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The 2016–2017 Employment Forecast for Holland-Ottawa County Area

This presentation discusses the employment forecast for the Holland-Ottawa County area. It analyzes the current state of the economy, exploring factors such as GDP, consumer confidence, and employment growth. It also addresses potential challenges and opportunities that may arise in the coming years.

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The 2016–2017 Employment Forecast for Holland-Ottawa County Area

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  1. The 2016–2017 Employment Forecast for Holland-Ottawa County Area Can it get any better than this? Randall Eberts Brian Pittelko W.E. Upjohn Institute for Employment Research January 12, 2016

  2. A Special Thanks to … for its support of this presentation… and to …for sponsoring this event.

  3. Why am I here…and not this guy?

  4. The answer… Retirement and… …a new grandson

  5. "Investors have started the new year in panic mode," said Ed Yardeni, HAPPY NEW YEAR!!?? Crude oil continues to nosedive. Crude plunged as much as 4% to $32.10 a barrel, the lowest level since late 2003. Most of the blame goes to China Investors are also alarmed by the decline in China’s currency

  6. Others think stocks will rebound from the China fears, which is exactly what happened last summer. "There isn't really some new structural smoking gun for the economy and markets like mortgages were back in 2008," Kopp said. This bull market will celebrate its seventh anniversary in early March.

  7. The news last week wasn’t new—slowing Chinese economy and another bad week for China’s stock market…

  8. But once again the U.S. stock market reacted to the “news.” 6% decline in the first week

  9. But let’s put last week behind us and look at why 2016 should not be 2008 • China stock market problems do not equal a global financial meltdown • Strong fundamentals…at least GDP and employment • Growing consumer confidence and solid balance sheet • No apparent bubbles; housing coming back Tempered by… • Weak international economies • Continued strong stimuli in US • Strong dollar (good for low inflation and imports/bad for exports) • Mental fatigue (whatever that means)

  10. What’s on the docket this morning… • National view of what the economy looks like today compared to 2007 • Turn to the state economy to take its pulse and see how it might affect Ottawa County’s economy in 2016 • Focus on the Ottawa County’s economy and what may lie ahead • Which all leads up to … 2016-2017 Employment Forecast

  11. National

  12. GDP is still relatively strong and expected to keep chugging along through 2016 Q1 2016 Q1 2008

  13. Employment growth is quite strong…last three months it was above the 24-month average of 240,000 and above the 63-month average of 205,000 per month 24-month average 2014-2015 of 240,000 24-month average 2006-2007 of 134,000

  14. The consensus forecast sees employment growth continuing at an average monthly increase of 197,000 …whereas 2008 was a blood bath, losing close to 1 million jobs Consensus forecast

  15. Forecasts look for continued employment growth in the next two years 258,000/ mth 221,000/mth 197,000/mth 133,000/mth Source: University of Michigan RSQE & Upjohn Institute

  16. Demand for workers is strong…number of job seekers per opening is back to pre-recession levels Source: BLS Job Opening and Labor Turnover.

  17. Question is whether supply can keep up… Employment growth depends upon: • Population growth, primarily immigration • Labor force participation growth • Employment per labor force (flip side of natural rate of unemployment) Over the long-run, many analysts believe that the trends are moving in the wrong direction: • Population growth is slowing from 1.2 percent to less than 1 percent, unless immigration picks up. • As the workforce ages and young people postpone entering the workforce, LF participation continues to fall

  18. Facing possible skills shortage of those in the labor force…but has not caused wages to increase Source: BLS.

  19. In the past five years, consumer confidence has risen and so has household debt, but not where it was in 2008—135% of disposable income v. 103% now Source: New York Federal Reserve and Conference Board.

  20. Consumers are not spending beyond their means…rate falling as more people are working Source: BEA.

  21. What about possible bubbles?

  22. A housing bubble? No, home prices have recovered and are back to about where they were before the recession Source: Federal Housing Finance Agency.

  23. Stock market bubble? No, price-to-earnings ratio slightly below average since 2001 That’s a bubble

  24. Is there a bubble in the auto industry? No, sales have been gradually moving upward… Source: New York Federal Reserve and Conference Board.

  25. …and in the long-term it looks like we’re just returning to “Normal” Source: BEA.

