Joseph Von Nessen, Ph.D.
Research Economist
January 15, 2020
joey.vonnessen@moore.sc.edu

Is a Recession Looming?
U.S. Expansion
2009-???

Tariff Effects are Now More Visible
The Sources of Concern
Tax Stimulus Has Worn Off
Fed Policy Reversals in 2019

-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
q112 q113 q114 q115 q116 q117 q118 q119
U.S. GDP Growth (Annualized)
Source: U.S. Bureau of Economic Analysis
2.1%

-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
q112 q113 q114 q115 q116 q117 q118 q119
U.S. GDP Growth (Annualized)
Source: U.S. Bureau of Economic Analysis
2.1%
2.1%
3.1%

• Early 2018: U.S. tariffs
– 10 percent tariffs on $250 billion of Chinese goods
implemented
• Late 2018: China retaliates
– Duties on $110 billion of U.S. goods
– 40 percent tariff on U.S. autos
• 2019/2020: Ongoing negotiations
– January 2019: Chinese auto tariffs reduced to 15
percent
– May 2019: U.S. tariffs increased from 10 percent to 25
percent
– December 2019: USMCA passed
– January 2020: U.S. Phase I trade deal with China likely
The Trade Talks Persist...

0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
q113
q213
q313
q413
q114
q214
q314
q414
q115
q215
q315
q415
q116
q216
q316
q416
q117
q217
q317
q417
q118
q218
q318
q418
q119
q219
q319
China’s GDP Growth (Annualized)
+6.0%
Source: Trading Economics, December 2019

Source: Trading Economics, December 2019
Eurozone GDP Growth (Annualized)
+0.2%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
q117 q217 q317 q417 q118 q218 q318 q418 q119 q219 q319

-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
q217 q317 q417 q118 q218 q318 q418 q119 q219 q319
Germany’s GDP Growth (Annualized)
Source: Trading Economics, December 2019
+0.1%

Institute for Supply Management (ISM) Index
30
35
40
45
50
55
60
65
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Manufacturing NonManufacturing
ExpandingContracting

U.S. Gross Output by Industry
Source: U.S. Bureau of Economic Analysis
Year/Year Pct. Change
q318 q319 Change
Manufacturing +7.3% +1.4% -5.9%
Services +6.1% +4.0% -2.1%
All Industries +6.3% +3.5% -2.8%

Total Employment Growth: U.S. vs. S.C.
Source: U.S. Bureau of Labor Statistics, CES, NSA
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
U.S. S.C.
1.7%
2.4%
1.6% 1.6%
2018 2019

0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
U.S. Job Openings Rate U.S. Unemployment Rate
U.S. Job Openings Rate vs. Unemployment Rate
U.S. Unemployment Rate: 3.5%
Source: U.S. Bureau of Labor Statistics, JOLTS SA; CES SA
S.C. Unemployment Rate: 2.4%

Average Hourly Earnings of all U.S. Employees
Source: U.S. Bureau of Economic Analysis
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Prod. & NonSupervisory Emp. All Workers

U.S. Nominal Wage Growth
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2011 2012 2013 2014 2015 2016 2017 2018
Prof. & Tech. Svs. High School Dip. Bachelor's and Above
Source: U.S. Bureau of Labor Statistics, Sept. 2019, 3-Yr. Rolling Average

-$100.0
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
Jan.'10
Jan.'11
Jan.'12
Jan.'13
Jan.'14
Jan.'15
Jan.'16
Jan.'17
Jan.'18
Jan.'19
Real Personal Consumption Expenditures
Source: U.S. Bureau of Economic Analysis
Year/Year Change, in Billions

U.S. Retail Sales Growth
Source: U.S. Census Bureau
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0% 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Delinquency Rates on Consumer Loans
Source: Board of Governors of the Federal Reserve System
0
0.01
0.02
0.03
0.04
0.05
0.06
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

U.S. Consumer Sentiment
Source: University of Michigan
40
50
60
70
80
90
100
110
Jan.'10
Jan.'11
Jan.'12
Jan.'13
Jan.'14
Jan.'15
Jan.'16
Jan.'17
Jan.'18
Jan.'19

“Small business optimism posted a modest decline...while
continuing its exceptionally strong two-year trend.”
“Compensation increases to its highest in nearly 30 years while
expected business conditions and expected real sales scale back.”
- NFIB Research Foundation, Dec. 2019

What about South Carolina?

South Carolina Employment Growth
+1.5%
Source: U.S. Bureau of Labor Statistics, CES, NSA (Year/Year Pct. Change)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Jan.'11
Jan.'12
Jan.'13
Jan.'14
Jan.'15
Jan.'16
Jan.'17
Jan.'18
Jan.'19
+1.5%

South Carolina Employment Growth
+1.5%
Source: U.S. Bureau of Labor Statistics, CES, NSA (Year/Year Pct. Change)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Jan.'11
Jan.'12
Jan.'13
Jan.'14
Jan.'15
Jan.'16
Jan.'17
Jan.'18
Jan.'19
+1.5%

S.C. Employment Growth
Source: U.S. Bureau of Labor Statistics, CES, NSA
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
2015-2019 2018-2019

S.C. Employment Growth
Source: U.S. Bureau of Labor Statistics, CES, NSA
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
2015-2019 2018-2019

How are auto tariffs affecting
manufacturing in South Carolina?
• Short-run effects: Increased Costs
• Long-run effects: Potential Changes in
Global Production Strategies

-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
South Carolina Export Volume (TEUs)
Source: South Carolina Ports Authority; November 2019
Annual Growth Rate: Rolling 3-month Average
Chinese 40% retaliatory tariffs implemented
Chinese 40% retaliatory tariffs suspended

South Carolina Cargo Volume (TEUs)
Source: South Carolina Ports Authority; November 2019
Annual Growth Rate: Rolling 3-month Average
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
Exports Only Total Cargo Volume

-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
2013 2014 2015 2016 2017 2018 2019
Manufacturing Trans. Equip. Manuf. Employment Services
Changes in S.C. Manufacturing Trends
Source: U.S. Bureau of Labor Statistics

S.C. Employment Growth
Source: U.S. Bureau of Labor Statistics, CES, NSA
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
2015-2019 2018-2019

New U.S. Single-Family Housing Sales
Source: U.S. Bureau of Labor Statistics
300
350
400
450
500
550
600
650
700
750
800
2014 2015 2016 2017 2018 2019
(in thousands)

Labor costs
Lumber costs
Interest rates

Labor costs
Lumber costs
Interest rates

150
170
190
210
230
250
270
290
Jan.'16 Jul.'16 Jan.'17 Jul.'17 Jan.'18 Jul.'18 Jan.'19 Jul.'19
PPI of Softwood Lumber Products (NSA)
+31%
Source: U.S. Bureau of Labor Statistics

2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
2015-01-15 2015-07-15 2016-01-15 2016-07-15 2017-01-15 2017-07-15 2018-01-15 2018-07-15 2019-01-15 2019-07-15
30-Year Fixed Mortgage Interest Rates

New U.S. Single-Family Housing Sales
Source: U.S. Bureau of Labor Statistics
300
350
400
450
500
550
600
650
700
750
800
2014 2015 2016 2017 2018 2019
(in thousands)

S.C. Construction Employment Growth: 2016-2019
Source: U.S. Bureau of Labor Statistics, CES, NSA
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
Const. of Bldg Spec. Trade Cont.

What Do These Trends Imply about
the Charleston Housing Market?

400
600
800
1,000
1,200
1,400
1,600
1,800
Jan.'13 Jul.'13 Jan.'14 Jul.'14 Jan.'15 Jul.'15 Jan.'16 Jul.'16 Jan.'17 Jul.'17 Jan.'18 Jul.'18 Jan.'19 Jul.'19
Charleston MLS Sales Activity by Year
+12.1%
+17.2%
+11.9% +3.1%
-3.9% -0.01%
N/A
Source: Multiple Listing Service & Moore School of Business

Charleston MLS: Sales Growth by Year
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2012 2013 2014 2015 2016 2017 2018 2019
12.7%
24.9%
9.9%
14.7%
7.7%
2.2%
-0.5%
0.4%
Source: Multiple Listing Service & Moore School of Business

Charleston SF Median House Price Growth
Source: Multiple Listing Service & Moore School of Business
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Jan.'16 Jul.'16 Jan.'17 Jul.'17 Jan.'18 Jul.'18 Jan.'19 Jul.'19

Charleston Quintile Analysis
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
2012 2013 2014 2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q5
Source: Multiple Listing Service & Moore School of Business

Pct. of Charleston SF Sales Greater than $300K
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2012 2019
27.4%
48.4%
Source: Multiple Listing Service & Moore School of Business

Looking Ahead!

South Carolina Employment Growth
Source: U.S. Bureau of Labor Statistics
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Jan.'12 Jan.'13 Jan.'14 Jan.'15 Jan.'16 Jan.'17 Jan.'18 Jan.'19
South Carolina Charleston

S.C. Avg. Employment Growth: 2018 vs. 2019
Fairfield
12.2 %
Growth > state average
Growth < state average
Employment losses
Source: BLS, Local Area Unemployment Statistics, NSA (Nov)

Source: Division of Research, Moore School of Business
S.C. Outlook for 2020: Employment Growth
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
q118 q218 q318 q418 q119 q219 q319 q419 q120 q220 q320 q420
2.6%
2.4% 2.3% 2.4%
1.5% 1.6% 1.7%
1.5% 1.4% 1.5%
1.7%
1.5%
Historical Forecast

FHFA House Price Index
Source: Federal Housing Finance Agency
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
q310 q311 q312 q313 q413 q315 q316 q317 q318 q319
South Carolina Charleston Columbia Gville/Sptnbg

The Bottom Line
• Slower growth in 2020 for South Carolina, but no current
expectations for a recession
• South Carolina’s economy remains resilient despite trade
shocks
• Labor shortage will likely be a bottleneck for growth
• Lower employment gains, higher wage growth anticipated
• As good as it gets?

Thank You!