Economic Outlook: Cyclical Recovery, Structural Challenges
Georgia Economic Outlook
John E. Silvia, Chief Economist
December 11, 2013
Where Are We Now?
Interest
Rates
Inflation
Growth
Five benchmarks for good
decision making
Profits
Source:
Georgia Economic Outlook
2
The Dollar
Wells Fargo vs. Consensus
Expectations for the Future
§  Sustained below-trend growth
§  Employment—cyclical and structural change
§  Still cautious on consumer segments
How do we differ from
consensus?
§  Housing improving—multifamily especially
§  State and local governments—still restructuring
§  Unsustainable long-run fiscal policy
§  Europe exits recession
Georgia Economic Outlook
3
What We Get Versus What We Expect
U.S. Real GDP
Bars = CAGR
Line = Yr/Yr Percent Change
10%
10%
GDP - CAGR: Q3 @ 2.8%
8%
GDP - Yr/Yr Percent Change: Q3 @ 1.6%
6%
6%
Forecast
4%
Sustained recovery in
2014, but still below historical
experience—benchmark 2.75
percent is trend from 1982-2012
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-6%
-8%
-8%
-10%
2000
-10%
2002
2004
2006
2008
2010
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
8%
4
2012
2014
Private Sector vs. Public Sector
8%
The economy is rebalancing
back to private sector demand
Real Final Sales to Private Domestic
Purchasers vs. Government Spending
8%
6%
6%
4%
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
Both series are Year-over-Year Percent Changes
-6%
Final Sales to Private Dom. Purch.: Q3 @ 2.4%
Gov. Consumption & Investment: Q3 @ -2.8%
-8%
-8%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
-6%
5
Manufacturing: Production and Jobs
Production & Jobs in Manufacturing Sector
Index, 2007=100 on Left Axis, Right Axis in Millions
The gap between jobs and
production in the manufacturing
sector has become massive
120
20
100
18
80
16
60
14
40
12
Manufacturing Production: Oct @ 96.3 (Left Axis)
Manufacturing Employment: Nov @ 12.0 Million (Right Axis)
20
10
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Dept. of Labor, Federal Reserve Board and Wells Fargo Securities, LLC
Georgia Economic Outlook
6
Initial Unemployment Claims: Cyclical
Initial Claims for Unemployment
Seasonally Adjusted, In Thousands
700
650
600
Signaling continued, moderate
job gains ahead
700
Year-over-Year Percent Change: Nov-30 @ -19.5%
Initial Claims: Nov-30 @ 298.0 Thousand
4-Week Moving Average: Nov-30 @ 322.3 Thousand
52-Week Moving Average: Nov-30 @ 343.7 Thousand
650
600
550
550
500
500
450
450
400
400
350
350
300
300
250
250
86
88
90
92
94
96
98
00
02
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
7
04
06
08
10
12
Employment: Structural
Employment-Population Ratio
16 Years and Over, Seasonally Adjusted
Structural Change:
A much lower base to support
growth and spending, especially
for entitlements
65
65
64
64
63
63
62
62
61
61
60
60
59
59
58
58
Employment-Population Ratio: Nov @ 58.6
57
57
86
88
90
92
94
96
98
00
02
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
8
04
06
08
10
12
Consumer Spending
Real Personal Consumption Expenditures
Bars = CAGR
Line = Yr/Yr Percent Change
8%
8%
6%
6%
4%
Subpar recovery suggests slower
consumer spending and lower
state sales tax revenues
compared to the past
Forecast
2%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-8%
2000
-6%
PCE - CAGR: Q3 @ 1.5%
PCE - Yr/Yr Percent Change: Q3 @ 1.8%
-8%
2002
2004
2006
2008
2010
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
4%
9
2012
2014
Income Growth
Income Growth by Quintile
Percent Change from 1984 to 2012, After-Tax Income
After-tax income has increased
the most for the lowest and
highest income households since
the mid-1980s
250%
250%
200%
200%
150%
150%
100%
100%
50%
50%
0%
0%
Lowest 20
percent
Second 20
percent
Third 20
percent
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
10
Fourth 20
percent
Highest 20
percent
Personal Income
Personal Income Sources
October 2013
Transfer
Receipts, 16%
Receipts on
Assets, 13%
Wages and salaries make up less
than half of personal income as
transfer payments make up a
greater share
Wage and Salary
Disbursements,
47%
Rental
Income, 4%
Proprietors'
Income, 9%
Supplement to
Wages and
Salaries, 11%
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
11
Housing
U.S. Housing Starts
Millions of Units
2.4
2.4
2.1
2.1
1.8
1.8
Forecast
1.5
Continued improvement ahead
1.2
1.2
0.9
0.9
0.6
0.6
0.3
0.3
0.0
0.0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
1.5
12
Housing
U.S. Homeowners vs. Renters
Annual Change in Occupied Units, In Thousands
3,000
3,000
Renters: 2012 @ 1,094.8 Thousand
Homeowners: 2012 @ -237.8 Thousand
2,500
The amount of renters has been
accelerating steadily since 2007,
while homeowners have been
declining
2,000
2,000
1,500
1,500
1,000
1,000
500
500
0
0
Series
Break
1981
-500
-500
-1,000
-1,000
-1,500
-1,500
66
70
74
78
82
86
90
94
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
2,500
13
98
02
06
10
Housing: Overcoming the Rise in Rates
Overview
§  Mortgage demand is up and lending standards have
eased (Senior Loan Officers Survey)
§  Housing Affordability: High
§  Rental costs rise faster than cost of ownership
What is the housing
environment looking like now?
