Puget Sound Regional Economic Outlook Electric League of the Pacific Northwest February 23, 2017 Spencer Cohen, PhD Senior Economist Community Attributes Inc.
About Community Attributes Regional Economics Land Use Economics Data Dashboards & Business Intelligence Community & Economic Development Information Design China Business Strategy 2/23/2017 Puget Sound Economy and Outlook 2
Key Takeaways Seattle is ahead of the U.S. and other cities in terms of growth and prosperity. But our region is highly reliant on external markets the U.S. economy and global markets. Instability in either can undermine growth. China and emerging markets are leading sources of growth for the region. Slowdowns in these markets could impair future growth here. Seattle and Washington also face many of the same challenges as the rest of the U.S., e.g., inequality. Region expected to remain strong in 2017, but beyond that many uncertainties could affect local economy. 2/23/2017 Puget Sound Economy and Outlook 3
Outline Leading global indicators National indicators Washington s linkages to the global economy Economic outlook Headwinds Tailwinds Projections 2/23/2017 Puget Sound Economy and Outlook 4
Circular Flows of the Economy 5
What Drives the Regional Economy? Global environment and international trade Stability and volatility in global markets and supply chains Geopolitical considerations U.S. economic conditions Cost of capital Domestic demand Regional conditions Skill supply and competitiveness Innovation and technology leadership Tapping into future growth opportunities, able to seize these opportunities 2/23/2017 Puget Sound Economy and Outlook 6
Global Economic Trends
Global Growth, 2000-2015 Annual change (%), constant prices Sources: International Monetary Fund, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 8
Global Trade Total merchandise and services trade, current USD Services Merchandise and Commodities Global trade fell 11.4% in 2015 first y/y decline since 2009 (20.4%) Sources: World Trade Organization, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 9
3-Month London Interbank Offered Rate (LIBOR) Percent, Quarterly, Not Seasonally Adjusted, based on U.S. Dollar Sources: ICE Benchmark Administration Limited (IBA), retrieved from FRED, Federal Reserve Bank of St. Louis, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 10
Trade Weighted U.S. Dollar Index: Major Currencies Index Mar 1973=100, Quarterly, Not Seasonally Adjusted Sources: Board of Governors of the Federal Reserve System (US), retrieved from FRED, Federal Reserve Bank of St. Louis, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 11
China: GDP Expenditure Components Sources: OECD.Stat, 2016; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 12
U.S. Economic Trends
U.S. Unemployment Rate Sources: U.S. Bureau of Labor Statistics, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 14
Weekly UI Claims, 4-week Moving Average Sources: Federal Reserve Bank of St. Louis, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 15
U.S. Real GDP Growth, Annual Sources: Federal Reserve Bank of St. Louis, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 16
Real Income and GDP Change over time, 1986-2015 Sources: Federal Reserve Bank of St. Louis, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 17
U.S. Manufacturing Jobs Millions of jobs China s entry into the WTO Sources: U.S. Bureau of Labor Statistics, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 18
U.S. Share of Global Manufacturing Output Sources: IMF, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 19
U.S. Productivity Measures Sources: Federal Reserve Bank of St. Louis, 2017; U.S. Bureau of Labor Statistics, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 20
Automation or Trade? Estimated Worldwide Supply of Industrial Robots 2/23/2017 Puget Sound Economy and Outlook 21
Puget Sound Economic Growth
Economic Growth and Challenges in the Region Seattle has growing housing and homeless challenges Inequality and middle income jobs growth Transportation concerns and access to employment centers Educational funding and performance 2/23/2017 Puget Sound Economy and Outlook 23
