ECONOMIC OUTLOOK 2016 Dr. Michael L. Walden

THREE BIG STORIES IN THE NATIONAL ECONOMY IN 2015 CONTINUING SLOW GROWTH PLUNGING ENERGY PRICES U-TURN BY THE FEDERAL RESERVE

SOME NUMBERS 2015 LONG RUN AVERAGE GDP 2.4% 3.2% GDP pc 1.4% 1.7% Payroll jobs 1.9% 2.2%

WHY THE SLOW GROWTH? SLOW GROWTH IN LABOR FORCE * AGING * LOWER BIRTH RATE SLOW IMPROVEMENTS IN PRODUCTIVITY FRUGAL CONSUMERS STIMULUS BORROWED FROM FUTURE GROWTH

HOUSING MARKET CONTINUES A MODEST RECOVERY

THE OIL PRICE PLUNGE

KEPT INFLATION AT BAY ALL ITEMS CPI 0.5% CORE CPI: 2.0%

INTEREST RATES REMAINED HISTORICALLY LOW

DOLLAR’S INTERNATIONAL VALUE ROSE

FISCAL POLICY: RELATIVE SIZE OF DEFICIT IMPROVED IN 2015 BUT IMPACT OF HIGHER INTEREST RATES AND RELATIVE SIZE OF TOTAL DEBT EXPECTED TO TREND HIGHER

BIG NEWS: THE FEDERAL RESERVE FINALLY MOVES RAISED SHORT-TERM RATE 0.25% POINTS – LIKELY FIRST OF MANY NEEDED IF WANTS INTEREST RATE TOOL TO ADDRESS NEXT RECESSION WORRIED ABOUT POSSIBLE ASSET “BUBBLES”

NATIONAL 2016 FORECASTS SLIGHTLY FASTER GDP GROWTH: 2.5% 2.5 MILLION NET ADDITIONAL PAYROLL JOBS FEDERAL FUNDS RATE: 1% BY YEAR’S END ALL-ITEMS INFLATION RATE IN 2% TO 2 ¼% RANGE IMPROVED WAGE AND SALARY GROWTH

NORTH CAROLINA: BETTER ECONOMIC NUMBERS THAN THE NATION IN 2015 GROWTH IN: NC US GDP 3.4% 2.2% LABOR FORCE 3.2% 0.6% PAYROLL JOBS 2.2% 1.9% HSEHOLD EMP. 3.1% 1.4%

NORTH CAROLINA’S ECONOMIC RIDE HAS ALWAYS BEEN BUMPIER

FASTEST JOB GROWTH IN: FINANCIAL SERVICES PROFESSIONAL/BUSINESS CONSTRUCTION OTHER SERVICES

STILL DISPARITIES IN GROWTH FASTEST GROWING METROS: CHARLOTTE, GREENSBORO, DURHAM METROS LOSING JOBS: FAYETTEVILLE, HICKORY

NORTH CAROLINA 2016 FORECASTS TIED TO NATION 3.6% GDP GROWTH (2.5% US) 90,000 NET ADDITIONAL PAYROLL JOBS HEADLINE JOBLESS RATE: 5.7% TO 5.1%

LONG-RUN FACTORS IMPACTING THE ECONOMY

AGING % Over Age 65 2010: 13% 2050: 21%

TECHNOLOGIAL UNEMPLOYMENT HALF OF TODAY’S OCCUPATIONS COULD BE DOWNSIZED DUE TO TECHNOLOGY NEED FOR RE-SKILLING

FINAL WORD: DON’T FORGET THE “KNOWN UNKNOWNS” AND “UNKNOWN UNKNOWNS” K-UK’s: terrorism China Middle East weather/epidemics power grids election UK-UK’s: ??????

THANK YOU!