§  Consumer confidence/ jobs rising
§  Negative equity decline
Georgia Economic Outlook
14
Housing
Negative Equity by State
Percent of Mortgages Outstanding
Minnesota
Negative equity in homes has
contributed to foreclosures and
reduced labor mobility, but
much improvement has been
seen since 3 years ago
12.6%
16.3%
New Hampshire
14.2%
New Jersey
14.9%
California
15.4%
Q2 2013
15.4%
32.8%
Maryland
17.3%
Ohio
18.8%
19.7%
Rhode Island
18.8%
20.3%
Illinois
20.0%
19.7%
Georgia
20.7%
Michigan
22.2%
28.1%
22.5%
Arizona
38.0%
24.7%
Florida
50.0%
31.5%
Nevada
46.4%
36.4%
U.S.
14.5%
0%
10%
15
68.1%
23.0%
20%
Source: CoreLogic and Wells Fargo Securities, LLC
Georgia Economic Outlook
Q2 2010
18.4%
30%
40%
50%
60%
70%
80%
Inflation & Interest Rates
Core
Monetary
InflationInflation
Policy
Yield
Curve
Key
Drivers
Growth
Real Interest
Rates
Profits
Wage-Price
Spiral
Georgia Economic Outlook
Market
Expectations
16
Interest
Rates
The Dollar
Inflation
Consumer Price Index vs. Producer Price Index
Year-over-Year Percent Change
10%
Overall price growth should not
pose a barrier to continued easy
monetary policy
10%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
CPI: Oct @ 0.9%
-6%
-6%
PPI: Oct @ 0.3%
-8%
-8%
00
01
02
03
04
05
06
07
08
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
17
09
10
11
12
13
Inflation vs. Yields: Negative Real Yields – Three Non-market Buyers
Inflation and the Real Yield
Percent
8.0%
8.0%
5-Year Treasury Note Yield: Dec @ 1.5%
Median Inflation Expect. for 5-10 Yrs: Dec @ 2.8%
7.0%
Inflation expectations exceed
nominal returns
7.0%
6.0%
6.0%
5.0%
5.0%
4.0%
4.0%
3.0%
3.0%
2.0%
2.0%
1.0%
1.0%
1996-2009 Average Median Inflation Expectation for 5-10 Years: 2.9%
0.0%
1996
0.0%
1998
2000
2002
2004
2006
2008
2010
Source: Federal Reserve Board, University of Michigan and Wells Fargo Securities, LLC
Georgia Economic Outlook
18
2012
Corporate Profits: Increasing Role of Global Profits
Corporate Profits
As a Percent of GDP
Profits as a percentage of GDP
are historically high and are
being boosted by profits earned
abroad
14%
14%
12%
12%
10%
10%
8%
8%
6%
6%
4%
4%
2%
Rest of World: Q3 @ 2.5%
2%
Domestic: Q3 @ 10.1%
0%
0%
47 51 55 59 63 67 71 75 79 83 87 91 95 99 03 07 11
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
19
Corporate Profits from Abroad
U.S. Companies listed in the S&P 500 with Greater Than 50 Percent
of Sales Abroad
(A Sample)
Many U.S. companies rely on
the health of international
economies
Georgia Economic Outlook
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§
§
§
§
§
Goodyear Tire
BorgWarner
Priceline.com
Nike
Coca-Cola
Heinz
Proctor & Gamble
Avon
Exxon Mobil
AFLAC
Intel
Applied Materials
Oracle
Johnson & Johnson
20
§
§
§
§
§
§
§
§
§
§
§
§
§
§
Merck
Boeing
Eaton Corp.
