Elliott D. Pollack & Company To: GFOAZ By: Jim Rounds Senior Vice President Elliott D. Pollack...

Elliott D. Pollack & Company

To:GFOAZ

By:Jim Rounds

Senior Vice PresidentElliott D. Pollack & Company

February 21, 2014

Economic Outlook2014-2015

Economic Crisis Du Jour

• European Debt;• U.S. Debt Ceiling;• Rating Downgrade;• ObamaCare;• Fiscal Cliff;• Sequestration;• Govt. Shutdown;• Debt Ceiling…Again;• And Again… No growth for

What is

United States Real Gross Domestic Product* Annual Growth 1970 - 2015**

Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators

-0.5%-0.2%

3.5%3.5%4.2%

4.5%4.5%4.8%

3.8%3.4%

2.5%1.8%

2.8%3.0%

* Based on chained 2009 dollars.

** 2014 and 2015 are a forecast from the Blue Chip Economic Indicators, January 2014.

Recession Periods

3.8% = 40-year avg during expansion

3.2% = 20-year avg during expansion

US Non-Farm EmploymentChange from Prior Month (S/A)

June 2010 – January 2014Source: Bureau Labor of Statistics

-61-42

106122

183164196

226243

9611088

160150161

225203214

199199201

Feel Better When >200k

U.S. Unemployment Rate 1970 – 2014*

Source: Bureau of Labor StatisticsRecession Periods

*Seasonally adjusted data through January 2014

Underemployment = 12.7%

U.S. Leading Indicators1971 – 2013*

Source: The Conference Board

Recession Periods

*Data through December 2013

10 Components of U.S. Leading Indicators – December 2013

• Interest rate spread• Manuf. new orders index• Leading Credit Index (inverted)• Stock prices• Manuf. new orders – consumer goods• Manuf. hours• Consumer expectations• Manuf. new orders – capital goods• Building permits• Claims for unemployment (inverted)

Consumer Confidence1978 – 2013*

Source: The Dismal Scientist

*Data through December 2013.

Recession Periods

Worried

Disenfranchised P.O.’d

WEALTH EFFECT

Housing prices are up.

Stock market is up.

Financial Obligation Ratio**1980 – 2013*

Source: Federal Reserve

*Data through third quarter 2013**Ratio of mortgage and consumer debt (including auto, rent and tax payments) to disposable income.

Recession Periods

Household Debt CompositionPercent Change Year Ago

2004 – 2013* Source: The Federal Reserve Bank of New York Recession Periods

* Data through third quarter 2013.

Interest Rate Monthly Payment

3.0% $449.22

4.0% $460.00

5.0% $471.78

6.0% $483.32

7.0% $495.03

8.0% $506.91

9.0% $518.96

10.0% $531.18

How Rate Sensitive?$25,000 Car Loan Payments

5-Year Term

Interest Rate

$150,000Loan

$200,000Loan

$250,000Loan

3.0% $632.41 $843.21 $1,054.01

4.0% $716.12 $954.83 $1,193.54

5.0% $805.23 $1,073.64 $1,342.05

6.0% $899.33 $1,199.10 $1,498.88

7.0% $997.95 $1,330.60 $1,663.26

8.0% $1,100.65 $1,467.53 $1,834.41

For Comparison:Mortgage Payments

30-Year Term

Interest Rate

$150,000Loan

$200,000Loan

$250,000Loan

3.0% $632.41 $843.21 $1,054.01

4.0% $716.12 $954.83 $1,193.54

5.0% $805.23 $1,073.64 $1,342.05

6.0% $899.33 $1,199.10 $1,498.88

7.0% $997.95 $1,330.60 $1,663.26

8.0% $1,100.65 $1,467.53 $1,834.41

Business

Business Spending on EquipmentPercent Change from Prior Quarter

2005 – 2013* Source: Bureau of Economic Analysis

Recession Periods

*Data through third quarter 2013

Business Spending on Plant Percent Change from Prior Quarter

2005 – 2013* Source: Bureau of Economic Analysis

Recession Periods

*Data through third quarter 2013Note: Data smoothed in Q1 of 2011

Hours WorkedPercent Change from Year Ago

1976 – 2013* Source: Bureau of Labor Statistics

Recession Periods

*Data through third quarter 2013

US Non-Farm EmploymentPercent of Persons Working Full Time (S/A)

1970 – 2013*Source: Bureau Labor of Statistics Recession Periods

LT Average

Top Sources of New JobsU.S.

