Where We Are and Where We’re Headed...Joseph Von Nessen, Ph.D. Research Economist October 18, 2018 [email protected] South Carolina’s Economy in 2018 Where We Are and

JosephVonNessen,Ph.D.ResearchEconomistOctober18,2018

[email protected]

South Carolina’s Economy in 2018 Where We Are and Where We’re Headed

Both the U.S. and S.C. economies

are strong and stable overall

U.S. GDP Growth (Annualized)

Source: U.S. Bureau of Economic Analysis

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

q110 q310 q111 q311 q112 q312 q113 q313 q114 q314 q115 q315 q116 q316 q117 q317 q118

4.2%

Real Personal Consumption Expenditures Growth


Year/Year Percent Change, SAAR

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Real Private Non-Residential Fixed Domestic Investment Growth

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%q1

11

q211

q311

q411

q112

q212

q312

q412

q113

q213

q313

q413

q114

q214

q314

q414

q115

q215

q315

q415

q116

q216

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q117

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q118

q218



Real Net Export Growth



-15.0%-10.0%-5.0%0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%

q111

q211

q311

q411

q112

q212

q312

q412

q113

q213

q313

q413

q114

q214

q314

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q115

q215

q315

q415

q116

q216

q316

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q117

q217

q317

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q118

q218

GDP = C + I + G + NX Keep your eye on the fundamentals...

Which growth trend will dominate?

Private Investment vs. Net Exports in 2019

U.S. Consumer Sentiment

50.0

60.0

70.0

80.0

90.0

100.0

110.0

120.02001-01-01

2001-08-01

2002-03-01

2002-10-01

2003-05-01

2003-12-01

2004-07-01

2005-02-01

2005-09-01

2006-04-01

2006-11-01

2007-06-01

2008-01-01

2008-08-01

2009-03-01

2009-10-01

2010-05-01

2010-12-01

2011-07-01

2012-02-01

2012-09-01

2013-04-01

2013-11-01

2014-06-01

2015-01-01

2015-08-01

2016-03-01

2016-10-01

2017-05-01

2017-12-01

2018-07-01

Source: University of Michigan

Labor Force Participation

59.060.061.062.063.064.065.066.067.068.0

75.0

77.0

79.0

81.0

83.0

85.0

87.01981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

25-54 AllAges16+

Source: U.S. Bureau of Labor Statistics

10-Year Treasury Constant Maturity Rate Less 2-Year Treasury Constant Maturity Rate

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Source: Board of Governors of the Federal Reserve System

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

10-Year Treasury Constant Maturity Rate


-100.0%

-50.0%

0.0%

50.0%

100.0%

150.0%

19861988199019921994199619982000200220042006200820102012201420162018


2-Year Treasury Constant Maturity Rate (Yr/Yr Pct. Change)

What about South Carolina?

South Carolina Employment Growth

+1.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Jan-16

May-16

Sep-16

Jan-17

May-17

Sep-17

Jan-18

May-18


S.C. Employment Growth

-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%

2016/2017 2017/2018


S.C. Employment Growth

-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%

2016/2017 2017/2018


S.C. Construction Markets

Construction Emp. Growth vs. SC Average

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%Jan-11

Ap

r-11

Jul-1

1Oct-11

Jan-12

Ap

r-12

Jul-1

2Oct-12

Jan-13

Ap

r-13

Jul-1

3Oct-13

Jan-14

Ap

r-14

Jul-1

4Oct-14

Jan-15

Ap

r-15

Jul-1

5Oct-15

Jan-16

Ap

r-16

Jul-1

6Oct-16

Jan-17

Ap

r-17

Jul-1

7Oct-17

Jan-18

Ap

r-18

Jul-1

8

Construction SouthCarolina


S.C. Construction Emp. Growth Components

-20.0%-15.0%-10.0%-5.0%0.0%5.0%10.0%15.0%20.0%

ConstructionofBuildings HeavyandCivilEngineering SpecialtyTradeContractors


275

325

375

425

475

525

575

625

Random Lengths Framing Lumber Composite Index

U.S. Commerce Dept. Places Higher Import Tariffs on

Canadian Lumber

Index up 21% since January 2017

Housing Demand is Strong

Sales Activity

Permit Activity

Inventory

Increasing builder costs

vs.

