Transcript Scary Boom Times

Scary Boom Times
Commercial Association of Brokers
Halloween 2016
Portland, Oregon
John W. Mitchell
10/31/2016
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Last Day of the 88th Month
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Interest Rates in 2016 have hit 5,000 Year Lows
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Oregon Has Spent Time as the Fastest Growing State In Terms of Employment
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Case Shiller Portland Most Rapid Price Gains Followed by Seattle and Denver
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Cusp of Monetary Policy Move
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You Work in an Asset Class that has Seen Rapid Appreciation
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Election Process that Neither We Nor the World Will Soon Forget
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Oregon Tax Battles Once Again
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“Economic growth in advanced economies has been weaker for longer than it has been in the
lifetime of most people on earth.” Neil Irwin NYT 8/17/16
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McKinsey Global Institute 65-70% of Households in Advanced Economies Market Incomes flat or
down 2005-2014
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Political Risk-(Cubs in Series)
Real GDP Q3/2015-16 Commerce
Department (SAAR,%)
Q3 15
Q4-15
Q1-16
Q2-16
Q3-16
GDP
2
.9
.8
1.4
2.9
Consumption
2.7
2.3
1.6
4.3
2.1
Equipment
9.1
-2.6
-9.5
-2.9
-2.7
Intell
Prop
2.1
4.6
3.7
9
Non-Res
-4.3
-15.2
.1
-2.1
5.4
Residential
12.6
11.5
7.8
-7.7
-6.2
Federal
1
3.8
-1.5
-.4
2.5
State and Local
2.5
-.6
3.5
-2.5
-.7
Exports
-2.8
-2.7
1.8
10
Imports
1.1
.2
2.3
.7
-.7
-.6
4
Labor Market DataThe Roller Coaster Ride
Monthly Change Payroll
Employment 2015-2016
Source: BLS
350000
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191,700 Jobs Per Month Last Three
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LF Growth 75,000-100,000 per
Month
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Average Hourly Earnings up 2.6
Percent
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JOLTS Data August-over 12 Months
62.7 million hires and 60.1 million
separations-net gain 2.6 Million
300000
250000
200000
150000
100000
50000
0
Inflation September
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Year to September 1.5% Core 2.2%
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Food At Home -2.2%, Food Away from Home 2.8%
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Gasoline -6.5%, Medical Services 4.8%, Shelter 3.4%, Used Cars -4.1%, New
Cars 0, Apparel -.1- Always a Mix
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Impact of Dollar Strength Diminishing
Federal Funds Rate and 10 Year Treasury
Source: Treasury, Fed
7
6
5
4
3
2
1
0
Fed Funds
10 Year
Monetary Policy Experiment
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9/21/2016 “labor market has continued to strengthen
and growth in economic activity has picked up”….
“Household spending growing, but business fixed
investment has remained soft. Inflation has continued
to run below the Committee’s 2 percent longer run
objective…”
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“the case for an increase in the federal funds rate has
strengthened, but decided, for the time being , to
await further evidence of continued progress towards
its objectives.”
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Reduced Rate Expectations: New Medians .6% in 2016,
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1.1% in 2017, 1.9% in 2018, and 2.6% in 2019
Outlook
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Median NABE 1.5% in 2016 and 2.3% in 2017
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Inflation 1.2% in 2016 and 2.2% in 2017
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Fed Median GDP 2016 1.8%, 2017 2% and 2018 2%, Longer
Run 1.6%-2.2% (September)
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Consensus Forecasts, OMB, CBO- Annual Projections 20182022-Average Between 2.3% and 2.1%
Job Growth Update September 2016 Data
Year over Year Change – 42 States Up
Source: BLS, ASU
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Florida 1
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Oregon 2
Idaho 3
Washington 4
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South Dakota 16
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Michigan 17
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North Carolina 18
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New Hampshire 19
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Virginia 20
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Utah 5
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Texas 21
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Colorado 6
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Maryland 22
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Nevada 7
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Iowa 23
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South Carolina 8
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Indiana 24
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Georgia 9
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Minnesota 25
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Hawaii 10
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Wisconsin 26
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Delaware 11
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Ohio 27
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Arizona 12
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New York 28
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Missouri 29
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California 13
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Massachusetts 14
Kentucky 30
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New Jersey 31
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Tennessee 15
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Arkansas 32
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Vermont 33
Rhode Island 34
Alabama 35
Nebraska 36
Illinois 37
Pennsylvania 38
Connecticut 39
Mississippi 40
Montana 41
Maine42
West Virginia 43
New Mexico 44
Kansas 45
Oklahoma 46
Louisiana 47
Alaska 48
North Dakota 49
Wyoming 50
May
Dec.
July
Feb
Sept.
April
November
June
January
August
March
October
May
December
July
February
September
April
November
June
Jan-08
Aug-07
Oregon Wage and Salary Employment ( ,000-SAAR)
Employment Department
1,900
1,850
1,800
1,750
1,700
1,650
1,600
1,550
1,500
1,450
Portland Job Growth
Year to September 2016 (2.7%)
Source: Employment Dept.
29,800
Total
6,000
Government
1,200
1,900
Other Services
Leisure & Hosp.
5,000
6,600
Ed. and Health
Prof. Services
800
TP,W and Util
0
Finance
900
1,500
Information
Trade
5,900
Construction
0
0
Mine & Log
Manufacturing
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Gross Receipts Tax
Measure 97
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Holmes, DeVito and Friedman
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2.5% Gross Receipts of Specifically Organized Firms with More then $25 Million
in Oregon Sales
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Only People Pay Taxes-What will be the incidence? Passed on to Customers,
Back to Owners or Employees (There is no Tooth Fairy!)
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Sales Tax Levied on Specific Kind of Organization over a Certain Size
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Goods-Location of Customer Services-Sale Allocated to Where the Service is
Perform
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Price Impacts-Piled on Different Stages of Production
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25% Increase in State Revenues-Out of the Range of Normal Changes
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How will Funds Be Spent?
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Organizational Response ?
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Competitive Equity-Depends on Organization-Lacks the Exemptions to Reduce
Regressivity
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Industry Implications: LRO- Retail Current Law $69.8 Million to $604.8 Million,
Wholesale $102.1 Million to $697.3 Million, Utilities $400,000 to $104.5 Million
2016-17 Themes-Questions
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National Expansion Should Continue
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Tightening Labor Markets
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Inflation Pick Up- As Transitory Events Pass-Watch the Dollar and Oil
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Residential Markets Improving
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Will Investment Rebound
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Unease About Overseas Events-Trade Policy
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Very Gradual Rate Increases-Data Driven –Volatility-New Territory
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Oregon Should Continue to Grow at a Slowing Pace 3.5-2.5% over 2016 and
2017
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New Cast of Characters-Mix of Control
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A Glimmer