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Economic Outlook Maricopa County Board Of Supervisors Alan E. Maguire September 2019 Economic Outlook “Where are we going?” • US Economy in the Global Economy • Arizona Economy in the US Economy • Maricopa County • Pertinent Observations Economic Outlook “Where are we going?” • US Economy in the Global Economy • Arizona Economy in the US Economy • Maricopa County • Pertinent Observations US Economic Outlook US Economy in the Global Economy ü The Current Global Outlook ü The Near-Term Outlook ü Long-Term Trends US Economic Outlook ü The Current Global Outlook • IMF Forecast for 2020: 3.5 % Global GDP Growth Up from 3.2% for 2019 • Current Challenges Brexit Uncertainty / EU Weakness China Weakness India Weakness US Economic Outlook ü The Current Global Outlook • IMF Forecasts 2018: 2019 2020 US 2.9 2.6 1.9 Europe 1.9 1.3 1.6 UK 1.4 1.3 1.4 China 6.6 6.2 6.0 India 6.8 7.0 7.2 US Economic Outlook ü The Current Global Outlook Since Financial Crisis • Postposed Recovery and Expansion • No Classic Rebound! • Lesson: Limits of Monetary Stimulus • Post 2016 : US Leading Developed World * US Economic Outlook 2016 Then ü The Current Context – US • Very Slow Growth for “Recovery” period ü Historical Recovery Drivers Missing ü Closer to the Next Recession than the Last One ü Growth Rates are SLOWING • Is this the “New Normal”? ü Global Consumer Restraint –Weak Demand; No Inflation ü Business Caution – Uncertainty; Weak Demand ü Bothersome International Issues – Over and over ü ………… US Economic Outlook * US GDP 2007 - 2019 Recession Steady, but Sluggish! US Economic Outlook US GDP 2007 - 2019 Recession Better, but …! US Economic Outlook US Quarterly GDP 2007 - 2019 Very Choppy! US Economic Outlook * ü The Current Context – US • Role of Federal Reserve • Record Employment • US Treasury Yield Curve US Economic Outlook * Fed Balance Sheet 1984 to 2019 US Economic Outlook Fed Balance Sheet 1984 to 2019 Tailwinds! Headwinds! US Economic Outlook * Fed Funds Rate 1954 to 2019 US Economic Outlook * Fed Funds Rate 2006 to 2019 US Economic Outlook Fed Funds Rate 2006 to 2019 Tailwinds! Headwinds! US Economic Outlook * Jobless Claims 1967 to 2019 US Economic Outlook Jobless Claims 1967 to 2019 US Economic Outlook * Jobless Claims 2009 to 2019 US Economic Outlook Jobless Claims 2009 to 2019 Amazing! US Economic Outlook * Treasury Yield Curve 10 / 2 US Economic Outlook * Treasury Yield Curve 10 / 2 Inversions US Economic Outlook Treasury Yield Curve 10 / 2 MAYBE ?? Inversions * US Economic Outlook ü The Outlook – Near Term – 2019 • Continued Steady Growth: 2.0% to 2.5% • Substantial Deterrents to Growth & Investment International Issues – Especially Europe China’s Internal Challenges Need to Get Past Brexit! • Solid US Confidence • Policy Risk US Economic Outlook ü The Outlook – Near Term – 2019 0.25% Year!! • Continued Steady Growth: 2.0% to 2.5% Down from Last • Substantial Deterrents to Growth & Investment International Issues – Especially Europe China’s Internal Challenges Need to Get Past Brexit! • Solid US Confidence • Policy Risk US Economic Outlook ü Longer Term Trends • Worldwide Demand Issues – Slowing or Growing? • China – Slowing Limits of Government Stimulus Need for Domestic Demand Potential Political Turmoil Ahead • India – Still Re-organizing – But Growing Continuing “Rule of Law” Issues Costs of Urbanization Economic Outlook “Where are we going?” • US Economy in the Global Economy • Arizona Economy in the US Economy • Maricopa County • Pertinent Observations AZ Economic Outlook ü The Current AZ Context • Returning to Trend -- Which Trend? 