Real Annual GDP Growth Seattle Metropolitan Area and U.S. Sources: U.S. Bureau of Economic Analysis, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 24
Real GDP Growth, 2010-2015 Seattle Metropolitan Area Sources: U.S. Bureau of Economic Analysis, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 25
Seattle Employment Quarterly employment, year-over-year change, Seattle MSA Sources: U.S. Bureau of Labor Statistics, 2017; Community Attributes Inc., 2017. 2/23/2017 Puget Sound Economy and Outlook 26
Unemployment Rate Seattle Metro Area, Washington State, and U.S. Sources: Washington State Employment Security Department, 2017; Community Attributes Inc., 2017. Metro area represented by the Seattle-Bellevue-Everett Metropolitan District. Not seasonally adjusted. 2/23/2017 Puget Sound Economy and Outlook 27
Population Change King County and the U.S., 2000-2016 Sources: Washington State Office of Financial Management, 2016; U.S. Census Bureau, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 28
Productivity Gains Real GDP per worker, Seattle-Tacoma-Bellevue, WA 2015 $ 2001-2014 CAGR: 1.4% 2001-2014 CAGR: 1.0% 2001-2014 CAGR: 0.7% Sources: U.S. Bureau of Economic Analysis, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 29
Real Median Household Income Indexed to 1989 Sources: Washington State Office of Financial Management, 2016; U.S. Census Bureau, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 30
Income Gains Percentage change in real wages (2015 $), 2009-2015, Seattle-Tacoma-Bellevue, WA Sources: Washington State Employment Security Department, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 31
Middle Wage Jobs by Occupation Group Jobs that pay between $38,000 and $77,000 in King County At an average of 1.3 earners per households, jobs that support middle household incomes range in pay from $38,000 to $77,000 per year. Jobs in this wage range increased by 10,000 in Seattle from 2005 to 2013 (0.3% CAGR). All other jobs increased by 135,000 (1.5% CAGR). 2/23/2017 Puget Sound Economy and Outlook 32
Middle Wage Openings by Sector Jobs that pay between $38,00 and $77,000 in King County, 2015 Total Middle Wage Jobs 127,600 68,700 57,300 57,000 51,900 40,900 40,000 The Services sector had 6,000 middle wage job openings in 2015, the most of any sector. Information had the highest growth rate of middle wage jobs from 2014 to 2015. In 2015, 4.9% of the sector s middle wage jobs were from new openings. 38,100 28,400 27,900 Sources: Washington State Employment Security Department, 2016; Bureau of Labor Statistics, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 33
Sources of Regional Growth
Sources of Growth Leading industries Trade Investment
Aerospace Business Revenues (2015 $) Sources: Washington Department of Revenue, 2016; Federal Reserve Bank of St. Louis, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 37
Aerospace & Related Jobs by County, 2015 Sources: Washington State Employment Security Department, 2016; Washington Aerospace Partnership, 2013 and 2015; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 38
Aerospace Economic Impacts, 2012, 2014, and 2015 Sources: Washington Aerospace Partnership, 2013 and 2015; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 39
Information & Communication Technology Sources: U.S. Bureau of Labor Statistics, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 40
Maritime Jobs, 2012-2015 Sources: U.S. Census Bureau, 2016; Washington State Employment Security Department, 2016; Community Attributes Inc., 2016. Maritime Sector employment increased by 5,200 jobs from 2012 to 2015, largely driven by growth in the commercial fishing and seafood products subsector and boat and ship building, repair, and maintenance. This represents a compound annual growth rate of 2.7%. 2/23/2017 Puget Sound Economy and Outlook 41
Defense Spending in Washington Defense industry contracts supported 56,300 jobs in Washington in 2014. Additional 100,000 civilian and military defense personnel in state. Sources: Washington Military Alliance, 2015; Community Attributes Inc., 2015. 2/23/2017 Puget Sound Economy and Outlook 42
