Emerald Coast Association of Realtors/ Building Industry Association of Okaloosa/Walton Economic and Housing Forecast Rick Harper, Ph.D. UWF Office of Economic Development and Engagement January 20, 2016

The 21 st century jobs market: “It’s a great time to own a productive capital asset, not such a good time to sell your labor for wages, particularly if you do things that industrial robots or software could do.”

Job polarization: the disappearance of employment in occupations in the middle of the skill distribution Characteristics: – since the 1980s – Job polarization is not a gradual process; mostly occurring during economic downturns – Jobless recoveries are associated with the disappearance of middle-skill occupations (most of which involve performing routine tasks) – Technology is biased against routine tasks Based on research by Nir Jamiovich and Henry Siu (2012), Goldin and Katz, Acemoglu and Autor, presentation by Mike Chriszt of the Atlanta Federal Reserve Bank.

Non-routine cognitive: management, finance, legal, science, engineering, healthcare practitioner – tend to be high-skill occupations Non-routine manual: healthcare support, food prep, janitorial, etc. – tend to be low-skill occupations Routine cognitive: sales-related, office and admin support – tend to be middle-skill occupations Routine manual: production, material moving, construction – tend to be middle-skill occupations Consider 4 types of jobs: As presented by Mike Chriszt, Atlanta FRB, from Jamiovich and Siu 2012

From Chriszt, and Jamiovich and Siu

Will these changes become larger or smaller over the coming decades? The pace of technology growth is accelerating. The cost of shipping has fallen. Technology is biased against routine tasks, whether they involve cognitive skills or not. The cost to businesses of using labor is rising, especially with respect to nonwage costs (healthcare, other fringes). Businesses are increasingly able to hire specialty talent, giving rise to the “gig,” or the “free agent” economy. There is increasing divergence in the income distribution in the developed economies.

Arlington New York Williams, ND Sully, SD Los Alamos Alexandria McMullen, TX

Leon Alachua Collier Okaloosa

What’s the Bottom Line? Economic activity results from matching area resources (supply) with needs in the marketplace (demand). Improving the quality of local assets (labor, capital, natural resources, intellectual property, entrepreneurial ability) allows assets to earn a higher return in the marketplace. The high-wage, sustainable jobs of tomorrow will go to those with the skills to create and use new technologies. Routine, non-cognitive tasks will either be automated or off-shored. Safe streets and good schools are essential to healthy growth. Small and new businesses have been the net job generators, but that role has been changing over time.

Economic Drivers Job market recovery continues (Hollowing out of middle class) Low to moderate economic growth (demand deficit) Housing market recovers (Need formation of new households) Monetary policy (unwinding years of money supply growth) Fiscal policy (“Stim-sterity” needed, calm before the storm) Dollar / inflation ($ up, inflation expectations anchored) World growth weaker than US (Grexit, Brexit, China, BRICs)

National Outlook 2016: Economic activity well above pre-recession levels Unemployment decline slows, 5+% range represents full employment Economic growth trajectory suffering from modest consumer income growth Housing purchase prices recovering Residential real estate market recovery in full swing; mortgage rates rise. 10 year Treasury yield at historic low, Fed will stop buying MBS Large banks prosper, community banks slowly improve Elections coming up; no meaningful fiscal (or any) policy Budget crisis abated; baby boomer retirements loom Health care cost trajectory improved but not yet sustainable

Emerald Coast Association of Realtors/ Building Industry Association of Okaloosa/Walton Economic and Housing Forecast Questions? Rick Harper, Ph.D. UWF Office of Economic Development and Engagement January 20, 2016