Roundtable Series It is The Eighth Year The Zeros Have Left The Building San Antonio Texas June 13 2016 John W Mitchell June 2016 Month 84only 3 Longer Postwar Six Years of Growth Near 2 ID: 704012
Download Presentation The PPT/PDF document "#IASACINVO The 2016 Executive Educatio..." is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1Slide2
#IASACINVO
The
2016
Executive Education
Roundtable
SeriesSlide3
It is The Eighth Year: The Zeros Have Left The Building
San Antonio, TexasJune 13, 2016
John W. MitchellSlide4
June 2016
Month 84-only 3 Longer PostwarSix Years of Growth Near 2%
Inflation Near 1%, Unemployment at 5%Oil Price Volatility $110-$25-$50- General Commodity WeaknessNet Worth Up $2.6 Trillion in 2015- More than ½ Holding Gains on Real EstateNIRP Enters the Vocabulary-Underwriting PressureGrand Monetary Experiment Unfolding-None of Us have been Through BeforeSlide5
Q1-15
Q2-15
Q3 15
Q4-15Q1-16GDP
.63.92
1.4 .8Consumption
1.83.63.02.4
1.9
Equipment
2.3
.3
9.9
-2.1-9IntellProp7.48.3-.8-.2-.1Non-Res -7.46.2-7.2-5.1-8.9Residential10.19.38.210.117.1Federal1.10.22.3-1.6State and Local-.84.32.8-1.22.9Exports-65.1.7-2-2Imports7.132.3-.7-.2
Real GDP 2015-16 Commerce Department (SAAR,%)Slide6
Labor Market Data
To April
Monthly Change Payroll Employment 2015-2016
5.5 Million Jobs Above 1/08 Peak and 14.2 Million Above 2/10 Trough
Participation Rate 62.8%-Above the Lows-Down for the MonthAll Super Sectors up except Mining, Logging and ManufacturingPart Time Economic Reasons 5.78 Million down by 589,000 Over the YearHourly Earnings Growth-2.5%-Moving up?Slide7
Beige Book April, 2016 “Labor market conditions continued to strengthen.”–”difficulty in filling certain positions in a number of low and high skilled occupations.” Notably contacts reported difficulty in finding quality retail workers, low skilled manufacturing workers, construction workers and skilled professionals in occupations such as information technology, accounting, engineering and customers service.”
NABE April Survey-Wage Pressures Highest in Transportation, Utilities, Information and Communication
Walking Around, Watching and ListeningSlide8
Atlanta Fed Wage Growth Tracker
Median Change in Hourly Earnings Same People Over 12 MonthsSlide9
Consumer PricesSlide10
The DollarSlide11
Inflation
Always A Mix: Food at Home , Apparel, Used Cars, Energy Down over the Year, Increases in Rent, Medical, Auto Insurance
April CPI 1.1% and 2.1% CoreGasoline Down over 20.9% to March and 13.8% to AprilIn April Import Prices rose .3% for the second consecutive month on a 3.3% Fuel Price- Year over Year -5.7% Year Fuel -36.4% and Other Imports down 2%- Year over Year down Every Month Since July 2014Import Prices Falling from All Regions except France
PCE March .8%, Core 1.6%Fed-Transitory Influence of Dollar and Oil- How Long?Slide12
Federal Funds Rate and 10 Year Treasury
Source: Treasury, FedSlide13
Rates
Sweden, Switzerland, Denmark, Japan, ECB-Negative Central Bank Rates
Applied to Central Bank Deposits-Not passed on in Negative Rates, but Fees for Deposits, No InterestTry to Encourage Lending, Hold Down Currency, Try to Increase the Rate of Inflation10 Year US 1.76%, Japan -.11%, Germany .17%, Canada 1.37%, Denmark .48% Switzerland -.31% (Economist 5/21)
Mortgage Rates 5/20 3.58%Search for Yield-Monetary Policy and Asset Prices Slide14
Consensus 1.8% in 2016 and 2.3% in 2017
Inflation 1.2% in 2016 and 2.3% in 2017- The December to December changes the last 2 years have been .8% and .7Fed Long Term Median 2016 2.2%, 2017 2.1% and 2018 2%, Longer Run 2% (March)Consensus Forecasts, OMB, CBO- Annual Projections 2018-2022-Average Between 2.3% and 2.1%
Outlooks
(Note the Preponderance of 2’s)Slide15
Other Long Cycles-End of Recession to Year Seven Real GDP Growth Slide16
The No Show Acceleration
Tsunami, Weather, West Coast Port DisruptionsBudget Conflicts/Shutdown/Debt Ceiling/Episodes
Old Oil Shocks-New Oil Shocks (US Production in 2010 5.5 MBD in 2015 9.7 MBD)Global Weakness and the DollarPermanent Effect of Recession/Policy (Hysteresis)Something More Fundamental-Secular Stagnation? Old Idea Back in the NewsSlide17
Labor Productivity Growth in The Business Sector 1947-2015Slide18
BLS December, 2015 Labor Force Employment Projections
Distribution
2004
Distribution 2014Distribution 20241994-2004 AGR
2004-14 AGR2014-24AGRTotal
1.2%.6%.5%16-2415.1%
13.7%11.3%.3-.4-1.4
25-54
69.3
64.6
63.9
.8
-.1.455-Older15.621.724.843.91.8Slide19
Blip-Trend-Leftover?