Emerson Electric
Fluor
GE
3M
Caterpillar
Cisco
Qualcomm
Apple
eBay
IBM
Symantec
Corporate Profits: Domestic Profits
Domestic Profits
Financial and NonFinancial Corporations, Billions of Dollars
$1,400
$1,400
NonFinancial Corporations: Q3 @ $1,241.1B
Financial Institutions: Q3 @ $464.8B
$1,200
$1,200
$1,000
Big gains in profits have been
from nonfinancial corporations
$1,000
$800
$800
$600
$600
$400
$400
$200
$200
$0
$0
-$200
-$200
01
02
03
04
05
06
07
08
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
21
09
10
11
12
13
Fiscal Policy: Difficult Choices/Chronic Imbalance
Federal Budget Balance
Percentage of GDP
4%
4%
2%
2%
0%
0%
Forecast
-2%
The nation has entered
uncharted waters in fiscal policy
—no balance at 2.75 percent
GDP growth
-2%
-4%
-4%
-6%
-6%
-8%
-8%
-10%
-10%
-12%
-12%
Budget Balance: Q3 @ -4.1%
-14%
2000
-14%
2002
2004
2006
2008
2010
2012
2014
Source: U.S. Department of Commerce, U.S. Department of the Treasury and Wells Fargo Securities, LLC
Georgia Economic Outlook
22
Federal Debt Held by the Public: Unsustainable
Federal Debt Held by the Public
Percentage of GDP, CBO Projection
140%
140%
Federal Debt Held by the Public: 2023 @ 77.0%
Federal debt held by the public
will likely remain near 80
percent
Projected
120%
120%
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20
Source: Congressional Budget Office and Wells Fargo Securities, LLC
Georgia Economic Outlook
23
Federal Government Spending
U.S. Federal Government Mandatory Outlays
Trillions of U.S. Dollars, Projections Begin in 2013
$4.0T
$3.5T
The unfunded liabilities of the
entitlement programs reflect a
commitment to spend in the
future
$4.0T
Other Programs: 2023 @ $0.3T
Income Security: 2023 @ $0.3T
Social Security: 2023 @ $1.4T
Healthcare Programs: 2023 @ $1.6T
$3.0T
$3.0T
$2.5T
$2.5T
$2.0T
$2.0T
$1.5T
$1.5T
$1.0T
$1.0T
$0.5T
$0.5T
$0.0T
2012
$0.0T
2014
2016
2018
Source: Congressional Budget Office and Wells Fargo Securities, LLC
Georgia Economic Outlook
$3.5T
24
2020
2022
Global Economies: A Strong Dollar Policy?
U.S. Dollar Index
Broad Index
Economic fundamentals and
risks abroad will drive the dollar
130
130
120
120
110
110
100
100
90
90
80
80
US$ Broad Index: Q3 @ 85.3
Long-run Average (1982-2012): 96.99
70
70
82
84
86
88
90
92
94
96
98
Source: Federal Reserve Board and Wells Fargo Securities, LLC
Georgia Economic Outlook
25
00
02
04
06
08
10
12
U.S. Forecast
Wells Fargo U.S. Economic Outlook
Actual
2013
Real Gross Domestic Product
Personal Consumption
Inflation Indicators
PCE Deflator
1
Actual
2011
2012
2013
Forecast
2014
2015
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1.1
2.5
2.8
1.8
1.8
2.4
2.6
2.7
1.8
2.8
1.7
2.3
2.8
2.3
1.8
1.5
2.0
2.0
2.1
2.2
2.3
2.5
2.2
1.9
2.0
2.4
1.4
1.1
1.1
1.1
1.3
1.8
1.8
2.0
2.4
1.8
1.2
1.8
2.2
1.7
1.4
1.6
1.5
1.6
2.1
1.9
2.0
3.1
2.1
1.5
1.9
2.2
4.1
1.1
2.3
5.2
4.2
4.3
4.4
4.5
3.4
3.6
2.5
4.0
4.7
2.1
4.5
6.3
5.0
4.1
5.4
6.2
5.3
7.9
7.0
4.5
5.3
5.9
76.2
77.5
75.2
76.5
77.3
77.5
77.8
78.3
70.9
73.5
76.4
77.7
78.9
7.7
7.6
7.3
7.2
7.1
7.0
7.0
6.9
8.9
8.1
7.5
7.0
6.7
0.96
0.87
0.89
0.94
1.03
1.13
1.18
1.20
0.61
0.78
0.93
1.10
1.25
2
Consumer Price Index
