Scary Boom Times Commercial Association of Brokers Halloween 2016 Portland, Oregon John W. Mitchell

10/31/2016 Last Day of the 88th Month Interest Rates in 2016 have hit 5,000 Year Lows Oregon Has Spent Time as the Fastest Growing State In Terms of Employment Case Shiller Portland Most Rapid Price Gains Followed by Seattle and Denver Cusp of Monetary Policy Move You Work in an Asset Class that has Seen Rapid Appreciation Election Process that Neither We Nor the World Will Soon Forget Oregon Tax Battles Once Again “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 McKinsey Global Institute 65-70% of Households in Advanced Economies Market Incomes flat or down 2005-2014 Political Risk-(Cubs in Series)

Real GDP Q3/2015-16 Commerce Department (SAAR,%) .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 4.6 3.7 9 4 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 -.6 3.5 -2.5 -.7 Exports -2.8 1.8 10 Imports 1.1 .7 .2

Labor Market Data- The Roller Coaster Ride Monthly Change Payroll Employment 2015-2016 191,700 Jobs Per Month Last Three LF Growth 75,000-100,000 per Month Average Hourly Earnings up 2.6 Percent JOLTS Data August-over 12 Months 62.7 million hires and 60.1 million separations-net gain 2.6 Million

Inflation September Year to September 1.5% Core 2.2% Food At Home -2.2%, Food Away from Home 2.8% Gasoline -6.5%, Medical Services 4.8%, Shelter 3.4%, Used Cars -4.1%, New Cars 0, Apparel -.1- Always a Mix Impact of Dollar Strength Diminishing

Federal Funds Rate and 10 Year Treasury Source: Treasury, Fed

Monetary Policy Experiment 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…” “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.” Reduced Rate Expectations: New Medians .6% in 2016, 1.1% in 2017, 1.9% in 2018, and 2.6% in 2019

Outlook Median NABE 1.5% in 2016 and 2.3% in 2017 Inflation 1.2% in 2016 and 2.2% in 2017 Fed Median GDP 2016 1.8%, 2017 2% and 2018 2%, Longer Run 1.6%-2.2% (September) Consensus Forecasts, OMB, CBO- Annual Projections 2018- 2022-Average Between 2.3% and 2.1%

Oregon 2 Idaho 3 Washington 4 Job Growth Update September 2016 Data Year over Year Change – 42 States Up Source: BLS, ASU Florida 1 Oregon 2 Idaho 3 Washington 4 Utah 5 Colorado 6 Nevada 7 South Carolina 8 Georgia 9 Hawaii 10 Delaware 11 Arizona 12 California 13 Massachusetts 14 Tennessee 15 South Dakota 16 Michigan 17 North Carolina 18 New Hampshire 19 Virginia 20 Texas 21 Maryland 22 Iowa 23 Indiana 24 Minnesota 25 Wisconsin 26 Ohio 27 New York 28 Missouri 29 Kentucky 30 New Jersey 31 Arkansas 32 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

Oregon Wage and Salary Employment ( ,000-SAAR) Employment Department

Portland Job Growth Year to September 2016 (2.7%)

Gross Receipts Tax Measure 97 Holmes, DeVito and Friedman 2.5% Gross Receipts of Specifically Organized Firms with More then $25 Million in Oregon Sales Only People Pay Taxes-What will be the incidence? Passed on to Customers, Back to Owners or Employees (There is no Tooth Fairy!) Sales Tax Levied on Specific Kind of Organization over a Certain Size Goods-Location of Customer Services-Sale Allocated to Where the Service is Perform Price Impacts-Piled on Different Stages of Production 25% Increase in State Revenues-Out of the Range of Normal Changes

How will Funds Be Spent? Organizational Response ? Competitive Equity-Depends on Organization-Lacks the Exemptions to Reduce Regressivity 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 National Expansion Should Continue Tightening Labor Markets Inflation Pick Up- As Transitory Events Pass-Watch the Dollar and Oil Residential Markets Improving Will Investment Rebound Unease About Overseas Events-Trade Policy Very Gradual Rate Increases-Data Driven –Volatility-New Territory Oregon Should Continue to Grow at a Slowing Pace 3.5-2.5% over 2016 and 2017 New Cast of Characters-Mix of Control A Glimmer