Robert Gordon “The Rise and Fall of American Growth” 2016- Headwinds
Demographics-Aging PopulationEducational SystemInequality-Holding Down MedianMore Limited Impact of Technical AdvancesOthersLeftovers from Great Recession
Excess Savings Limiting Monetary PolicyRegulatory/Policy MixMeasurement ProblemSlide20
4/27/16 “labor market conditions have improved as growth in economic activity appears to have slowed” “household spending moderated”, “housing sector has improved further, but business fixed investment and net exports have been soft.” “Inflation continued to run below ..objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports.”
“The Committee continues to closely monitor inflation indicators and global economic and financial developments.”
Inflation “ to rise to 2 percent over the medium term as the transitory effects of the declines in energy prices and import prices dissipate and the labor market strengthens further.”
Monetary PolicySlide21
When the next downturn arrives, what happens?Rate Cuts, Forward Guidance, Quantitative Easing, Negative Rates- Bernanke (2016)Helicopter Money-An Expansionary Fiscal Policy financed by an increase in the Money SupplySlide22
Fiscal Policy
Two Year Budget Deal late in 2015-Kick the Can
CBO(2016) Budget Deficit Increase for the first Time in 6 Years as a Share of GDP7% Increase in Mandatory, 3% Discretionary and 14% Increase in Net InterestHealth Care Related 11%- 60% of the Increase in MandatorySqueeze on Discretionary
CBO makes its Usual WarningsNon-Issue at the Moment55-60% of Federal Spending Increases to 2040-Attibutable to Aging of the Population ( Olivia Mitchell, Business Economics 1/2016)Slide23
Residential Permits- (,000) A Long Road
A 12% Increase in 2015 and 2.9% to April, 2016Slide24
Housing Questions
Millennial Behavior-Apartments or Houses (TV Commercial)
Employment Growth, Household Formation Gain, Ease in Lending StandardsCapacity to Produce-Workers-Permits-Lots-Backlog of Permits Not Started IncreasingHomeownership Rate Ticking UpNegative Equity down to 10.7% in Q4-CoreLogic Nevada High at 18.7%, Texas 2.1%Case-Shiller-February National 5.3%-Prices Back to Winter 2007-Portland, Seattle, Denver and San Francisco at the top of the List
FHFA House Price Index up All States other than Vermont Q1 2016Slide25
Idaho 1
Oregon 2Utah 3
Tennessee 4Arizona 5Washington 6Georgia 7Florida 8
Virginia 9Colorado 10South Carolina 11Nevada 12California 13Hawaii 14
Delaware 15Job Growth Update March 2016 DataYear over Year Change – 43 States Up
Source: BLS, ASUNorth Carolina 16Maryland 17Arkansas 18
Michigan 19Kentucky 20Rhode Island 21New Jersey 22Ohio 23Massachusetts 24New Hampshire 25Mississippi 26
Vermont 27
Wisconsin 28
New York 29
Texas 30
Nebraska 31
Illinois 32Minnesota 33Pennsylvania 34Alabama 35Indiana 36Missouri 37Iowa 38Maine 39Connecticut 40South Dakota 41Montana 42 New Mexico 43Kansas 44 Oklahoma 45Alaska 46Louisiana 47West Virginia 48Wyoming 49North Dakota 50Slide26
Texas Job Growth
Year to April,
2016 (1.6%)Slide27
California Job Growth
Year to April, 2016
(2.8%)Slide28
North Dakota
Job Growth Year to
April 2016 (-3.7%)Slide29
2016 Themes
National Expansion Should Continue
Risks-Slow Growth/Shock –Carl Dietz Theory-Robert Shiller-”Basically, global recessions begin when newly popular narratives reduce individuals motivation to spend money. Psychology matters a great deal.” (May 1 NYT) Opening Weeks of 2016Tightening Labor MarketsInflation Pick Up- As Transitory Events Pass-Energy AdjustmentsTech Sector StrengthResidential Markets Improving
Implications of Overseas EventsGradual Rate Increases-Data Driven –VolatilityRegions float on a global sea, buffeted by local tides and winds.Slide30
Before You Go To Sleep
Is 2% Growth the New Normal? Will There Be A Policy Response?
Will We Be Able to Enhance Mobility and Enable Potential To Be Realized?How Do Expansions End?How Long Do They Last? (Netherlands 26 Years, Australia 25 Years and Still Going, Economist 5/21) Prime Rate Formula