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U.S. economy continues to expand, but at a slower pace, reaching about 2 percent growth in 2020
INDIANAPOLIS -- The U.S. economy will continue to expand for a 12th consecutive year in 2020, but by only about 2 percent and struggling to remain at that level by year's end. Indiana's economic output will be more anemic, growing at a rate of about 1.25 percent, according to a forecast released today by the Indiana University Kelley School of Business. Over the past year, political dysfunction and international trade friction have disrupted supply chains and eroded both consumer and business confidence. U.S. employment has grown during 2019 but will decelerate throughout 2020, well short of 150,000 jobs per month and possibly to about 100,000 by year's end. A tight labor market will continue to be an issue for many companies. "The total number of job openings in the economy peaked in late 2018," said Bill Witte, associate professor emeritus of economics at IU. "Average hours worked have been flat over the past year, and auto sales have been flat for nearly two years. Given the reliance of the U.S. economy on consumer spending, these are disturbing signs. But they are vague signs, and not enough to convince us that the end of the expansion is in sight. "We expect that growth will be weaker than in the past two years, and this outlook is likely a best-case outcome," he added. "There is massive uncertainty in the current situation." The Kelley School presented its forecast this morning to Indianapolis community and business leaders at IUPUI. The Business Outlook Tour panel also will present national, state and local economic forecasts in seven other cities across the state through Nov. 20. Indiana's more meager economic growth expected in 2020 can largely be attributed to the outsized presence of manufacturing and particularly tight labor markets, said Ryan Brewer, associate professor of finance at Indiana University-Purdue University Columbus and author of the panel's Indiana forecast. Manufacturing contracts more rapidly versus other areas of the economy, and tight labor markets limit employers' capacity to grow, he said. Expectations about business investment have fallen short, and corporations have been buying back stock instead of making capital investments. The trade war with China and slowing global expansion have also affected state manufacturers. The world is about to record its slowest economic growth since the financial crisis of 2009. Next year, global growth is projected at 3.4 percent, with downside risks continuing to build. China and the European Union each face structural issues amid tariffs imposed by the United States. Brexit remains unresolved. Recent data from the Institute for Supply Management showed that manufacturing activity has slowed to its lowest rate since the beginning of the Great Recession. Indiana has sought to diversify its economy in recent decades, but manufacturing output represents nearly 28 percent of gross state product. Indiana continues to lead the nation in manufacturing employment, with more than 17 percent of its jobs in that sector. "Constrained by a historically tight labor market, Indiana is expected to experience slow growth in jobs and gross output, along with the possibility for continued rising wages," Brewer said. "With fewer and fewer available people to hire, tightness of the Indiana labor markets will serve as a drag to output and employment growth." The outlook for the Indianapolis-Carmel-Anderson metropolitan statistical area is slightly better, with expected growth between 1.5 and 2 percent. "Indianapolis continues to draw in talent and investment that should help it exceed the overall state level of growth," said Kyle Anderson, clinical assistant professor of business economics. "However, there is risk that weakness in the broader economy, and especially weakness in manufacturing, could make this forecast too optimistic." Other highlights from the forecast: The national and state unemployment rates will hold steady. The nation's rate could be below 4 percent by year's end, and the state will stay at or below full employment through 2020. Inflation will rise and end 2020 close to the Federal Reserve's 2 percent target. The stock market will struggle to get average returns with headwinds from trade, supply chain disruption and policy uncertainty. Earnings continue to exceed expectations, yet lack of definitive trade consensus continues to drive headwinds. Interest rates will remain low. The 10-year Treasury rate should stay below 2 percent and mortgages below 4 percent. Speculative grade bond yields have been rising, indicating increased risk of insolvency for marginal firms. Entry-level wage growth could cause costs to rise, earnings to fall and growth to stagnate for firms heading into 2020. Energy prices will be relatively stable, with average prices similar to those in 2019. Business investment will remain weak, although a little improved from this year. Housing will achieve a meager increase, ending two years of negative growth. Government spending will grow, but much more slowly than the past year, as the impact of the 2018 budget deal ends. The starting point for the forecast is an econometric model of the United States, developed by IU's Center for Econometric Model Research, which analyzes numerous statistics to develop a national forecast for the coming year. A similar econometric model of Indiana provides a corresponding forecast for the state economy based on the national forecast plus data specific to Indiana. A select panel of Kelley faculty members, led by Indiana Business Research Center co-director Timothy Slaper, then adjusts the forecast to reflect additional insights it has on the economic situation. A detailed report on the outlook for 2020 will be published in the winter issue of the Indiana Business Review, available online in December. In addition to predictions about the nation, state and Indianapolis, it also will include forecasts for other Indiana cities and key economic sectors. Presenting the forecast at the Indianapolis Business Outlook Tour event were Phil T. Powell, associate dean of Kelley academic programs at Indianapolis and clinical associate professor of business economics and public policy; Cathy Bonser-Neal, associate professor of finance; and Anderson.
