national outlook...national outlook j. michael jones, phd december 4, 2020 office of state budget...

NATIONAL OUTLOOK

J. MICHAEL JONES, PHD

DECEMBER 4, 2020

Office of State Budget Director

Control Scenario(Probability – 50%)

GDP growth slows to 0.6% in FY2021and 2.2% in FY2022

Sharp deceleration in growth from FY2021Q1 growth of 33.1%

COVID-19 infection rates exceed expectations going into colder

weather months and new restrictions implemented

Previous stimulus efforts fading and new stimulus removed from

baseline assumptions

GDP pre-pandemic peak reached in FY2022Q3

Overshooting on housing starts and consumer purchases of durable

goods unwind over the next several quarters

Federal Reserve maintains Federal Funds rates near 0%

Increases in Brent oil prices, as oil expected to be $53.17/bbl by

FY2022Q3, stabilizing US domestic drilling and production activity

2

Optimistic Scenario

(Probability – 25%)

GDP growth increases to 1.3% in FY2021and 3.1% in FY2022

New fiscal stimulus fuels recovery

Direct payments to households of $270 billion

Re-introduction of emergency unemployment benefits at $300 per week

Extension of PUA and PEUC unemployment programs to FY2021Q4

COVID-19 vaccine availability by FY2021Q2 and widespread

availability the next quarter

Employment increases by 4.4% in FY2022

Unemployment under 4.5% by FY2022Q3

Real Consumer Spending increase by 3.5% in FY2022

GDP pre-pandemic peak reached in FY2022Q1

3

Pessimistic Scenario

(Probability – 25%)

GDP growth decreases to -0.4% in FY2021and 1.6% in FY2022

No new fiscal stimulus

Increase in COVID-19 cases, hospitalizations, and deaths relative to

baseline forecast

Retrenchment of consumer spending and pace of economic

expansion slows

Employment increases by 3.0% in FY2022

Unemployment under 5.0% by FY2024Q1

Real Consumer Spending increase by 1.6% in FY2022

GDP pre-pandemic peak reached in FY2023Q1- two quarters later

than baseline forecast

4

Real GDP(Billions of Chained 2012 Dollars, Annual Rate, BEA)

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000

$18,000

$19,000

$20,000

$21,000

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

Optimistic Pessimistic Control

5

Real GDP(IHS Markit, Annual Growth Rates)

2.5%

-1.1%

0.6%

2.2%

2.5%

-1.1%

1.3%

3.1%

2.5%

-1.1%

-0.4%

1.6%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

FY2019 FY2020 FY2021 FY2022

Control Optimistic Pessimistic

6

U.S. Employment – Total Non-Farm Payrolls(Millions, BLS)

120.0

125.0

130.0

135.0

140.0

145.0

150.0

155.0



7

U.S. Employment – Total Non-Farm Payrolls(IHS Markit Forecast, Annual Growth Rates)

1.5%

-1.9% -2.0%

3.7%

1.5%

-1.9%

-1.5%

4.4%

1.5%

-1.9%

-2.8%

3.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

FY2019 FY2020 FY2021 FY2022


8

U.S. Employment – Manufacturing(Millions, BLS)

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5



9

U.S. Employment – Manufacturing(IHS Markit Forecast, Annual Growth Rates)

1.9%

-1.7%

-2.5%

1.4%

1.9%

-1.7%

-2.1%

2.3%

1.9%

-1.7%

-2.6%

1.6%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

FY2019 FY2020 FY2021 FY2022


10

Housing Starts(Millions, Annual Rate, U.S. Bureau of the Census)

0.0

0.5

1.0

1.5

2.0

2.5



11

Housing Starts(IHS Markit Forecast, Annual Growth Rates)

-2.6%

8.3%

6.7%

-6.2%

-2.6%

8.3%

10.1%

-3.9%

-2.6%

8.3%

5.1%

-9.4%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

FY2019 FY2020 FY2021 FY2022


12

Real Personal Income(Billions of Chained 2012 Dollars, Annual Rate, BEA)

$10,000

$11,000

$12,000

$13,000

$14,000

$15,000

$16,000

$17,000

$18,000

$19,000



13

Real Personal Income(IHS Markit Forecast, Annual Growth Rates)

2.9%

3.8%

-0.2%

-0.8%

2.9%

3.8%

0.3%

-0.2%

2.9%

3.8%

-1.0% -0.9%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

FY2019 FY2020 FY2021 FY2022


14

Real Consumer Spending (Excluding Food and Energy)(Billions of 2012 Dollars, Annual Rate, BEA)