Source: Bureau of Labor Statistics

Job Growth Wage

Total 2,238,000 $49,200

1 Administrative Services 435,900 $34,870

2 Food Services 347,900 $16,242

3 Retail Trade 316,700 $27,729

4 Health Care 277,900 $45,407

5 Professional services 220,200 $83,357

6 Construction 180,000 $52,294

7 Wholesale Trade 98,500 $68,226

*Job growth January 2014/ January 2013

Jobs are being created at a slow rate.

Those that have jobs are spending a little more but will remain cautious.

Unemployment should trend lower.

Wealth levels are improving.

Consumer Summary:

Businesses are in better shape.

Spending on equipment to continue to grow.

Spending on plant will lag until capacity utilization goes higher…getting close.

Employment to continue to grow.

Business Summary:

Federal Government

Arizona At Risk For Spending CutsFederal Spending as Percent of State GDP

Pew Center for the States

National Average = 5.3%

What will they bring us this spring? Impact of the shutdown was overstated. We don’t want to go through this again though.

Federal Government Summary:

Arizona Jobs?

323 15

Alaska 24

Job Growth 2006Source: US BLSSource: US BLS

Jobs growing

Jobs declining

Top 10

Hawaii

2341 40

Hawaii

Alaska 2

Jobs growing

Jobs declining

Top 10

Job Growth 2010Source: US BLSSource: US BLS

Alaska 50

Jobs growing

Jobs decliningTop 10

Hawaii

Job Growth 2013*Source: US BLS

*Pre-revisions

Arizona RankEmployment Growth

1990-2013Source: Bureau of Labor Statistics

*Pre-revisions

Arizona Employment* Source: ADOA

Sectors in Decline

Change%

Change

Government -4,400 -1.0%

Manufacturing -2,500 -1.6%

Other Services -100 -0.1%

*December 2013/ December 2012

Sectors Improving

Change%

Change

Trade, Transp. & Utilities 15,100 3.1%

Education & Health Services 12,800 3.4%

Financial Activities 10,400 5.8%

Professional & Bus. Services 6,600 1.8%

Leisure & Hospitality 6,400 2.4%

Construction 4,900 4.2%

Information 300 0.8%

Natural Resources & Mining 100 0.8%

Top Sources of New JobsArizona

Source: Bureau of Labor Statistics, ADOA

*Job growth December 2013/ December 2012

Job Growth Wage

Total 49,600 $45,237

1 Financial Activities 10,400 $59,564

2 Health Care 9,500 $47,847

3 Retail Trade 8,200 $29,843

4 Professional Services 6,600 $49,866

6 Food Services 5,000 $16,452

Top Sources of New JobsU.S.

Source: Bureau of Labor Statistics

Job Growth Wage

Total 2,193,000 $49,200

1 Administrative Services 411,300 $34,870

2 Retail Trade 406,900 $27,729

3 Food services 294,000 $16,242

4 Health Care 281,400 $45,407

5 Professional services 175,800 $83,357

*Job growth December 2013/ December 2012

Arizona Job Losses Exceeded U.S.Source: Bureau of Labor Statistics, Seasonally Adjusted Data

Slide stolen from Lee McPheters…

Arizona Jobs Regained Since Bottom of CycleMost Industries Yet To Regain Lost Jobs

Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted, As of December 2013

Greater Phoenix Employment* Source: ADOA

Sectors in Decline

Change%

Change

Manufacturing -2,100 -1.8%

Government -2,100 -0.9%

Natural Resources and Mining

-300 -7.7%

Sectors Improving

Change%

Change

Education & Health Services 10,900 4.2%

Financial Activities 8,300 5.5%

Professional & Bus. Services 6,300 2.2%

Leisure and Hospitality 5,200 2.8%

Construction 5,000 5.6%

Other Services 1,000 1.6%

Information 400 1.3%

Employment Levels: Greater Phoenix back to Peak in 2016?