Industrial Production
1
Corporate Profits Before Taxes
Trade Weighted Dollar Index
Unemployment Rate
Housing Starts
Forecast
2014
2
3
4
5
Quarter-End Interest Rates
Federal Funds Target Rate
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.44
Conventional Mortgage Rate
3.57
4.07
4.49
4.30
4.40
4.50
4.60
4.70
4.46
3.66
4.11
4.55
4.95
10 Year Note
1.87
2.52
2.64
2.60
2.70
2.80
2.90
3.00
2.78
1.80
2.41
2.85
3.25
Forecast as of: November 13, 2013
1
C ompound Annual Growth Rate Quarter-over-Quarter
2
Year-over-Year Percentage C hange
3
Federal Reserve Major C urrency Index, 1973=100 - Quarter End
4
Millions of Units
Annual Numbers Represent Averages
5
Source: U.S. Department of Commerce, U.S. Department of Labor, Federal Reserve Board, Freddie Mac and Wells Fargo Securities, LLC
Georgia Economic Outlook
26
Georgia
Georgia – Economic Activity Index
Georgia Economic Activity Index
Year-over-Year Percent Change
Economic activity in Georgia is
still experiencing negative rates
of growth
2%
2%
1%
1%
0%
0%
-1%
-1%
-2%
-2%
Georgia: Q2 2013 @ -0.2%
USA Index: Q2 2013 @ -0.2%
-3%
-3%
1981
1987
1993
Source: Moody’s Analytics and Wells Fargo Securities, LLC
Georgia Economic Outlook
28
1999
2005
2011
South Atlantic Personal Income Growth
Percent Change in Personal Income by State
Q2 2012 to Q2 2013
DE
2.2%
WV
1.2%
OK
3.5
VA
2.5%
DC
2.3%
MD
2.2%
NC
2.0%
Georgia falls in the middle of the
road as personal income growth
goes within the South Atlantic
region
TX
3.7
GA
2.7%
SC
2.1%
FL
3.4%
U.S. = 2.7%
Greater than 3.2%
2.8% - 3.2%
2.4% - 2.8%
2.0% - 2.4%
Less than 2.0%
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
29
Georgia – Employment Growth & Unemployment Rate
Employment growth in the state has been broad based with most sectors experiencing growth
in October. The state’s unemployment rate remains above the national average.
Employment
Unemployment Rate
Georgia Employment Growth By Industry
Georgia vs. U.S. Unemployment Rate
Year-over-Year Percent Change, 3-MMA
Seasonally Adjusted
12%
Total Nonfarm
Trade, Trans. & Utilities
12%
10%
Government
Prof. & Bus. Svcs.
10%
More
8%
8%
Number of
Employees
6%
6%
4%
4%
Educ. & Health Services
Leisure and Hospitality
Manufacturing
Financial Activities
Less
Other Services
2%
Construction
Information
October 2013
-4%
-2%
0%
0%
2%
4%
6%
8%
0%
90
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
2%
Unemployment Rate: Oct @ 8.1%
United States: Oct @ 7.3%
30
92
94
96
98
00
02
04
06
08
10
12
South Atlantic Unemployment Rates by State
Unemployment Rate by State
October 2013
DE
6.8%
DC
8.9%
WV
6.2%
VA
5.6%
MD
6.7%
NC
8.0%
Georgia has a relatively high
unemployment rate compared to
its peers
SC
7.5%
GA
8.1%
U.S. = 7.0%
FL
6.7%
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
31
<6.0%
6.0% - 6.9%
7.0% - 7.9%
8.0% - 8.9%
>9.0%
Georgia – Home Prices and Construction
Home prices still have not returned to their prerecession peak, however, they have experienced
a recovery similar to the nation’s. Home building is experiencing a modest upward trend for
both single- and multifamily homes.
Housing Permits
CoreLogic HPI: GA vs. U.S.
