ECONOMIC OUTLOOK 2018: “THE COSTS OF GROWTH” Dr. Michael L. Walden

HEADLINES DESPITE SLOW GROWTH, CURRENT EXPANSION WILL BECOME 2ND LONGEST THIS YEAR GROWTH HAS ACCELERATED FOCUS HAS TURNED TO THE COSTS OF GROWTH

RECENT REAL GDP PATH (ANNUAL % GROWTH RATE)

FASTER GROWTH IS BRINGING WORRIES AND REALITIES OF FASTER INFLATION FROM ANNUAL RATE UNDER 2% IN RECENT YEARS TO ANNUAL RATE OF 3% TODAY WORRIES OF IMPACTS ON COSTS OF INPUTS

FED TO CONTINUE INCREASING SHORT TERM RATES (%) UNDER NEW CHAIR POWELL FOUR OTHER FED BOARD VACANCIES ALSO REDUCING ITS PORTFOLIO ULTIMATE BATTLE WITH TRUMP ADMINISTRATION?

LONG TERM RATES ARE ALSO RISING (%) HIGHER RATES INCREASE BORROWING COSTS FOR BUSINESSES AND BUYERS BUSINESSES AND INVESTORS WORRY ABOUT ULTIMATELY CAUSING AN ECONOMIC SLOWDOWN

INCREASES IN INFLATION AND INTEREST RATES HAVE LED TO STOCK MARKET VOLATILITY MARKET IS ADJUSTING TO THE COSTS OF GROWTH

PRODUCTIVITY AND LABOR FORCE TO THE RESCUE? GAINS CAN MUTE IMPACTS OF HIGHER INFLATION AND INTEREST RATES

OTHER NATIONAL NEWS WHO WILL GAIN FROM TAX CUTS? RISING INTEREST COSTS ON A RISING NATIONAL DEBT WILL CROWD-OUT OTHER SPENDING A “GO” ON INFRASTRUCTURE? POSSIBILITIES OF A TRADE WAR?

NATIONAL FORECASTS FOR 2018 2017 2018 GDP 2.4% 2.7% JOBS 1.4% 1.6% WAGES 0.9% 1.0% INFLATION 1.7% 2.3% 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 IN 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)

THE NCSU LEADING INDICATOR INDEX SUGGESTS CONTINUED STATE GROWTH

NORTH CAROLINA 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

ORANGE COUNTY

ORANGE COUNTY EMPLOYMENT TRENDS

ORANGE COUNTY UNEMPLOYMENT RATE TRENDS (%)

KEY TAKE-AWAYS NATIONAL – CONTINUED GROWTH, BUT WITH COSTS STATE – FASTER GROWTH THAN NATION FUELED BY IN-MIGRATION ORANGE CO. – CONTINUED STRONG GROWTH; PRESSURE ON HOUSING SUPPLY AND PRICES & TRAFFIC

QUESTIONS