ECONOMIC OUTLOOK 2018: “SETTING A RECORD” Dr. Michael L. Walden

HEADLINES DESPITE SLOW GROWTH, CURRENT EXPANSION WILL BECOME 2ND LONGEST THIS YEAR GROWTH HAS ACCELERATED – WILL IT LAST? STILL, FAMILIAR PROBLEMS PERSIST

MOST OF THE MAJOR INDICATORS IMPROVED IN 2017 1960-2009 2009-2016 2017 Annual Rates GDP 3.1% 1.9% 2.4% JOBS 1.8% 1.4% 1.4% WAGES 0.4% 0.4% 0.9% INVESTMENT 17.6% 15.6% 16.5% STOCK MKT 12.6% 12.3% 15.6% GDP, wages, and stock market are after-inflation; jobs are the change in payroll job numbers, and investment is % of GDP

WHY THE IMPROVEMENT IN 2017? POLICY OR POSITION ?

POLICY: BUSINESS AND INVESTOR COMMUNITY LIKE THE POLICIES OF THE TRUMP ADM. DEREGULATION ENERGY TAX CHANGES TRADE ????

POSITION: ONLY RECENTLY HAS CONSUMER CONFIDENCE RETURNED SEVERITY OF RECESSION SCARED CONSUMERS – MADE THEM “TIGHTWADS” WITH THE ECONOMIC EXPANSION CONTINUING, CONSUMERS ARE NOW CONFIDENT

OTHER FACTORS INFLATION REMAINS TAME FOREIGN ECONOMICS ARE DOING BETTER OIL PRICES HAVE RISEN ($30 TO $60/BLL) SHORT-TERM INTEREST RATES ARE RISING

THE FEDERAL RESERVE WILL BE UNDER NEW LEADERSHIP JEROME POWELL WILL BE THE NEW CHAIR ALSO, THE PRESIDENT WILL FILL FOUR OF THE SEVEN MEMBER GOVERNING BOARD

FEDERAL RESERVE’S 2018 AGENDA HOW FAST TO RAISE SHORT-TERM RATES? HOW FAST TO REDUCE PORTFOLIO? WHO WINS: “HAWKS” OR “DOVES”?

WORRIES IN THE ECONOMY CONSUMER DEBT? HOUSING BUBBLE? STOCK MARKET BUBBLE? BOND MARKET BUBBLE? INTERNATIONAL EVENTS?

WALDEN’S BIGGEST WORRY CHANGES IN THE JOB MARKET DUE TO TECHNOLOGICAL ADVANCES – AKA: TECHNOLOGICAL UNEMPLOYMENT

NATIONAL ECONOMIC POLICIES TO WATCH FOR 2018 INFRASTRUCTURE PLAN ENTITLEMENT REFORM TRADE NEGOTIATIONS HEALTH CARE REVISITED

NATIONAL FORECASTS FOR 2018 2017 2018 GDP 2.4% 2.7% JOBS 1.4% 1.6% WAGES 0.9% 1.0% INFLATION 1.7% 2.1% GDP and wages are after-inflation; jobs are changes in payroll job numbers

NORTH CAROLINA

NC AND US JOB GROWTH RATES 2012 EXPLANATION – BIG DROP IN PHARM PRODUCTION IN NC

NC SECTOR GROWTH RATES, 2009-2017 (% change in real GDP)

JOB GROWTH IN NORTH CAROLINA CONTINUES TO BE HIGH WAGE AND LOW WAGE INDUSTRIES

GROWTH ALSO CONTINUES TO BE CONCENTRATED IN LARGE AND MEDIUM SIZED METROS

REGIONAL GROWTH HAS NOT BEEN EVEN (% CHANGE IN PAYROLLS, 2010 - 2017)

NC CONSTRUCTION STRONGER, BUT STILL UNDER PRE-RECESSION LEVELS (RESIDENTIAL BUILDING PERMITS; FORECAST FOR 2017)

THE NCSU LEADING INDICATOR INDEX SUGGEST CONTINUED STATE GROWTH

ISSUES FOR THE FUTURE 1. TECHNOLOGICAL UNEMPLOYMENT 2. URBANIZATION OF THE STATE 3. SUPPORT IN DEPOPULATING COUNTIES 4. ACCOMMODATING 3 MILLION MORE RESIDENTS BY 2050 5. POWERING OUR FUTURE 6. IMPROVING EDUCATION & RE-SKILLING

QUESTIONS