Turning disability into accessibility
As communities grow and modernize – are we making the proper accommodations for those with disabilities to live a fulfilling, productive, and independent life? It’s a popular topic and one that we are now seeing being advocated more in many areas of everyday life. Accessibility laws and expectations are now ensuring that all aspects of education, business, transit, and health care are made available to everyone. The concept is sound – but how are we as a community developing reasonable accommodations and community resources that allow all people to participate in the community and successfully live their life? Often, it’s not a matter of intentional exclusion, rather the issue simply hasn’t been considered and no plan exists. And there are costs to not having a plan in place. Not addressing these “social determinants of health” (housing, transportation, etc.) affect healthcare outcomes and raise costs of hospitals, social services, and health care. Addressing these issues and improving accessibility may actually increase societal health, decrease long-term societal healthcare costs, and bolster the tax base. But as we move forward there are a lot of questions in the community about how to approach accessibility: What mechanisms are in place to gather input on needs, identify barriers, and consider requests for accommodation? What types of accessibility needs exist of the people who will use different community settings? (Physical, cognitive, sensory, emotional, developmental, etc.)? What types of accessibility barriers exist (architectural, environmental, attitudinal, financial, transportation, etc.)? How much do different accommodations cost? How can community settings partner with people with disabilities and/or health and human service providers? What specific ways can accessibility improve societal health? And that’s where the experts from CARF can help. Christine M. MacDonell is the Managing Director of Medical Rehabilitation and International Aging Services/Medical Rehabilitation at CARF International. She can address the issue of accessibility as it relates to people who have experienced brain injury, stroke, cancer, amputation, and spinal cord injury. Christine is available to speak with media regarding this topic – simply click on her icon to arrange an interview.
With a long road ahead, it's already a crowded field for DNC hopefuls
On Monday California Senator Kamala Harris told the nation she’s running for president against Donald Trump in 2020. Harris is now one of four females who have all but thrown in their hat including fellow Senators Elizabeth Warren and Kirsten Gillibrand along with Congresswoman Tulsi Gabbard. Also kicking the tires are Former Housing and Urban Development Secretary Julian Castro and New Jersey Congressman John Delaney. That’s five candidates, each with impressive resumes. And it is still very early. Some are expecting heavy hitters like Joe Biden, Beto O’Rourke, Cory Brooker and potentially a third try by Hillary Clinton to all take their shot against a potentially vulnerable President Trump. There’s still along way to go between now and July 2020 when the party picks its candidate, and odds are this will seem a lot more like a marathon than a sprint. However, with a strong field already, there are a lot of angles to consider: Is declaring this early an advantage or disadvantage for candidates? Just how much money will be needed to secure the nomination this time? Does a candidate like Harris risk peaking too early if declared the frontrunner this far out? Who else is lurking in the weeds that few might consider? Lastly, there’s public support and there are super-delegates. Does the candidate still need to be the party favorite to have a chance at winning? That’s where the experts from the University of Mary Washington can help. Rosalyn Cooperman, is an associate professor of political science at the University of Mary Washington and member of Gender Watch 2018, is an expert on women in politics. Dr. Stephen Farnsworth is professor of political science and international affairs at the University of Mary Washington. Author of six books on the presidential elections, the media and the presidency, he is available to speak with media regarding this issue. Simply click on either expert’s icon to arrange an interview today.
