate; Quarterly
“The trends of the two series tend to track each other over several decades, reflecting the general growth of the economy. The past
decade and a half seems to be different, though. Never have corporate profits outgrown employee compensation so clearly and for so
long.” - Federal Reserve Bank of St. Louis; August 9, 2018

0
25
50
75
100
125
150
Apr-33to
Apr-37
Jul-38to
Jan-45
Nov-45to
Oct-48
Nov-49to
Jun-53
Jun-54to
Jul-57
May-58to
Mar-60
Mar-61to
Nov-69
Dec-70to
Oct-73
Apr-75to
Dec-79
Aug-80to
Jun-81
Dec-82to
Jun-90
Apr-91to
Feb-01
Dec-01to
Nov-07
Jul-09to
Current
Time Between Recessions (Months) Average
Source: National Bureau of Economic Research
Time Between Recessions (1933 to Current)
NBER Based Recession Indicators for the United States From the Peak Through the Trough
Longest Time Between Recessions (Apr-91 to Feb-01): 119 mo.
Average Time Between Recessions: 62 mo.
Time Since Previous Recession: 111 mo.

U.S. Recession
0.0%
1.5%
3.0%
4.5%
6.0%
3-Month Treasury 2-Year Treasury 10-Year Treasury
Source: Board of Governors of the Federal Reserve System; National Bureau of Economic Research; Retrieved from FRED, Federal Reserve Bank of St. Louis
Treasury Yield Curve as a Predictor of U.S. Recessions
Monthly, End of Period, Not Seasonally Adjusted
“Research beginning in the late 1980s documents the empirical regularity that the slope of the yield curve is a reliable predictor of future
real economic activity.” - Federal Reserve Bank of New York

U.S. Recession
60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
YTD18
Homeownership Rate (%)
Source: U.S. Bureau of the Census; National Bureau of Economic Research; Retrieved from FRED, Federal Reserve Bank of St. Louis
Homeownership Rate
United States, Not Seasonally Adjusted, Annual, End of Period
The U.S. homeownership rate inched up to 64.4% in the third quarter, driven by young buyers entering the housing market for the first
time. The share of households headed by someone under 35 years old rose to 36.8% in the third quarter, up 1.2% from one year ago, and
the highest level since the end of 2013.

Homeownership and Household Formation
Source: U.S. Census Bureau; Retrieved from FRED, Federal Reserve Bank of St. Louis
60.0%
62.5%
65.0%
67.5%
70.0%
-1.0
0.0
1.0
2.0
3.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD18
Thousands
Owner Occupied Housing Units (Millions) Renter Occupied Housing Units (Millions) Homeownership Rate (%)

U.S. Recession
30.0%
45.0%
60.0%
75.0%
90.0%
3Q03 3Q04 3Q05 3Q06 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18
U.S. Overall Under 35 years 35 to 44 years
45 to 54 years 55 to 64 years 65 years and over
Source: U.S. Bureau of the Census; National Bureau of Economic Research
Homeownership Rate by Age
The homeownership rate was 64.4% in Q3 2018, up from 64.3% in the second quarter and 63.9% one year ago. The rate for homeowners
under age 35 increased to 36.8%, the highest level since the end of 2013, and up strongly from 35.6% one year ago.

U.S. Recession
$0.0
$0.3
$0.6
$1.0
$1.3
$1.6
2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17 2Q18
Thousands
Student Loans Outstanding (Trillions)
Source: Board of Governors of the Federal Reserve System; National Bureau of Economic Research; Retrieved from FRED, Federal Reserve Bank of St. Louis
Student Loans Outstanding
United States, Owned and Securitized, Not Seasonally Adjusted, Quarterly, End of Period
“College tuition hikes and the resulting increase in student debt burdens in recent years have caused a significant drop in homeownership
among young Americans, according to new research by the Federal Reserve Bank of New York. The study is the first to quantify the impact
of the recent and significant rise in college-related debt on the decline in homeownership among Americans ages 28 to 30. ” - Bloomberg

60.0
63.0
66.0
69.0
72.0
75.0
2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
“Millennials are expected to overtake Boomers in population in 2019 as their numbers swell to 73 million and Boomers decline to 72
million. Generation X (ages 36 to 51 in 2016) is projected to pass the Boomers in population by 2028.” - Pew Research Center
Millennials Projected to Become America’s Largest Generation
Projections of the Population: Age 20-34 (Millions)
Source: U.S. Census Bureau

100.0
125.0
150.0
175.0
200.0
225.0
Aug-03 Feb-05 Aug-06 Feb-08 Aug-09 Feb-11 Aug-12 Feb-14 Aug-15 Feb-17 Aug-18
U.S. Recession S&P/Case-Shiller U.S. National Home Price Index
Source: S&P Dow Jones Indices; National Bureau of Economic Research; Retrieved from FRED, Federal Reserve Bank of St. Louis
S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index
United States, Monthly, Seasonally Adjusted, January 2000 = 100
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.8% annual gain in
August, down from 6.0% in the previous month. Las Vegas, San Francisco and Seattle reported the highest year-over-year gains among the
20 cities. Four of the 20 cities reported greater price increases in the year ending August 2018 versus the year ending July 2018.

U.S. Recession
2.0%
3.2%
4.4%
5.6%
6.8%
8.0%
100.0
130.0
160.0
190.0
220.0
250.0
Housing Affordability Index 30-Year Fixed Rate Mortgage Average (%)
18
Housing Affordability Index
United States, Not Seasonally Adjusted, Monthly
Source: National Association of Realtors; Freddie Mac; National Bureau of Economic Research; Retrieved from FRED, Federal Reserve Bank of St. Louis
Value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home.
An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a
median-priced home, assuming a 20% down payment.

ARBOR.COM • 1.800.ARBOR.10
About Us
Arbor Realty Trust, Inc. (NYSE:ABR) is a nationwide real estate investment trust and direct lender, providing loan
origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets.
Headquartered in Uniondale, New York, Arbor manages a multibillion-dollar servicing portfolio, specializing in Fannie
Mae, Freddie Mac and other government-sponsored enterprises, as well as CMBS, bridge, mezzanine and preferred
equity lending. Rated by Standard and Poor’s and Fitch Ratings, Arbor is committed to building on its reputation for
service, quality and flexibility and dedicated to providing our clients excellence over the entire life of a loan.
The research contained in this report should not be construed as a solicitation to and/or trade. All opinions, news,
research, analyses, prices or other information is provided as general market commentary and not as investment advice;
all information is subject to change. Arbor, its members, shareholders, employees, agents and representatives do not
warrant the completeness, accuracy or timeliness of the information supplied, and shall not be liable for any loss or
damages, consequential or otherwise, which may arise from the use or reliance on the content contained herein. Past
performance is not indicative of future performance.

Arbor US Economic Overview 2018 Q3

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Arbor US Economic Overview 2018 Q3

Similar to Arbor US Economic Overview 2018 Q3 (20)

More from Ivan Kaufman

More from Ivan Kaufman (20)

Recently uploaded

Recently uploaded (20)

Arbor US Economic Overview 2018 Q3