MC_081814_ JIM ROUNDS_ELLIOTT D POLLACK & COMPANY.PDF

Interpreting Schizophrenic
Economic News
August 18, 2014
Presented By:
Jim Rounds
Senior Vice President
Elliott D. Pollack & Company
Elliott D. Pollack & Company

Paranoid
about the
economy?
Elliott D. Pollack & Company

Is there a story?
• Does the data make sense?
• If not, is there an explanation
for why it is off?
• If not, then worry.
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Elliott D. Pollack & Company

United States Real Gross Domestic Product*
Annual Growth 1970 - 2015**
Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators
8% Q2 = 4.0%
7.3%
5.6% 5.4% 5.6% Q3/Q4 = ?
6%
5.2% 4.6% 4.2% 4.8%
4.6% 4.2% 4.5%4.5%
3.5% 3.5% 3.7% 3.6% 4.0% 3.8% 4.1% 3.8%3.4%
4%
3.3% 3.2% 3.0%
2.6% 2.7% 2.7% 2.8% 2.7% 2.5% 2.3%
1.9% 1.8% 1.8% 2.2%2.1%
2% 1.6%
0.9%
0.2%
0%
-0.5%-0.2% -0.2% -0.1% -0.3%
-2%
-1.9%
-2.8%
-4%
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
3.8% = 40-year avg during expansion
* Based on chained 2009 dollars.
** 2014 and 2015 are a forecast from the Blue Chip Economic Indicators, August 2014. 3.2% = 20-year avg during expansion
Recession Periods
Elliott D. Pollack & Company

US Non-Farm Employment
Change from Prior Month (S/A)
June 2010 – July 2014
Source: Bureau Labor of Statistics
400
360
350 322
304 298
300 280 274
250 241 212 217 221 226243 225 237 229
196 203214 197 199199201 202 222203 209
200 168 183164 160150161 164
137 142 149 144
150 106122
102 96110
100 7170 88 84
50
0
(50)
-61-42-57
(100)
July = 209,000; Worry?
(150) -122
(200)
(250)
Elliott D. Pollack & Company

U.S. Unemployment Rate
1970 – 2014*
Recession Periods
Source: Bureau of Labor Statistics
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
Underemployment = 12.2%
0.0%
*Seasonally adjusted data through July 2014
Elliott D. Pollack & Company

U.S. Unemployment Rate
1970 – 2014*
Recession Periods
Source: Bureau of Labor Statistics
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
Underemployment = 12.1%
0.0%
*Seasonally adjusted data through June 2014
Elliott D. Pollack & Company

U.S. Leading Indicators
1971 – 2014* Recession Periods
Source: The Conference Board
120
110
100
90
80
70
60
50
40
30
Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
Elliott D. Pollack & Company *Data through June 2014

10 Components of U.S. Leading
Indicators – June 2014
+ • Interest rate spread
• Leading Credit Index (inverted)
• Stock Prices
• Manuf. new order index
• Manuf. new orders – capital goods
• Manuf. new orders – consumer goods
• Consumer expectations
• Claims for unemployment (inverted)
• Manuf. hours
- • Building permits
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U.S. Risks
• Stock market?
• Fed?
International Risks:
• China?
• Russia?
Elliott D. Pollack & Company

WEALTH EFFECT
Housing prices are
up.
Stock market is up.
Elliott D. Pollack & Company

Consumer Confidence
1978 – 2014*
Source: The Dismal Scientist Recession Periods
150
140
130
120
110
100
90
80
70
60
50
40
30
20
Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
*Data through July 2014.
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Household Debt Composition
Percent Change Year Ago
2004 – 2014*
Source: The Federal Reserve Bank of New York Recession Periods
*Data through second quarter 2014.
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Average Age of Auto Fleet
(all light vehicles)
• 2013 – 11.4 years
• 2010 – 10.6 years
• 2005 – 9.5 years
• 2000 – 8.9 years
• 1995 – 8.4 years
Elliott D. Pollack & Company Source: R.L. Polk Company

Hours Worked
Percent Change from Year Ago
1976 – 2014*
Source: Bureau of Labor Statistics Recession Periods
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
1976 Q1 1977 Q1 1978 Q1 1979 Q1 1980 Q1 1981 Q1 1982 Q1 1983 Q1 1984 Q1 1985 Q1 1986 Q1 1987 Q1 1988 Q1 1989 Q1 1990 Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014 Q1
*Data through second quarter 2014
Elliott D. Pollack & Company