Source: ADOA

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2,000.0

2,200.0

2,400.0

Recession Periods

*Based on seasonally unadjusted monthly data

Tucson

Tucson Total Nonfarm Employment NSA

1990 – 2013*Source: Bureau of Labor Statistics

Recession Periods

200,000

250,000

300,000

350,000

400,000

450,000

Tucson Employment* Source: ADOA

Sectors in Decline

Change%

Change

Construction -1,000 -6.7%

Government -800 -1.0%

Professional & Business Services

-400 -0.8%

Information -300 -7.0%

Other Services -200 -1.6%

Manufacturing -100 -0.4%

Sectors Improving

Change%

Change

Financial Activities 800 4.2%

Leisure & Hospitality 400 1.0%

Education & Health Services 200 0.3%

Natural Resources & Mining 100 4.8%

Remainder of State

Balance of State Employment* Source: ADOA

Sectors in Decline

Change

Government -1,500

Other Services -900

Manufacturing -300

Sectors Improving

Change

Education & Health Services 1,700

Financial Activities 1,300

Construction 900

Leisure & Hospitality 800

Professional & Business Services 700

Trade, Transp. & Utilities 600

Natural Resources & Mining 300

Information 200

Population?

Why did population flows slow?

Slow job growth, High un(der)employment, Delayed retirement, Difficulty in selling home, Difficulty in qualifying for a loan, Etc.

Arizona Population Growth Was

Slow But Still Top 10 in 2012

Percent Change 2012

U. S. Census Bureau

Arizona Rank - Population Growth1991-2012

Source: Census Bureau

31 States in Red Lost Domestic Population to 19 States in Green

Texas, Florida, Arizona Attracted Most Domestic Migrants in 2012

3AlaskaHawaii

U.S. Census Bureau

Slide stolen from Lee McPheters…

Arizona Domestic Migration Ranking

Source: U.S. Census Bureau

Year Rank

2005 2

2006 3

2007 4

2008 3

2009 11

2011 12

2012 3

*No data available for 2010

Arizona International Migration Ranking

Source: U.S. Census Bureau

Year Rank

2005 8

2006 9

2007 8

2008 9

2009 8

2011 8

2012 18

*No data available for 2010

Housing?

Greater Phoenix Single Family Permits

Source: RL Brown

Year Permits % chg

2004 60,872 27.6%

2005 63,570 4.4%

2006 42,423 -33.3%

2007 31,172 -26.5%

2008 12,582 -59.6%

2009 8,027 -36.2%

2010 6,822 -15.0%

2011 6,794 -0.4%

2012 11,615 71.0%

2013 12,785 10.1%

Single Family Permits Greater Phoenix 1975–2016*

Source: RL Brown & Elliott D. Pollack & company

8.711.1

11.510.6

19.4 18.1

22.623.2

17.915.1

12.010.6

27.428.5

29.631.7

36.035.3

34.736.2

8.06.86.8

11.612.8

15.819.0

# Permits(000)

*2014 – 2016 forecast is from Elliott D. Pollack & Company

Home Prices IndicesGreater Phoenix

1989 – 2013* Source: Macro Markets, LLC; AMLS

MLS Index Case-Shiller Index Trendline (4.0%)

Recession Periods

*Data through November 2013.

2,1012,555

5,2815,795

4,8825,2745,363

7,2417,172

6,8677,493

11,783

2,0881,865

1,4372,038

10,000

11,000

12,000

13,000

Greater Tucson - Single Family Permits1990–2013

Source: Bright Future Real Estate ResearchRecession Periods

Tucson New Median Home Price2000-2013*

Source: Bright Future Real Estate Research

Recession Periods

$267,725

$172,250

$250,403

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

$260,000

$280,000

Tucson Resale Median Home Price2000-2013*

Source: Bright Future Real Estate Research

Recession Periods

$220,000

$135,000

$154,700

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

What Else Will/ Can Happen?

Benefits of the “SUNBELT”

Alaska

Hawaii

Industrial Northwest

Leads to…

• Retirement freedom,• Ability to move,• Comfort with additional spending,• Etc.

