The Comerica U.S. Economic Outlook A Taxonomy of Economic Risk - - PowerPoint PPT Presentation

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The Comerica U.S. Economic Outlook A Taxonomy of Economic Risk - - PowerPoint PPT Presentation

Oct 13, 2022 14 likes •199 views

The Comerica U.S. Economic Outlook A Taxonomy of Economic Risk Factors for 2017 Robert A. Dye Ph.D. Chief Economist, Comerica Bank September 2016 A Taxonomy of Economic Risk Factors Unknown Knowns Unknown Unknowns Standard economic metrics

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The Comerica U.S. Economic Outlook

A Taxonomy of Economic Risk Factors for 2017

Robert A. Dye Ph.D. Chief Economist, Comerica Bank September 2016

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A Taxonomy of Economic Risk Factors

Unknown Knowns Standard economic metrics that come with significant lags…net migration, population, county business patterns Unknown Unknowns We don’t see it coming Both immediate risks and long-term trends Known Knowns Standard economic metrics like GDP, unemployment rate, inflation rate, housing starts …etc Known Unknowns We know there is an issue but the data is sketchy…financial engineering, student debt, disruptive technology, political risk

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A Taxonomy of Economic Risk Factors

Unknown Knowns Standard economic metrics that come with significant lags…net migration, population, county business patterns Unknown Unknowns We don’t see it coming Both immediate risks and long-term trends Known Knowns Standard economic metrics like GDP, unemployment rate, inflation rate, housing starts …etc Known Unknowns We know there is an issue but the data is sketchy…financial engineering, student debt, disruptive technology, political risk

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The Heartbeat of the U.S. Economy

Source: BEA

Real Gross Domestic Product, Annualized Percent Change

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The Heartbeat of the U.S. Economy

Source: BEA

Real Gross Domestic Product, Annualized Percent Change “The Great Moderation” Manufacturing Services Federal Reserve Monetary Policy

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The Heartbeat of the U.S. Economy

Source: BEA

Real Gross Domestic Product, Annualized Percent Change “The Great Moderation”

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Potential GDP As a Guide to Economic Performance

Source: BLS

Labor Force, Pchya 8MA Output per Hour, Pchya 8MA Productivity Growth and Labor Force Growth

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Potential GDP As a Guide to Economic Performance

  • 1

1 2 3 4 5 6 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15

Source: BLS

Labor Force, Pchya 8MA Output per Hour, Pchya 8MA

Productivity Growth and Labor Force Growth

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GDP Forecast, Ongoing Moderate Expansion

Sources: BEA, Comerica Bank

U.S. Real GDP Growth, Annualized Percent Change

Forecast History

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Unemployment Rate Approaching Lower Bound

Payroll Employment, avg monthly diff, ths (L) Unemployment Rate, percent (R) Sources: BLS, Comerica Bank

+151k in August, U. Rate 4.9 Percent

Forecast

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Upward Pressure on Wages Will Continue

Average Hourly Earnings, percent change year ago Unemployment Rate

Source: BLS

Unemployment Rate and Hourly Earnings

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Interest Rate Outlook Clouded by Fed Uncertainty

Fed Funds 10-Year Treasury Bond 30-Year FRM

Sources: Federal Reserve, Comerica Bank

Yield, percent

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2017 Forecast…The 360 View

Downside Risks

  • Inventory correction
  • Global volatility, China, Japan,

Eurozone/Brexit, Russia, MENA

  • Job growth steps down quickly
  • Consumer spending slumps
  • Housing stalls
  • Monetary policy stumbles
  • Foreign exchange rates
  • Investor confidence falls/sell-off

Upside Risks

  • Ongoing strong job growth
  • Households unleash pent-up demand
  • Low energy prices for longer
  • Consumer/Business confidence surges
  • Increased business investment
  • Single-family housing market
  • Increased gov./defense spending
  • China/Europe find traction
  • Risk On!
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A Taxonomy of Economic Risk Factors…How Do We Push the Risk Analysis into the Unknown?

Unknown Knowns Standard economic metrics that come with significant lags…net migration, population, county business patterns Unknown Unknowns We don’t see it coming Both immediate risks and long-term trends Known Knowns Standard economic metrics like GDP, unemployment rate, inflation rate, housing starts …etc Known Unknowns We know there is an issue but the data is sketchy…financial engineering, student debt, disruptive technology, political risk

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Another Taxonomy of Economic Risk Factors

Stability Services vs Manufacturing Consumer vs Export Countercyclical Monetary Policy Fiscal Stabilizers Volatility Financial Markets Rest of the World Commodity Prices Disruptive Technology Sustainable Non-sustainable

Long Term Short Term

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What Looks Like It Is Not Sustainable?

“Risk isn’t a word in my vocabulary. It’s my very existence.”

  • Slash

Monetary Policy Negative Interest Rates, Quantitative Easing, Helicopter Money, Currency Devaluation Geopolitical The European Union, The United Kingdom, China, Japan, The Middle East, Venezuela, Russia The United States Healthcare, Federal Deficit, Income Inequality, Student Debt Pension Funds Commodities Excess Global Capacity, Oil Inventory Accumulation, High Oil Prices

Environmental

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The Michigan Economy Gained Momentum in 2016

70 80 90 100 110 120 130 140 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Michigan Total Economic Activity Index (2008=100)

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Robert A. Dye, Chief Economist Subscribe

www.comerica.com/economics

Follow on Twitter

@Comerica_Econ