Capacity Utilization Rate
1970 – 2014*
Source: The Federal Reserve Bank of St. Louis
Recession Periods
90
85
80
75
70
65
Jan-70 Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
*Data through June 2014.
Elliott D. Pollack & Company

Elliott D. Pollack & Company

Arizona Rank
Population Growth
1991-2013
Source: Census Bureau
Elliott D. Pollack & Company

Arizona Population
Annual Percent Change 1975–2013
Source: AZ Dept. of Administration
6%
4.8%
4.4%4.4%
3.9% 3.9%
4% 3.7% 3.8% 3.8% 3.5% 3.5%
3.4% 3.4% 3.3% 3.4% 3.3%
2.9% 3.1% 3.0% 3.1% 3.2%
2.7% 2.9% 2.9%
2.8% 2.7% 2.8% 2.8% 2.6%
2.5% 2.6%
2.2% 2.3%
2% 1.7%
1.5%
1.3%
0.9%
½ normal 0.6%
0.3%
0.2%
0%
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Recession Periods
Elliott D. Pollack & Company

Job Growth 2013
Source: US BLS
Alaska
47 9
14 1
11
7
46
6
3 2 4
16
Hawaii 10 44
Jobs growing 5
Top 10 8
Jobs declining
Elliott D. Pollack & Company

Job Growth 2014
YTD June 2014 vs YTD June 2013
Alaska Source: US BLS
47 11
30 1
7
35
33
2
9 5 6 8
27
Hawaii 15 50 10
Jobs growing 3
Top 10 4
Jobs declining
Elliott D. Pollack & Company

Job Growth 2014
YTD June 2014 vs June 2013
Source: U.S. Bureau of Labor Statistics
Rank State % chg. Rank State % chg.
1 North Dakota 4.34% 26 New York 1.23%
2 Nevada 3.78% 27 Hawaii 1.15%
3 Texas 3.07% 28 Arkansas 1.11%
4 Florida 3.03% 29 Kansas 1.06%
5 Utah 2.87% 30 Montana 1.06%
6 Colorado 2.85% 31 Nebraska 1.04%
7 Oregon 2.84% 32 West Virginia 1.01%
8 Delaware 2.42% 33 Wyoming 0.98%
9 California 2.34% 34 Ohio 0.96%
10 South Carolina 2.08% 35 Idaho 0.93%
11 Washington 2.07% 36 Mississippi 0.93%
12 Tennessee 1.88% 37 Louisiana 0.92%
13 Georgia 1.84% 38 South Dakota 0.79%
14 North Carolina 1.81% 39 Alabama 0.75%
15 Arizona 1.77% 40 Michigan 0.64%
16 Indiana 1.66% 41 Maryland 0.64%
17 Minnesota 1.65% 42 Connecticut 0.63%
18 Oklahoma 1.65% 43 Pennsylvania 0.61%
19 Wisconsin 1.58% 44 Vermont 0.55%
20 Iowa 1.56% 45 Illinois 0.55%
21 Massachusetts 1.49% 46 Kentucky 0.54%
22 Missouri 1.47% 47 Alaska 0.31%
23 Rhode Island 1.35% 48 Virginia 0.18%
24 New Hampshire 1.27% 49 New Jersey 0.07%
25 Maine 1.23% 50 New Mexico -0.20%
Elliott D. Pollack & Company

Greater Phoenix
Elliott D. Pollack & Company

Phoenix-Mesa Employment Growth
(Ranking among all metro areas greater than 1,000,000)
Source: Arizona State University, U.S. Bureau of Labor Statistics
Year Rank # MSA’s Year Rank # MSA’s
1991 4 19 2003 3 25
1992 4 19 2004 3 25
1993 2 19 2005 1 26
1994 1 19 2006 1 27
1995 1 20 2007 9 28
1996 1 21 2008 24 28
1997 1 22 2009 23 24
1998 1 23 2010 23 23
1999 3 24 2011 14 25
2000 9 25 2012 9 27
2001 7 26 2013 7 28
2002 5 25 2014* 14 28
Elliott D. Pollack & Company *YTD June 2014 vs. YTD June 2013

Greater Phoenix Has Gained 64% of Lost Jobs
88,700 Jobs (36%) Still to Recover
1,930,800 July 2007
156,600 Jobs
Regained (64%)
245,300 Phoenix
Jobs Lost (13%)
1,685,500 Sept. 2010
Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted
Data through June 2014.
Elliott D. Pollack & Company

Arizona Construction Employment is Still Down by
134,900 Jobs (55%) Since Peak
June 2006 244,300
June 2014 119,000
Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted
Elliott D. Pollack & Company

Employment Levels:
Greater Phoenix back to Peak in 2016?
Source: ADOA
Recession Periods
2,400.0
2,200.0
Peak
2,000.0
1,800.0
1,600.0
1,400.0
1,200.0
1,000.0
Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
*Based on seasonally unadjusted monthly data
Elliott D. Pollack & Company

Single Family Permits
Greater Phoenix 1975–2015*
Source: RL Brown & Elliott D. Pollack & company
# Permits
(000)
70
63.6
60.9
60
50 47.7
42.4
38.9
40 31.736.035.3 34.7 36.2
29.6 31.2
30 28.9 23.2 27.4 28.5
22.3 22.6 22.7
18.8 19.4 18.1 17.9 18.4
20 15.1
11.5 11.6 12.0 13.7 12.6 12.811.8 13.6
8.7 11.1 10.6 10.6 8.0 11.6
10 6.8 6.8
0
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
*2014 – 2015 forecast is from Elliott D. Pollack & Company
Elliott D. Pollack & Company

Greater Phoenix Median Price of New Homes
2000-2014*
Source: Information Market Recession Periods
*Data through July 2014.
Elliott D. Pollack & Company

Greater Phoenix Median Price of Resale Homes
2000-2014*
Source: Information Market Recession Periods
*Data through July 2014.
Elliott D. Pollack & Company

U.S. and Greater Phoenix Annual Foreclosures
2002–2013
Source: CoreLogic; Information Market
U.S. % chg year Greater Phoenix % chg year
Year Foreclosures ago Foreclosures ago
2002 230,750 4,288
2003 253,584 9.9% 4,788 11.7%
2004 273,930 8.0% 3,881 -18.9%
2005 290,872 6.2% 1,108 -71.5%
2006 379,380 30.4% 935 -15.6%
2007 587,872 55.0% 9,550 921.4%
2008 972,933 65.5% 38,427 302.4%
2009 1,009,284 3.7% 47,054 22.5%
2010 1,145,292 13.5% 49,338 4.9%
2011 930,633 -18.7% 42,518 -13.8%
2012 821,689 -11.7% 22,629 -46.8%
2013 618,493 -24.7% 9,686 -57.2%
Elliott D. Pollack & Company

Pent-up Demand?
Millennials?
Elliott D. Pollack & Company

U.S. and Greater Phoenix
Annual Homeownership Rate
2005–2013
Source: U.S. Census Bureau
Elliott D. Pollack & Company

Percent of 18-34 Year Olds Living With Parents
U.S.: 1983 – 2013
Recession Periods
Source: US Census Bureau
18-34 year olds represent 23% of total population. (73.7 million persons)
Elliott D. Pollack & Company

Millennials –
Economic or Social?
• 30-34 year olds in 2012 had the lowest
homeownership rate of any similarly
aged group before them.
• Five years prior, this exact same group
(at 25-29 years old) had the highest
homeownership rate than any group
before them.
Elliott D. Pollack & Company

Unemployment Rate
By County
Source: Bureau of Labor Statistics
Arizona
2004: 5.0%
2014*: 7.1%
*Data through June 2014
Elliott D. Pollack & Company

The long term outlook for
Arizona remains strong.
We are ready for a boom.
But, what if there is no boom
this time?
Elliott D. Pollack & Company

ELLIOTT D. POLLACK
& Company
• Economic and Fiscal Impact Analysis/Modeling
• Real Estate Market and Feasibility Studies
• Litigation Support
• Revenue Forecasting
• Keynote Speaking
• Public Finance and Policy Development
• Land Use Economics
• Economic Development
7505 East Sixth Avenue, Suite 100 Scottsdale, Arizona 85251
480-423-9200 P / 480-423-5942 F / www.arizonaeconomy.com / info@edpco.com
Elliott D. Pollack & Company