Georgia Housing Permits
Index, 2000=100, Not Seasonally Adjusted
Thousands of Permits, Seasonally Adjusted Annual Rate
220
Thousands
220
United States: Oct @ 165.0
200
200
Georgia: Oct @ 122.4
180
160
160
140
140
120
120
100
100
80
80
60
60
40
94
96
98
00
02
04
06
08
10
80
80
60
60
40
40
20
20
0
12
0
90
Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
100
Single-Family Average (1998-2003): 71,883
40
92
120
Single-Family: Oct @ 24,504
Single-Family, 12-MMA: Oct @ 22,915
Multifamily, 12-MMA: Oct @ 10,494
100
180
90
120
32
92
94
96
98
00
02
04
06
08
10
12
Thousands
Home Prices
Georgia – Gross State Product
Gross State Product growth in Georgia has remained roughly in line with the nation. The
largest portions of GSP comes from the trade, transportation and utilities and financial
activities sectors.
Gross State Product
Composition of Gross State Product
Georgia Gross State Product & U.S. GDP
Georgia GSP Composition
Year-over-Year Percent Change
Prof. & Bus.
Svcs.
Manufacturing
12%
12%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
Educ. & Health
7%
-2%
-2%
Leis. & Hosp.
4%
-4%
-4%
U.S. GDP: 2012 @ 2.5%
Georgia GDP: 2012 @ 2.1%
-6%
Government
13%
Information
8%
Construction
3%
Other Svcs.
2%
-6%
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
2012
33
Financial
Activities
18%
Nat. Res. &
Mining
1%
Trade, Trans. &
Utilities
20%
South Atlantic Growth by State
Percent Change in Real GDP
2011-2012
WV
3.3%
VA
1.1%
DC
0.7%
MD
2.4%
NC
2.7%
Georgia’s economic growth was
2.1 percent in 2012, slightly
below the nation’s 2.5 percent
pace of growth
SC
2.7%
GA
2.1%
U.S. = 2.5%
FL
2.4%
-0.1% - 1.2%
1.3% - 1.5%
1.6% - 2.2%
2.3% - 3.2%
3.3%–13.4%
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
34
Georgia – Employment Growth by Industry
Georgia Employment Growth by Industry
3-Month Moving Averages, October 2013
8%
Percent of Total Employees
10% to 20%
5 % to 10%
Less than 5%
3-Month Annualized Percent Change
6%
The majority of industries in
Georgia are recovering
Expanding
Recovering
Construction
4%
Financial Activities
Leisure and Hospitality
2%
Other Services
Educ. & Health Svcs.
Manufacturing
Government
0%
Trade, Trans. & Utilities
Information
-2%
Prof. & Bus. Svcs.
-4%
Decelerating
Contracting
-6%
-6%
-4%
-2%
0%
2%
Year-over-Year Percent Change
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
35
4%
6%
8%
Atlanta, GA
Atlanta – Labor Market
Atlanta’s unemployment rate continues to be elevated relative to the national average, but
nonfarm employment has been experiencing a modest upward trend for several years now.
Unemployment
Employment
Atlanta MSA Unemployment Rate
Atlanta MSA Nonfarm Employment
3-Month Moving Averages
Seasonally Adjusted
12%
12%
10%
Unemployment Rate: Oct @ 7.7%
12-Month Moving Average: Oct @ 8.2%
10%
10%
8%
8%
6%
6%
4%
4%
2%
2%
10%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-8%
0%
0%
91
93
95
97
99
01
03
05
07
09
11
-8%
-10%
13
-10%
91
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
-6%
3-Month Annual Rate: Oct @ 2.4%
Nonfarm: Yr/Yr Pct. Change: Oct @ 2.7%
Household: Yr/Yr Pct. Change: Oct @ 0.6%
37
93
95
97
99
01
03
05
07
09
11
13
Atlanta – Housing Market
Home prices have seen a strong recovery starting in 2012, but are still far from their
prerecession peak. Gains in homebuilding appear to be gaining steam from a very low base.
Home Prices
Housing Permits
Atlanta MSA Housing Permits
CoreLogic Home Price Index: Atlanta, GA
200
Thousands
200
United States: Oct @ 165.0
Atlanta, GA: Oct @ 120.2
180
180
80
80
Single-Family: Oct @ 15,516
Single-Family, 12-MMA: Oct @ 14,164
Multifamily, 12-MMA: Oct @ 8,512
70
Single-Family Average (1998-2003): 49,684
60
160
70
60
160
50
50
40
40
140
140
120
120
30
30
100
100
20
20
10
10
80
80
60
60
0
90
92
94
96
98
00
02
04
06
08
10
12
Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
0
90
38
92
94
96
98
00
02
04
06
08
10
12
Thousands
Thousands of Permits, Seasonally Adjusted Annual Rate
Index, 2000=100, Not Seasonally Adjusted
Commercial Real Estate
Apartment vacancy rates have been steadily declining as completions and net absorptions are
on the rise. On the industrial side, vacancy rates are also falling while net absorptions have
seen modest growth.