Washington State Goods Exports, 2002-2015 Sources: U.S. Census Bureau, 2016; Federal Reserve Bank of St. Louis, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 43
Export Markets for Washington Top merchandise and commodity markets, 2016 Sources: U.S. Census Bureau, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 44
Workers in Foreign Invested Firms Seattle Region, 2007-2014 (estimated) Washington ranks 35 th in FDI jobs/total workforce (2014). Seattle ranked 25 th in cumulative greenfield FDI, 2009-2015. Washington ranked 25 th in Chinese FDI from 2000-2015, and 29 th on per capita basis. Sources: U.S. Bureau of Economic Analysis, 2016; U.S. Bureau of Labor Statistics, 2016; Community Attributes Inc., 2016; Brookings Institute, 2016; Rhodium Group, 2016. 2/23/2017 Puget Sound Economy and Outlook 45
Economic Outlook
Headwinds Slowdown in China Trump administration and uncertainty on domestic and foreign policy issues Political and social instability Venezuela Middle East Syria, Yemen, Iran Putin South China Sea North Korea Durability of NATO Brexit Populism and nationalism in Europe Global growth weak global growth projections and decline in trade Alternative to TPP without the U.S. Uncertainty around future of ACA Climate Change 2/23/2017 Puget Sound Economy and Outlook 47
Tailwinds Continued growth at Amazon, tech industry overall Boeing aircraft orders and backlog Strength of U.S. economy Higher yields on expectations of fiscal stimulus and regulatory policy easing 2/23/2017 Puget Sound Economy and Outlook 48
Global Growth, Historic and Projections World GDP at PPP, Current dollars, 191 countries Sources: International Monetary Fund, 2015; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 49
Global Growth Will Slow Down Region 2003-2008 2009-2016 2016-2021 World 4.9% 3.7% 3.7% Major Advanced Economies 2.0% 1.8% 1.8% Emerging and Developing Asia 9.3% 7.3% 6.3% Emerging and Developing Europe 5.6% 3.4% 3.3% One of the biggest stories globally will be continued slowdown in Asia. China at the heart of this. Sources: International Monetary Fund, 2015; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 50
China s Growth (annual growth, inflation adjusted) Unresolved excess debt, especially among local government and SOEs. Rising labor costs. Expected slowdown underway. Sources: International Monetary Fund, 2015; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 51
Growth among Washington s Leading Export Markets Rank Country CAGR 2000-2016 CAGR 2016-2020 Difference 1 China 9.4% 6.0% -3.4% 2 Japan 0.7% 0.5% -0.3% 3 Canada 1.9% 1.9% 0.0% 4 South Korea 3.9% 3.0% -0.8% 5 United Arab Emirates 4.1% 3.2% -0.9% 6 United Kingdom 1.7% 1.6% -0.1% 7 Taiwan 3.4% 2.1% -1.3% 8 Saudi Arabia 3.7% 2.3% -1.4% 9 Netherlands 1.2% 1.7% 0.6% 10 Turkey 4.0% 3.2% -0.8% Sources: International Monetary Fund, 2015; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 52
Boeing Aircraft Forecast Boeing currently has a backlog of 5,635 orders. Source: The Boeing Company, 2016. 2/23/2017 Puget Sound Economy and Outlook 53
Annual Employment Historic and forecast, Central Puget Sound Region Sources: Washington State Employment Security Department, 2016; Community Attributes Inc., 2016. 2/23/2017 Puget Sound Economy and Outlook 54
Commercial Real Estate Development Pipeline 2/23/2017 55
Residential Real Estate Development Pipeline 2/23/2017 56
Synopsis and Takeaways on Future Growth Seattle area has strong, tradable industries that will support growth. Major concerns are global in nature declines in trade and economic softening in major export markets could weaken growth in the region. Seattle home to major hubs in ICT, aerospace, and maritime all have strong prospects for growth, assuming trade is not disrupted. Growth has not been even in the region. Housing increasingly unaffordable for many, contributing to homelessness. Slow, downward trend in globalization is possibly on the horizon. 2/23/2017 Puget Sound Economy and Outlook 57
Q&A Spencer Cohen, PhD spencer@communityattributes.com 206 523 6683 2/23/2017 Puget Sound Economy and Outlook 58