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THE ECONOMY IN 2015: LIFT-OFF?

Dr. Mike Walden

Reynolds Distinguished Professor

North Carolina State University

THE NATIONAL ECONOMY

GDP and Employment: back to pre-recessionary levels

Growth rates have accelerated

Confidence up

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REASONS FOR IMPROVEMENT

Rebound from initial slow growth

Housing improvement

Wealth upswing

Continued FED stimulus

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AND, THE PLUNGE IN GAS PRICES

Down 50% since summer

Like a $225 billion tax cut

Doubling of US oil supply in six years

Slowing of usage growth in Asia

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THE FUTURE OF GAS PRICES

Saudis have not cut their supply

Expect US supply to be curtailed

Some rebound in price in 2015

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THE HOUSING MARKET IN 2015

IMPROVEMENT HAS SLOWED

PRE-RECESSIONARY LEVELS NOT FORESEEN

WILL THE MILLENNIALS BUY?

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INFLATION AND INTEREST RATES

INFLATION IS STILL TAME (IS IT TOO LOW?)

SURPRISE: DROP IN LONG-RATES IN 2015

PERMANENT LOW?

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RISING INTERNATIONAL VALUE OF THE $

WILL INCREASE

THE PRICE OF

U.S. EXPORTS

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POLICY IN 2015: ALL EYES ON THE FEDERAL RESERVE

MORTGAGE BUYING HAS STOPPED

RAISING SHORT-TERM INTEREST RATES IS NEXT

WHEN?

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NATIONAL OUTLOOK3% GDP GROWTH

3 MILLION PAYROLL JOBS

5.0% TO 5.5% HEADLINE JOBLESS RATE

INFLATION AND INTEREST RATES STILL LOW

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NATIONAL ECONOMIC ISSUESMissing middle income jobs

Slow wage and salary gains

Technological unemployment

Rising dependency rate

Federal fiscal balance

Infrastructure improvement

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WHAT COULD GO WRONG?EXPANDED UKRANIAN CONFLICT

CHINESE REAL ESTATE IMPLOSION

MIDDLE EAST: IRAN; TERRORIST ATTACK IN SAUDI ARABIA

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NORTH CAROLINA ECONOMY

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NC PAYROLL JOB GROWTH

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2010 2011 2012 2013 20140

20000

40000

60000

80000

100000

120000

ALTERNATIVE MEASURES OF THE NORTH CAROLINA UNEMPLOYMENT RATE 2007: HEADLINE, 4.5%; U5, 5.6%; U6, 8.5%

4,09-3,10

2,10-1,11

3,10-2,11

4,10-3,11

2,11-1,12

3,11-2,12

4,11-3,12

2,12-1,13

3,12-2,13

2,13-1/14

3,13-2,14

4,13-3,14

5

7

9

11

13

15

17

headline U5 U6

%

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MIDDLE-INCOME JOBS HAVE BEEN THE SLOWEST GROWING DURING THE RECOVERY

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Leisure/Hosp.

Other Serv.

Trd/Tranp/Util

Educ/Hlth Care

Construction

Gov't

Manufacturing

Prof/Bus Serv

Information

Financial Serv

-10 -5 0 5 10 15 20 25

USNC

%

GEOGRAPHIC ECONOMIC INEQUALITY ALSO CONTINUES IN NORTH CAROLINA

Raleigh/Cary 15.8% Charlotte 14.1%

Asheville 10.4% North Carolina 9.5% Durham-CH 8.6% Wilmington 8.2% Burlington 7.9% Greenville 6.3% Greensboro-HP 5.7% Winston-Salem 5.4% Jacksonsville 4.6% Hickory 3.2% Goldsboro 2.1% Fayetteville 0.6%

Rocky Mount -2.0%

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105

NCSU INDEX OF NORTH CAROLINA LEADING ECONOMIC INDICATORS

Source: calculations by Dr. Michael Walden

NORTH CAROLINA OUTLOOK

CONTINUED GROWTH

125,000 PAYROLL JOBS

5.0% TO 5.5% HEADLINE JOBLESS RATE

AUTO ASSEMBLY PLANT?

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IN SUMMARY

2015 WILL BE A “GOOD YEAR”

MORE HOUSEHOLDS AND BUSINESSES WILL “GET AHEAD”

CHALLENGES RELATED TO GROWTH RATHER THAN DECLINE!

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