Apartment Supply & Demand
Industrial Supply & Demand
Atlanta Apartment Supply & Demand
Atlanta Warehouse Supply & Demand
Percent, Thousands of Units
Percent, Thousands of Square Feet
13%
5.0
16%
8,000
12%
4.0
15%
6,000
11%
3.0
14%
4,000
10%
2.0
13%
2,000
9%
1.0
12%
0
8%
0.0
7%
-1.0
11%
-2,000
10%
-4,000
6%
-2.0
Apartment Completions: Q3 @ 1674 Units (Right Axis)
Warehouse Completions: Q3 @ -9 SF (Right Axis)
Apartment Net Absorption: Q3 @ 2,323 Units (Right Axis)
5%
-3.0
9%
-4.0
8%
Warehouse Vacancy Rate: Q3 @ 11.7% (Left Axis)
4%
2006
2007
2008
2009
2010
2011
2012
2013
-8,000
2006
Source: Reis, Inc., PPR, U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
-6,000
Warehouse Net Absorption: Q3 @ 1,147 SF (Right Axis)
Apartment Vacancy Rate: Q3 @ 6.2% (Left Axis)
39
2007
2008
2009
2010
2011
2012
2013
Augusta, GA
Augusta – Labor Market
Augusta’s unemployment rate stubbornly remains above 8 percent. Household employment
has turned negative more recently and nonfarm payrolls are experiencing subpar growth.
Unemployment
Employment
Augusta MSA Unemployment Rate
Augusta MSA Nonfarm Employment
3-Month Moving Averages
Seasonally Adjusted
12%
12%
12%
Unemployment Rate: Oct @ 8.2%
12-Month Moving Average: Oct @ 8.5%
10%
10%
8%
8%
6%
6%
4%
4%
2%
2%
0%
93
95
97
99
01
03
05
07
09
11
9%
6%
6%
3%
3%
0%
0%
-3%
-3%
-6%
-6%
3-Month Annual Rate: Oct @ -0.4%
Nonfarm: Yr/Yr Pct. Change: Oct @ 1.2%
Household: Yr/Yr Pct. Change: Oct @ -0.4%
-12%
13
41
-9%
-12%
91
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
9%
-9%
0%
91
12%
93
95
97
99
01
03
05
07
09
11
13
Augusta – Housing Market
Augusta’s housing market didn’t experience quite as severe a crash as the rest of the nation, as
both home prices and housing starts took moderate hits compared to other parts of the nation.
Home Prices
Housing Permits
Augusta MSA Housing Permits
CoreLogic Home Price Index: Augusta, GA
Index, 2000=100, Not Seasonally Adjusted
200
180
Thousands
200
180
160
160
140
140
120
120
100
100
80
Augusta, GA: Oct @ 134.8
92
94
96
98
00
02
04
06
08
10
4
3
3
2
2
1
1
0
0
90
12
Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
4
60
40
90
5
Single-Family Average (1998-2003): 2,524
United States: Oct @ 165.0
40
6
Single-Family: Oct @ 1,968
Single-Family, 12-MMA: Oct @ 2,223
Multifamily, 12-MMA: Oct @ 33
5
80
60
6
42
92
94
96
98
00
02
04
06
08
10
12
Thousands
Thousands of Permits, Seasonally Adjusted Annual Rate
Savannah, GA
Savannah – Labor Market
Savannah’s unemployment rate has been declining slowly, but employment growth has also
been trending solidly downward, reflecting the ongoing issue the nation is having with a falling
labor force participation rate
Unemployment
Employment
Savannah MSA Unemployment Rate
Savannah MSA Nonfarm Employment
3-Month Moving Averages
Seasonally Adjusted
10%
10%
8%
8%
6%
6%
4%
12%
12%
8%
8%
4%
4%
0%
0%
-4%
-4%
4%
2%
2%
3-Month Annual Rate: Oct @ 0.3%
Nonfarm: Yr/Yr Pct. Change: Oct @ 0.3%
Household: Yr/Yr Pct. Change: Oct @ -1.7%
-8%
Unemployment Rate: Oct @ 7.7%
12-Month Moving Average: Oct @ 7.9%
0%
0%
91
93
95
97
99
01
03
05
07
09
11
-12%
13
-12%
90
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
-8%
44
92
94
96
98
00
02
04
06
08
10
12
Savannah – Housing Market
Home prices are recovering at a slower pace than the nation. Single-family permits are leading
the way for construction, while multifamily permits have been mostly flat for the past several
years.
Home Prices
Housing Permits
Savannah MSA Housing Permits
CoreLogic Home Price Index: Savannah, GA
Index, 2000=100, Not Seasonally Adjusted
200
Savannah, GA: Oct @ 141.9
United States: Oct @ 165.0
180
Thousands
200
180
4
4
Single-Family: Oct @ 912
Single-Family, 12-MMA: Oct @ 1,210
Multifamily, 12-MMA: Oct @ 517
Single-Family Average (1998-2003): 1,567
160
160
140
140
120
120
100
100
80
80
60
60
40
40
3
3
2
2
1
1
0
90
92
94
96
98
00
02
04
06
08
10
12
Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
0
90
45
92
94
96
98
00
02
04
06
08
10
12
Thousands
Thousands of Permits, Seasonally Adjusted Annual Rate
Commercial Real Estate
Vacancy rates for apartment and industrial have seen marked declines since 2010 in Savannah
Apartment Supply & Demand
Industrial Supply & Demand
Savannah, GA Apartment Vacancy Rate
Savannah Warehouse Supply & Demand
Percent
Percent, Thousands of Square Feet
15%
15%
13%
13%
11%
11%
9%
9%
7%
7%
36%
2,500
34%
2,000
32%
1,500
30%
1,000
28%
500
26%
0
24%
-500
22%
-1,000
20%
-1,500
18%
-2,000
16%
-2,500
14%
-3,000
12%
10%
Apartment Vacancy Rate: Q3 @ 5.2%
5%
2008
8%
5%
2009
2010
2011
2012
46
-3,500
-4,000
-4,500
2008
2013
Source: Reis, Inc., PPR, U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
Warehouse Completions: Q3 @ 0 SF (Right Axis)
Warehouse Net Absorption: Q3 @ -13 SF (Right Axis)
Warehouse Vacancy Rate: Q3 @ 14.2% (Left Axis)
2009
2010
2011
2012
2013
Macon, GA
Macon – Labor Market
Macon’s unemployment rate is largely in line with the other MSA’s in Georgia. Employment
growth remains at subpar levels, however, this is largely inline with what was Macon
experienced during the last economic recovery.
Unemployment
Employment
Macon MSA Unemployment Rate
Macon MSA Nonfarm Employment
3-Month Moving Averages
Seasonally Adjusted
12%
12%
10%
10%
10%
8%
8%
6%
6%
4%
4%
2%
0%
95
97
99
01
03
05
07
09
11
6%
6%
4%
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-6%
91
48
-8%
3-Month Annual Rate: Oct @ 6.1%
Nonfarm: Yr/Yr Pct. Change: Oct @ 1.7%
Household: Yr/Yr Pct. Change: Oct @ -0.6%
-12%
13
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Georgia Economic Outlook
8%
-10%
0%
93
8%
-8%
2%
Unemployment Rate: Oct @ 8.5%
12-Month Moving Average: Oct @ 8.9%
91
10%
93
95
97
99
01
03
05
07
-10%
-12%
09
11
13
Macon – Housing Market
Macon’s housing bubble was not nearly why the rest of the nation experienced, and the current
recovery is also relatively benign. Multifamily construction is leading the way for homebuilding
as single-family permits have essentially been flat.
Home Prices
Housing Permits
Macon MSA Housing Permits
CoreLogic Home Price Index: Macon, GA
Index, 2000=100, Not Seasonally Adjusted
200
Macon, GA: Oct @ 100.9
United States: Oct @ 165.0
180
Thousands
200
180
160
160
140
140
120
120
100
100
80
80
60
60
40
40
2.0
2.0
Single-Family: Oct @ 84
Single-Family, 12-MMA: Oct @ 71
Multifamily, 12-MMA: Oct @ 308
Single-Family Average (1998-2003): 724
1.5
1.0
1.0
0.5
0.5
0.0
90
92
94
96
98
00
02
04
06
08
10
Source: CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC
Georgia Economic Outlook
0.0
90
12
49
1.5
92
94
96
98
00
02
04
06
08
10
12
Thousands
Thousands of Permits, Seasonally Adjusted Annual Rate
Appendix
Wells Fargo Economics Group Publications
Recent Special Commentary
November-01
To join any of our research
distribution lists please visit our
website: http://
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economics
October-31
October-28
October-28
October-28
October-25
October-25
October-24
October-21
October-21
October-18
October-17
October-16
October-16
October-16
October-14
October-09
October-07
October-03
October-03
October-02
October-02
October-02
October-02
October-01
October-01
October-01
September-27
September-27
September-27
September-26
Georgia Economic Outlook
Housing Data Wrap-Up: October 2013
Vitner, Khan & Silverman
Bank Lending: Uneven Improvement
Are Developing Economies Heading for a Crash?
Measuring the State of the U.S. Labor Market: A New Index
Are Developing Economies Heading for a Crash?
Labor Market Dynamics: More Job Openings and Quits
Pennsyvania Economic Outlook: October 2013
The "Unsustainable" Path of Federal Fiscal Policy: Part III
Can America Achieve Stronger Export Growth?
Shutdown Showdown Finale: A Short-Term Bridge to the Next Crisis
Nashville's Economy Strikes the Right Chord
Portland's Economy Shows Consistent Strength
Short-Run Disruption, Long-Run Imbalance
Is There Pent-Up Demand for Consumer Durables?
Household Debt Service Ratio: New Lows, Less Stress
Singapore GDP Stronger Than Expected in Q3
The "Unsustainable" Path of Federal Fiscal Policy: Part II
The "Unsustainable" Path of Federal Fiscal Policy: Part I
Asheville's Recovery Remains Solidly on Track
How Does North Carolina Stack Up Today?
Abenomics Getting Warm Reception from Japanese Business
Naples Four Years After the Recession
Housing Chartbook: September 2013
Will British Consumers Continue to Spend?
Bank Lending: A Perspective on Credit
Corporate Credit: Bond Finance and Power in Reserve
Shutdown Showdown: Deficit Remains the Issue
Silvia, Watt & Zachary
Bryson & Miller
Silvia, Iqbal & Zachary
Bryson & Miller
Silvia & Zachary
Vitner & Wolf
Silvia, Brown & Zachary
Bryson, Quinlan & Griffiths
Silvia & Brown
Vitner & Wolf
Vitner & Silverman
Silvia & Brown
Bryson, Aleman & Brown
Silvia & Miller
Bryson
Silvia, Brown & Zachary
Silvia & Brown
Vitner & Wolf
Silvia, Brown & Griffiths
Quinlan
Vitner & Wolf
Vitner, Khan & Silverman
Bryson & Miller
Silvia & Watt
Silvia & Zachary
Silvia & Brown
Mexico: Tidbits of Better Times Ahead?
Strong Growth in Argentina in Q2 2013
Sequestering Economic Growth?
Why Has U.S. Labor Productivity Growth Slowed?
Aleman
Aleman
Silvia & Brown
Bryson & Watt
51
Wells Fargo Securities, LLC Economics Group
Global Head of Research and Economics
Diane Schumaker-Krieg
Global Head of Research & Economics
Economists
diane.schumaker@wellsfargo.com
Sam Bullard, Senior Economist
Nick Bennenbroek, Currency Strategist
Eugenio J. Alemán, Senior Economist
Anika R. Khan, Senior Economist
tim.quinlan@wellsfargo.com
michael.a.brown@wellsfargo.com
sarah.watt@wellsfargo.com
Michael T. Wolf, Economist
michael.t.wolf@wellsfargo.com
Economic Analysts
Senior Economists
Jay H. Bryson, Global Economist
Tim Quinlan, Economist
Sarah Watt, Economics
john.silvia@wellsfargo.com
Mark Vitner, Senior Economist
azhar.iqbal@wellsfargo.com
Michael A. Brown, Economist
Chief Economist
John E. Silvia
Azhar Iqbal, Econometrician
Zachary Griffiths, Economic Analyst
mark.vitner@wellsfargo.com
Sara Silverman, Economic Analyst
jay.bryson@wellsfargo.com
.
Mackenzie Miller, Economic Analyst
sam.bullard@wellsfargo.com
Blaire Zachary, Economic Analyst
nicholas.bennenbroek@wellsfargo.com
zachary.griffiths@wellsfargo.com
sara.silverman@wellsfargo.com
mackenzie.miller@wellsfargo.com
blaire.a.zachary@wellsfargo.com
Administrative Assistants
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Georgia Economic Outlook
52