U.S. economy to remain strong through most of 2019, with output averaging 3 percent
Higher than expected economic growth in 2018 should continue into next year, with U.S. output averaging 3 percent and continued strong gains in domestic job growth. Indiana will continue to outperform the nation, with output growing at a rate of 3.2 percent, according to a forecast presented today by Indiana University's Kelley School of Business. A year ago, members of Kelley's Indiana Business Outlook Tour panel predicted that U.S. gross domestic product would grow by 2.6 percent this year and about 3 percent if tax reform were enacted. Indiana was forecast to see growth of 2.8 percent. Friday's release of GDP data for the third quarter supports their view that 2018 should end up with output growth above those levels. "The tax cut has produced an acceleration in the U.S. economy during 2018 to well above the new normal status quo of 2 percent growth," said Bill Witte, associate professor emeritus of economics at IU. "We expect output growth in 2019 to average 3 percent, but with deceleration as the year proceeds. By this time next year, quarterly growth will be heading toward equilibrium growth at a little below 2.5 percent." The story in Indiana and the greater Indianapolis area is very similar. "The state economy appears poised to see its strongest growth in the first quarter of 2019, after which growth rates are expected to slow but remain strong through the end of the year," said Ryan Brewer, associate professor of finance at Indiana University-Purdue University Columbus and author of the panel's Indiana forecast. "It is most likely Indiana will continue to experience growth across the board -- in jobs, numbers of establishments, income levels, wages as well as gross state product." The Kelley School released its forecast this morning at the Indianapolis Artsgarden and will present it again at 11 a.m. today in Bloomington. The Business Outlook Tour panel also will present national, state and local economic forecasts in eight other cities across the state through Nov. 28. The national labor market has exceeded expectations for two years now. A year ago, the panel felt the U.S. economy would create jobs at a monthly rate of about 175,000 and that the unemployment rate would fall to 4 percent. Instead, monthly job creation through September has averaged nearly 200,000, and the jobless rate has fallen to 3.7 percent. These job creation trends are expected to continue into 2019, with average monthly job gains of 200,000, and the participation rate -- which measures the percentage of the U.S. population that was employed or looking for a job -- remaining flat. "The labor market will be increasingly tight," Witte said. "The unemployment rate could decline a little, but firms unable to find workers will remain an important theme." Risks to the forecast include the effects of political uncertainty, further trade disputes and economic concerns being felt in other parts of the world, including China and Europe. The panel also expressed reservations about the impact of further Federal Reserve interest rate hikes. They expect the federal funds rate to rise above 3 percent by the end of 2019. Kyle Anderson, clinical assistant professor of business economics and author of the forecast for an 11-county area that includes Indianapolis, Carmel and Anderson, said the region is at full employment, and continued job growth will ensure it stays there. Economic growth in the area will average about 2.5 percent. "Communities around Central Indiana are finding it necessary and important to invest in projects that improve quality of life and provide amenities for residents," Anderson said, referring to examples of this in downtown areas of Indianapolis and Speedway and in Carmel. "The message to community leaders is clear: Investing in infrastructure to improve quality of life is necessary to maintain a healthy local economy. "Tax incentives are not sufficient to draw in businesses and residents. Bike trails, community centers and connected neighborhoods were once seen as luxuries, but now are important economic development tools," he added. "This trend will continue, especially if the economic expansion continues nationally." Other highlights from today's forecast: · Consumer spending will continue to grow, although at a rate less than in 2018. · Business investment will be good, but held back by trade concerns. · Housing will resume growth with a small boost from the aftermath of hurricanes Florence and Michael. Elsewhere, including in Central Indiana, 30-year mortgage rates, nearly a full point higher than a year ago, could dampen enthusiasm for new housing and constrain prices. · Government spending will be strong early in the year, but growth could slow significantly toward year end. · The trade balance will show increasing deficits. A detailed report on the outlook for 2018 will be published in the winter issue of the Indiana Business Review, available online in December. For more assistance, contact George Vlahakis, associate director of communications and media relations at the IU Kelley School of Business, 812-855-0846 (o) or 812-345-1500 (m), vlahakis@iu.edu.
New research examines impact of 'homesharing' services like Airbnb
Local governments across the country are passing laws to limit short-term rentals like Airbnb, HomeAway and VRBO, with Washington, D.C., poised to put some of the strictest limits yet on these homesharing services. Kashef Majid, an assistant professor of marketing at the University of Mary Washington, has examined more than 12,000 rentals in the nation's capital over nearly a decade, identifying which properties are most in demand and earn the most revenue as well as the impact of price and location on demand. Majid also found that commercial operators -- those that purchase properties solely to rent on short-term rental markets like Airbnb -- limit the supply of affordable housing, create neighborhood tensions and negatively impact the number of rentals. "The issue of commercial operators became so contentious that the largest county in Virginia (by population) recently passed legislation to prevent their existence," Majid said. "Commercial operators are simply one example of the issues that arise within the sharing economy. Our research has also explored parallels in other markets, such as ride sharing." Majid is available to speak with media regarding these topics and this research. To contact him, simply click on his icon to arrange an interview.