80’s and 90’s OR 90’s and 00’s But “NOT LIKE THE (not so) OLD DAYS!!” • Cautious Consumers, But…. AZ Economic Outlook * 8 US US Employment -- Percent Change 6 4 2 0 2006 2011 2016 -2 -4 US -6 -8 -10 AZ Economic Outlook * 8 US AZ Employment -- Percent Change 6 4 2 0 2006 2011 2016 -2 US -4 AZ -6 -8 -10 AZ Economic Outlook * 8 US AZ Employment -- Percent Change 6 4 2 0 2006 2011 2016 -2 US -4 AZ -6 -8 -10 AZ Economic Outlook * 8 US AZ & Phx MSA Employment -- 6 4 2 0 2006 2011 2016 -2 US -4 AZ PHX MSA -6 -8 -10 AZ Economic Outlook 8 US AZ & Phx MSA Employment -- 6 4 2 0 2006 2011 2016 -2 US -4 AZ PHX MSA -6 -8 -10 AZ Economic Outlook * 3,500 AZ Employment -- By Sector 2005 to Current (000s) 3,000 2,500 2,000 1,500 1,000 500 AZ Total Private 0 2005 2007 2009 2011 2013 2015 2017 2019 Source: Eller Business School, AZ Economic Outlook 3,500 AZ Employment 2005 to Current (000s) 3,000 2,500 2,000 1,500 1,000 500 AZ Total Private 0 2005 2007 2009 2011 2013 2015 2017 2019 Source: Eller Business School, UA AZ Economic Outlook * 400 AZ Employment -- By Sector 2005 to Current (000s) 300 200 100 Construction Manufacturing Financial 0 Source: Eller Business School, UA AZ Economic Outlook * 400 AZ Employment -- By Sector 2005 to Current (000s) 300 200 100 Construction Manufacturing Financial 0 Source: Eller Business School, UA AZ Economic Outlook * 400 AZ Employment -- By Sector 2005 to Current (000s) 300 200 100 Construction Manufacturing Financial 0 Source: Eller Business School, UA AZ Economic Outlook ü The Current AZ Context • Cautious Consumers, But…. Still Overhanging Debt Demographic Trends Retirement Anxiety • Consumer Confidence Has Climbed Back Adaptation? AZ Economic Outlook ü The Current AZ Context • IT IS ALL ABOUT JOBS! • Above National Average Job Growth Rates (7th) Through July to July 2019: US 1.5 %; AZ 2.81% But “NOT LIKE THE OLD DAYS!!” • Continuing Strong Job Growth • Improving Quality of Jobs • Growing Breadth of Employment AZ Economic Outlook ü The Current AZ Context • IT IS ALL ABOUT JOBS! • Blue Chip Economic Forecast - Arizona JOBS: 2019 AZ 2.6% 2020 AZ 2.4% Retail Sales: 2019 AZ 5.0% 2020 AZ 4.9% AZ Economic Outlook ü The Current AZ Context • IT IS ALL ABOUT JOBS! • Blue Chip Economic Forecast – PHOENIX METRO JOBS: 2019 AZ 3.1% 2020 AZ 2.8% Retail Sales: 2019 AZ 5.5% 2020 AZ 5.2% AZ Economic Outlook ü AZ Long Term Trends • More Integrated Economically Not just the “Five C’s” anymore • More Integrated (Dependent) on US / Global Economy • Need to Strengthen Base Industries • Export (Out-of-State) focused Businesses Broader Customer Demand Greater Cyclical Stability Economic Outlook “Where are we going?” • US Economy in the Global Economy • Arizona Economy in the US Economy • Maricopa County • Pertinent Observations AZ Economic Outlook 8,000,000 Population Growth 2008 to 2019 7,000,000 Arizona 6,000,000 5,000,000 4,000,000 3,000,000 Maricopa 2,000,000 1,000,000 0 2008 2010 2012 2014 2016 2018 AZ Economic Outlook 8,000,000 Population Growth 2008 to 2019 7,000,000 Arizona 6,000,000 5,000,000 4,000,000 3,000,000 Maricopa 2,000,000 1,000,000 0 2008 2010 2012 2014 2016 2018 AZ Economic Outlook ü The Current AZ Context • IT IS ALL ABOUT JOBS! • Blue Chip Economic Forecast – PHOENIX METRO JOBS: 2019 AZ 3.1% 2020 AZ 2.8% Retail Sales: 2019 AZ 5.5% 2020 AZ 5.2% AZ Economic Outlook Consumer Confidence 1975 On AZ Economic Outlook Consumer Confidence Recession Warning AZ Economic Outlook Consumer Confidence ü Very Strong ü Slight Weakening Recently ü Watch for Decline AZ Economic Outlook Auto Sales 1976 On AZ Economic Outlook Auto Sales 1976 On AZ Economic Outlook Auto Sales ü Holding for Now ü Watch for Discounting ü Watch for “Zero Interest” AZ Economic Outlook Maricopa Road Tax 1999 to 2019 $500,000,000 $450,000,000 Road Tax Total $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 FY1999 FY2003 FY2007 FY2011 FY2015 FY2019 The Maguire Company AZ Economic Outlook Sales Tax Revenues ü Still Growing ü Watch Retail ü Watch Contracting Economic Outlook “Where are we going?” • US Economy in the Global Economy • Arizona Economy in the US Economy • Maricopa County • Pertinent Observations Economic Outlook Pertinent Observations • US Economy Leading Global Economy • Arizona Economy Leading US Economy • Maricopa County Leading Arizona Economy Economic Outlook Maricopa County Board Of Supervisors Alan E. Maguire September 2019