Elliott D. Pollack & Company Source: CBRE

Competitiveness Map – 2011, 2012Source : CBRE

Competitiveness Map – 2013Source : CBRE

Too far or just right?

Perception/Marketing Issues - AZ Example:

- Rankings (1-50 example, state and local).

- Branding (state and local).

- Consistent theme (“smart state/city”).

- Strategic research of self and competitors (state and local).

State: Any Areas of Need?

Long term infrastructure support?

How to fund? Limited resources.

Education:

- Studies have become political statements rather than solid, fundamental analyses.

- Remedy? What was done on economic development?

Others?

Forecasting and Budgeting

Things to keep in mind:

Avg. expansion is just under 5 years,The current expansion will hit 5 years this

summer,But, its not the age, it’s the mileage,How many more years of growth?

Forecasting & Budgeting

Things to keep in mind:

Less time to plan for next downturn,Less time to build infrastructure,Etc.

What are you doing now in terms of longer term planning?

Forecasting & Budgeting R

Revenues

Most Likely

Pessimistic

Revenues

Most Likely

Pessimistic

Recession

Normal Expansion

RevenuesMost LikelyPessimistic

Highest

The last dollar that is projected is the most risky.

Marginal analysis. What to do?

True “most likely”? Capital? Reserves?

RevenuesMost LikelyPessimistic

Highest

Questions?

ELLIOTT D. POLLACK & Company

7505 East Sixth Avenue, Suite 100 Scottsdale, Arizona 85251

480-423-9200 P / 480-423-5942 F / www.arizonaeconomy.com / info@edpco.com

• 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

Elliott D. Pollack & Company To: GFOAZ By: Jim Rounds Senior Vice President Elliott D. Pollack...

Documents

Elliott D. Pollack & Company By: Elliott Pollack “The Not So Attractive Recovery” (But it has a great personality!) Outlook 2010 Greater Phoenix Chamber

GFOAZ ABC’s of Municipal Financing May 11, 2007 Presented By:

Pollack Shisendo Review

Elliott D. Pollack & Company The Grind Continues Pinal Partnership December 14 th, 2012 Presented By: Elliott D. Pollack CEO, Elliott D. Pollack & Company

Has The Game Changed? · Has The Game Changed? IREM/CCIM 12th Annual Economic Forecast January 24th, 2019 Presented By: Elliott D. Pollack CEO, Elliott D. Pollack & Company. Elliott

The What and Why of Fund Accounting May 15, 2014 GFOAz 1

Elliott D. Pollack & Company To: ACMA By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company February 6 th, 2013 The Land of Common Non Sense

POLLACK INVESTMENTS 2020 Core Assetspollackinvestments.com/media/attachments/2020/01/16/pollack... · Michael A. Pollack Real Estate Investments 480-888-0888 Paradise Valley Scottsdale

POLLACK-2020.00110 proof 58

Pollack and the Tchaikovsky Competition Pollack and the First International Tchaikovsky Competition 2 it, his professor summarized the requirements and read them to him. Pollack had

Governmental Accounting Basics GFOAZ Quarterly Training May 17, 2012

What Resolution Copper Could Mean to the Superior Region...Painting the Picture . Elliott D. Pollack & Company What drives an economy? Elliott D. Pollack & Company Flow of a Region’s

The Anemia Continues...Elliott D. Pollack & Company Data through October 2014. Percentage of Homes Purchased with Cash Maricopa County – Single Family & Condo 2003 – 2014 Source:

Budget Boot Camp GFOAz Budget Forum October 22, 2015

Elliott D. Pollack & Company Goodwill Industries Operating in California Economic and Fiscal Impact 2012 Presented By: Elliott D. Pollack & company March

Elliott D. Pollack & Company Some Perspectives on Forecasting in an Uncertain Economy GFOAz October 17th, 2014 Presented By: Jim Rounds Sr. VP, Elliott

Pollack Iraq

Elliott D. Pollack & Company Schizophrenia and Economists Paramount Pool and Spa Systems October 6th, 2014 Presented By: Jim Rounds Sr. VP, Elliott D

Todd Pollack

Elliott D. Pollack & Company Outlook 2012: A Grind of a Recovery September 30, 2011 By: Elliott D. Pollack CEO, Elliott D. Pollack & Company