Being homeless negatively impacts health in diverse ways, especially for those experiencing chronic homelessness.1 Such persons are at higher risk for multiple infectious diseases, traumatic injuries, interpersonal violence, conditions related to extreme heat or cold, and death due to alcoholism and drug overdoses. They are more likely than housed persons to use hospital emergency departments for health care and to be admitted to the hospital for health problems, because they are less likely to have health insurance and because their conditions cannot be appropriately cared for without safe and secure housing. Thus, there are compelling reasons to know whether interventions aimed at reducing homelessness also reduce the adverse health consequences associated with it. Source:
Dubious loan origination and the housing collapse
Gonzalo Maturana, assistant professor of finance, and coauthor John M. Griffin (U of Texas) argue that securitization was not the only factor in the recent housing crisis. Their new research indicates that questionable mortgage origination practices played a significant role in the distortions in the 2003 to 2012 real estate boom and bust. Specifically, the underreporting of the true risk profiles of borrowers, including the misreporting of second-liens, helped to drive housing demand and, ultimately, contributed to the crisis. They note, “The process of underreporting key loan attributes can have the by-product of facilitating credit to borrowers who have little ability to repay.” The researchers tested their theory by using county deed records, securitized loan information, house price statistics, and home loan application data from a number of reliable sources to detail the 2003 to 2006 run-up of housing prices and its subsequent 2007 to 2012 collapse. After controlling for securitization, they determined that “originator malfeasance” in certain areas also served to raise the credit supply. Maturana and Griffin concluded that dubious originator practices helped to cause house prices in certain zip codes to increase relative to other areas and eventually led to larger price crashes. Source:
Misreporting in securitized loans
Nonagency mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) derived from MBSs and their role in the recent financial and housing crisis remain a subject of discussion. An MBS is an asset-backed security secured by a mortgage or grouping of mortgages. Non-agency MBSs are not guaranteed by any government-sponsored organization, such as Freddie Mac or Fannie Mae, or the federal government. According to research from Gonzalo Maturana, assistant professor of finance, and John Griffin (U of Texas), the complexity of these structured products made it difficult to learn the true value of the underlying assets. They analyzed “apparent fraud among securitized nonagency loans, looking at unreported second liens, owner occupancy misreporting, and appraisal overstatements.” The study data comes from Lewtan’s ABSNet Loan and HomeVal data sets, along with DataQuick’s Assessor and History files, for the time period between January 2002 and December 2011. The researchers discovered that “48% of loans exhibited at least one indicator of misrepresentation.” The level of misreporting was similar for low- and full-documentation loans. Also, loans with a misreporting were 51% more likely to be delinquent. Maturana and Griffin’s research points to apparent fraud by loan originators and MBS underwriters, and it also suggest that MBS underwriting banks were aware of some of the MBS representations at issuance. Source:
Securitized loan modification and loan performance
After the collapse of the housing market, the wave of foreclosures in the US changed the economic landscape of many neighborhoods across the country. Some academics and policymakers have argued that the renegotiation of those loans was a much better alternative than foreclosure and that incentives should have been offered to financial institutions to encourage it. However, little research exists to understand the performance of loans that were modified. Gonzalo Maturana, assistant professor of finance, takes a close look at loan modifications made early in the recent housing crisis to better understand the value of offering incentives to modify securitized non-agency loans. According to Maturana, researchers contend that the small number of loan modifications added to the number of foreclosures during the subprime crisis. His analysis consisted of slightly more than 835,000 non-agency securitized loans that became delinquent between August 2007 and February 2009. Maturana found that loan “modification reduces loan losses by 35.8% relative to the average loss, which suggests that the marginal benefit of modification likely exceeded the marginal cost.” Additionally, modifications resulted in fewer liquidations. He also found that modifications were particularly useful “in preventing future loan losses in times of large increases in delinquencies when servicers are more likely to be working at full capacity.” Source:
6 Facts We Learned Working with Migrants and Refugees Around the World - Facts 3 and 4 Working with migrants and refugees is our business at Catholic Relief Services. CRS was founded in 1943 to assist refugees during World War II. Seventy-five years later, we are still coming to the aid of people escaping conflict, violence and natural disasters. While CRS doesn’t resettle refugees in the United States (these programs are run by the Catholic Church’s Migration and Refugee Service and Catholic Charities), our rich history has taught us valuable lessons on how to best help families fleeing crisis. 3. Support the Family. The family unit provides the primary support for children during the traumatic refugee experience -- whether it is witnessing violence or crossing a desert on foot. CRS focuses on keeping families together. This means housing a family together and using any services provided – from trauma counseling to income generation – to boost family cohesion. Shannon Senefeld is a global development expert at CRS. She has published and presented extensively on international children’s issues and the importance of strengthened family care for children’s development. See her contact information at the bottom. 4. Kids Need School and Play. CRS is dedicated to keeping up children’s education, to provide stability and normality and give them hope for the future so they can be productive citizens wherever they end up. Kids need to be kids, too. Whether they are in a camp or any sort of migrant or refugee holding center they need a space to play. Caroline Brennan is the Emergency Communications Director for Catholic Relief Services. In her role, she travels to and/or works in areas facing natural or man-made emergencies. See her contact information at the bottom. The experts at Catholic Relief Services are available to help with any media coverage or insight that is required regarding this ongoing news story and issue that is continuing in America. Simply click on any of their icons to arrange a time for an interview. Source:
