Transcript THE ECONOMY IN 2017

THE ECONOMY IN 2017:
MUCH LIKE 2016, I THINK!
Presented by:
Elliot F. Eisenberg, Ph.D.
President: GraphsandLaughs, LLC
March 7, 2017
Denver, CO
The Economy
is Stable!
GDP = C+I+G+(X-M)
The Stock Market Is Doing Well
Households are Repairing their Balance Sheets
Trillions in Net Worth Recovered, at a New Record Level
Households Deleveraging is Done!!!!!!
Lack of income growth hurts, but debt is growing once again. Down 6.5% from peak
Credit is Tight: Thus, No Housing Bubble
University of MI Consumer Confidence is Good
At 6th highest reading in a decade. Huge Democrat Republican divide.
Small Business Confidence is OK
Spectacular rise since the presidential election. Well above the 42 year average of 98
Las Vegas Attendance Rocks
The gamblers are back, the conventioneers are too!
US Light Vehicle Sales are High but Flat
Annual Y-o-Y Percent Change in PCE
A solid growth rate of 2.75%
Oil Prices are Rising
Cheaper oil is a benefit to households, but not the economy.
Drilling Activity is Up
Number of oil rigs is finally rising and has been steadily rising since May 2016.
Corporate Profits are Again Rising After Weakening
Bank Net Interest Margins Are Growing!
ISM Manufacturing Numbers are Improving
But, manufacturing is not as important as it was in the past. It is out of recession!
ISM Non-Manufacturing Numbers are Excellent!
Service sector is doing very very well
OK. Now, Look at Capital Goods Orders!
Minus Defense and Aircraft
Budget Deficit Got Much Better but is Getting Worse
The Dollar is Strengthening Against all Currencies
It will hurt employment growth but will reduce inflation
Strong
Stronger
Weak
GDP Growth Goes Nowhere Slowly
Trump probably boosts GDP growth by 25 or 30 bps due to tax cuts as infrastructure.
Best of All, No Recession is in the Cards!
Designed to track real macroeconomic activity in real time
Labor Markets:
They’re on the mend
Historical Job Growth
Y-o-Y Total Employment Change
STEADY Labor Market Improvement: Involuntary Separation
Long Term Trends: 1967-2015 Initial claims below 300K for 99 weeks, amazing!
Tighter Labor Market than Perceived?
The number of Unemployed per Job Opening Keeps Falling!!!!! Best level since May 2007
Wage Growth is
Weak, but
Improving!
Y-o-Y Percent Change in Hourly Earnings
Changes in Median Wage Growth Looks Good!
Looks only at those continuously full-time employed
Inflation?
What Inflation!
Import Prices for all Commodities: Inflation!!
Rising nicely, largely due to energy price increases
Producer Prices Show Signs of Inflation!!
Consumer Price Index: Inflation is Rising
Headline inflation is clearly rising and Core is drifting up too
Core PCE Price Index: Inflation is Finally Rising!
It’s due to rising wages, a weakening dollar and rising energy prices.
Federal Reserve Behavior
Rates Will Rise.
But, How Fast?
Federal Reserve Behavior
• Fed funds is 0.625%
• 12/31/17: 1.375% 10-yr Treasury @ 2.80%
• 12/31/18: 2.125% 10-yr Treasury @ 3.20%
• 12/31/19: 2.875%
• Hike in March! Lots of Trump Uncertainty!
Housing?
It’s Improving but In
Fits and Starts!
Residential Fixed Investment Slowly Rises!
Up 3.4% Y-o-Y. Non-residential up 1%, public down 12% and residential down 31% from peaks
Household Formation is on the Move
But, it is all due to renter households. This should change.
Credit is Generally Very Hard to Get
It is getting easier, but very slowly.
New Home Prices Are Too High Due to Regulation
Months of Existing Home Inventory is Falling! Insane!
Price Growth Appears Not to be Slowing
Prices rise faster than wages! Y-o-Y prices up 4.9% 5.6% or 5.8% depending on the measure
House Price Growth Appears is not Slowing
Prices rise faster than wages! Y-o-Y prices up 5.6%, wages up just 2.8%
Rents are Rising Increasingly Quickly
Rents rise faster than wages! Y-o-Y prices up 4%. Fastest since the housing boom!
Single-family Rental Increases
Very large increases resulting from huge increases in demand
Bigger Houses Continue to Get Built
Single-Family and Multifamily Starts – A Slow Recovery
Lack of lots, gun shy lenders, high prices, higher rates, SF looks good
Single-Family and Multifamily Starts from 2005 Forward
Existing Home Sales
1st-time buyers remain largely MIA. Distressed sales are just 6% of total. Where is inventory?
TRID was the reason for the 14% November decline.
Recent Existing Home Sales
Solid steady improvement. Taper tantrum is the reason for the 15% decline in 2013, TRID was
the reason for the 11/15 14% decline.
MBA Mortgage Purchase Apps – Rise Steadily
1st time applications are up 10% Y-o-Y, at level of the late 1990s!
10% rise in purchase applications in 2017 from $990 billion to $1.1 trillion
Refinance Activity is Quite Flat!
2017 refi activity falls to $475 billion from $900. Share falls from 50% to 30%.
Refi activity rose due to very low rates, but is now falling.
Delinquencies & Foreclosures Continue Falling
30 and 60 day delinquencies are well prior lows. Legacy loans are still the issue.
Cash Sales are Down from Peak
Cash sales were 31.7% in 9/16, down 130 BP Y-o-Y. Resales are 80% of all sales.
Historically cash sales are 25%. Peak was 46.5% in 1/11. Return to normal by Late 2018.
Negative Equity is Less and Less of a Problem
Percent of Loans in Negative Equity Situation
What About
Things Here?
State of Colorado Real GSP
Doing well and accelerating of late
The Future Looks Better than the Present
State Unemployment Rates
Significant differences exist: However, unemployment is almost below 6% everywhere!
Unemployment Rates in Colorado MSAs
The entire Front Range has unemployment rates below that of the USA
Non-Farm Payroll Growth in 4 Largest CO MSAs
Of late Fort Collins is best followed by Denver then Boulder and then Colorado Springs.
Let’s Do this Without A Lawyer, Thank You!
Foreclosure inventory is 1% of homes with mortgage, still double the historic average.
Percentage of All-Cash Sales
Declined four percentage points over the last 12 months.
Front Range Housing Prices
Except for Colorado Springs, prices are in REAL terms where they were before the recession
Housing Starts in the Fort Collins, CO MSA
Single-family was recovering nicely, now SF is flat and MF is excellent.
Housing Starts in the Denver, CO MSA
Single-family is recovering, Multifamily is spectacular!
Housing Starts in the Colorado Springs, CO MSA
Single-family is weak but rising while MF looks to be improving
ANY QUESTIONS?
Elliot F. Eisenberg, Ph.D.
Cell: 202.306.2731
[email protected]
www.econ70.com
Do you want to get my daily 70 word economics email?
Please give me your business card or text “bowtie” to 22828
Thank YOU all very very much!
@ECON70