High demand due to steady employment & wage growth

Tradeoffs!

FHFA House Price Index

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%q1

10

q210

q310

q410

q111

q211

q311

q411

q112

q212

q312

q412

q113

q213

q313

q413

q114

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SouthCarolina Charleston Columbia Gville/Spt. HiltonHead

Source: Federal Housing Finance Agency

E/P Ratio Employment (D)

Permits (S)

A Demand to Supply Ratio

-0.50

0.51

1.52

2.53

3.5

2010 2011 2012 2013 2014 2015 2016 2017 2018

Charleston

-0.50

0.51

1.52

2.53

3.5

2010 2011 2012 2013 2014 2015 2016 2017 2018

Greenville

-0.5

0.5

1.5

2.5

3.5

2010 2011 2012 2013 2014 2015 2016 2017 2018

Columbia

-0.50

0.51

1.52

2.53

2010 2011 2012 2013 2014 2015 2016 2017 2018

Charlotte E/P Ratio Increases 2010-2018

Source: U.S. BLS & U.S. Census Bureau

Total Employment Growth: 2010-2018

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Charlotte Charleston Columbia Greenville SouthCarolina

27.3% 25.7%

16.6%18.9% 17.1%


How are tariffs affecting manufacturing in South Carolina?

Short-run Long-run •  Increased production costs

•  Lower demand (-1.9%)

•  USMCA to replace NAFTA?

•  Adjust global production strategies – a possible benefit for South Carolina

Growth in S.C. Employment Services

-12.0%-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

Jan.'15 Jul.'15 Jan.'16 Jul.'16 Jan.'17 Jul.'17 Jan.'18 Jul.'18


USMCA May Benefit the S.C. Automotive Sector

•  75% of a vehicle’s value must be produced in North America

•  40% of a vehicle must be made by workers earning at least $16/hour

•  “We will allocate more U.S. production for the U.S. market” – Harald Kruger, BMW CEO

•  Moving away from export-oriented manufacturing?

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%Jan-08

Jun-08

Nov-08

Apr-09

Sep-09

Feb-10

Jul-1

0

Dec-10

May-11

Oct-11

Mar-12

Aug-12

Jan-13

Jun-13

Nov-13

Apr-14

Sep-14

Feb-15

Jul-1

5

Dec-15

May-16

Oct-16

Mar-17

Aug-17

Jan-18

Jun-18

SC US

Unemployment Rates

SC: 3.4% US: 3.7%


Average Hourly Earnings of all U.S. Employees

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Annualized Growth in Employer Costs per Hour Worked (2011-2017)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

TotalCompensation Wages&Salaries SupplementalPay Non-ProductivityBonuses

2.8% 2.6%

7.4%

10.7%


Spotlight on Millennials & iGen

Total S.C. Population by Age

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

<15 15-29 30-44 45-59 60-74 75+

915,3721,008,405

918,345 991,136860,084

331,027

Source: American Community Survey

Average Daily Spending by U.S. Adults

$0

$20

$40

$60

$80

$100

$120

18-29 30-49 50-64 65+

$93$108

$95

$75$74

$110$95

$78

2008 2016

Source: Gallup; August 2017

S.C. vs. U.S. Student Loan Debt per Capita

Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

SC US

Average Homeownership by Age 30

Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax & National Student Clearinghouse

Group HomeownershipbyAge30

NoCollege 22%

Associate’sDegree,StudentDebt 24%

Associate’sDegree,NoStudentDebt 31%

Bachelor’sDegreeorhigher,StudentDebt 33%

Bachelor’sDegreeorhigher,NoStudentDebt 40%

The Bottom Line Strong national economic growth w/ steady employment and wage gains

Consumer spending experiencing consistent growth

Broad-based growth across most South Carolina sectors

Tariffs

Labor shortages

Interest rates

Thank You!

Documents

Where We Are and Where We’re Headed...Joseph Von Nessen, Ph.D. Research Economist October 18, 2018 [email protected] South Carolina’s Economy in 2018 Where We Are and