  26. Car Industry Fundamentals • In 2014, the average age of a vehicle on the road was 11.4 years. Come on people get with the program. • With low gas prices, CUVs, SUVs, and pick-ups are back • According to the BLS, auto prices are trending with the prices of all goods • U of M is forecasting car sales to reach 18 million units in 2016 and 2017. Wow! • Imports may be on the rise as higher dollar value makes imports cheaper

  27. Other Bubbles? • Oil? No, current OPEC policies appear aimed at keeping new oil reserves off line, by keeping prices low. If it raises its price, supply will likely increase. • Housing prices in major cities? No. • Yet, you may never see what hits you

  28. Concerns: Sluggish international economies, with some teetering on the edge of another recession and China losing steam China U.S Source: OECD.

  29. Even though China continues to be a larger player in the world economy, it’s share of the world equity market is quite small 2014

  30. Stimulus is still present: Even with the recent Fed Funds hike, short-term interest rates are close to zero… Source: New York Federal Reserve and BLS CPI.

  31. The Banking Situation Looks Calm Source: BEA and Federal Reserve.

  32. One reason the Fed has been reluctant to raise rates is the low inflation rate: below the Fed’s target of 2%. Source: BEA PCE Price Index.

  33. The value of the dollar has skyrocketed in recent months…helps to keep down inflation but could be trouble for manufacturing and other export-heavy sectors Biggest rally in 40 years Source: BEA and Federal Reserve.

  34. Is the economy getting tired? Only 4 business cycles have ever lasted longer than our current cycle of 96 months…and all but one occurred since 1960 1960-1969 1991-2001

  35. 1991-2001 If we could replicate the 1990s, we could enjoy another 3 years of expansion before we’re the longest in US history 1981-1990 2001-2007 2007-present

  36. At this stage of the business cycle, interest rates were considerably higher, which means those expansions were sustainable without the extra stimulus this one is still receiving

  37. Summing up the national scene • It is hard to find a cause for a recession in 2016—strong fundamentals: GDP, jobs, confidence, debt • However, there are some headwinds • Sluggish international markets, particularly China’s slowing growth rate • High value of the dollar could slow manufacturing and other exports even more • High value of the dollar will moderate inflation but that could prevent the Fed from raising interest rates, which may be good now but not good if we head into another recession • Labor and skills shortages (perceived or actual)

  38. Michigan

  39. Michigan Employment Trends • From 3rd Quarter 2014 to 3rd Quarter 2015, employment increased by 90,000 jobs • Manufacturers added 24,000 jobs during the four quarters; US added only 126,000 • Michigan’s GDP grew 4.5% in Q2, 13th best in US • If you are willing to assume an employment multiplier for manufacturing of 3.8, all of the state’s employment growth during the period was due—directly and indirectly—to its manufacturers Source: University of Michigan.

  40. Manufacturing clearly stands above the other sectors Source: BLS CES.

  41. Again, possible skills shortages are not reflected in higher wages Source: BLS CES.

  42. Latest University of Michigan Employment Forecast shows continued growth Employment forecast 4th quarter to 4th quarter: 2015 89,100 jobs 2016 61,100 jobs 2017 64,800 jobs Source: University of Michigan RSQE Nov, 2015.

  43. Michigan employment forecasted to grow over the next 2 years but at a slightly slower pace than nation Source: University of Michigan RSQE & Upjohn Institute

  44. The state’s unemployment rate continues to decline and stands close to the nation’s: 5.1 v. 5.0 Source: BLS LAUS.

  45. Ottawa County

  46. Ottawa County’s employment patterns are pretty well balanced…with most commuters heading east and northeast Commute into Ottawa County 50,956 Commute out of Ottawa County 63,973 Live and work in Ottawa County 55,840

  47. Manufacturing continues to dominate employment in Ottawa County…has created more jobs than the other sectors Source: BLS CES

  48. Ottawa County’s unemployment rate is almost 2 points lower than the nation’s, yet it wasn’t spared during the recession Source: BLS LAUS and Upjohn Institute.

  49. The decline in the area’s unemployment rate is a healthy combination of an increase in employment and more people coming into the labor force Source: MI Labor Market Indicators, Local Area Unemployment Statistics

  50. While following the state down during the depression, Ottawa County has generated 10% more jobs since the last peak Source: BLS LAUS and Upjohn Institute.

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