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000



15

Real Consumer Spending (Excluding Food and Energy)

(IHS Markit Forecast, Annual Growth Rates)

2.7%

-1.7%

1.0%

2.6%2.7%

-1.7%

1.9%

3.5%

2.7%

-1.7%

-0.2%

1.6%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

FY2019 FY2020 FY2021 FY2022


16

Real Consumer Spending on Durable Goods(Billions of 2012 Dollars, Annual Rate, BEA)

$700

$900

$1,100

$1,300

$1,500

$1,700

$1,900

$2,100

$2,300



17

Real Consumer Spending on Durable Goods


4.8%

2.9%

12.7%

-0.5%

4.8%

2.9%

14.2%

0.6%

4.8%

2.9%

10.7%

-1.8%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

FY2019 FY2020 FY2021 FY2022


18

Nominal Consumption of Gasoline and Oil(Billions of Dollars, Annual Rate, BEA)

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500



19

Nominal Consumption of Gasoline and Oil


3.3%

-14.4%

-12.9%

13.0%

3.3%

-14.4%

-10.5%

15.5%

3.3%

-14.4%-14.8%

11.9%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

FY2019 FY2020 FY2021 FY2022


20

Unit Sales of New Light Vehicles(Millions, Annual Rate, BEA)

8.0

10.0

12.0

14.0

16.0

18.0

20.0



21

Unit Sales of New Light Vehicles (IHS Markit Forecast, Annual Growth Rates)

-0.9%

-12.0%

4.3%

0.9%

-0.9%

-12.0%

4.8%

0.2%

-0.9%

-12.0%

3.3%

-0.3%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

FY2019 FY2020 FY2021 FY2022


22

Real Gross Private Fixed Investment(Billions of Chained 2012 Dollars, Annual Rate, BEA)

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000



23

Real Gross Private Fixed Investment


3.4%

-1.0%

0.9%

0.8%

3.4%

-1.0%

2.3%

3.0%

3.4%

-1.0%

0.6%

-0.3%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

FY2019 FY2020 FY2021 FY2022


24

Real Exports of Goods and Services(Billions of Chained 2012 Dollars, Annual Rate, BEA)

$1,100

$1,300

$1,500

$1,700

$1,900

$2,100

$2,300

$2,500

$2,700



25

Real Exports of Goods and Services (IHS Markit Forecast, Annual Growth Rates)

0.5%

-6.4%

-4.9%

9.4%

0.5%

-6.4%

-4.7%

9.8%

0.5%

-6.4% -6.5%

8.5%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

FY2019 FY2020 FY2021 FY2022


26

Real Exports of Motor Vehicles and Parts(Billions of Chained 2012 Dollars, Annual Rate, BEA)

$50

$70

$90

$110

$130

$150

$170

$190



27

Real Exports of Motor Vehicles and Parts


-2.3%

-15.1%

11.7%

15.3%

-2.3%

-15.1%

12.0%

15.9%

-2.3%

-15.1%

8.5%

12.8%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

FY2019 FY2020 FY2021 FY2022


28

KENTUCKY ECONOMIC

OUTLOOK

J. MICHAEL JONES, PHD

DECEMBER 4, 2020

Office of State Budget Director

Kentucky Non-Farm Employment(Thousands, KY MAK Model)

1,600.0

1,650.0

1,700.0

1,750.0

1,800.0

1,850.0

1,900.0

1,950.0

2,000.0



30

Non-Farm Employment – US and Kentucky(Fiscal Year Growth Rates, IHS Markit and KY MAK Model)

1.7% 2.09% 1.9%1.7%

1.5% 1.5%

-1.9%-2.0%

3.7%

1.29% 1.6% 1.4%

0.9%

0.5% 0.5%

-3.1%

-1.6%

3.3%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022

US - Control KY - Control

31

Kentucky Non-Farm Employment Forecasts(KY MAK Model, Annual Growth Rates)

0.5%

-3.1%

-1.6%

3.3%

0.5%

-3.1%

-1.1%

4.1%

0.5%

-3.1%

-2.6%

2.4%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

FY2019 FY2020 FY2021 FY2022


32

Kentucky Manufacturing Employment(Thousands, KY MAK Model)

200.0

210.0

220.0

230.0

240.0

250.0

260.0

270.0



33

Manufacturing Employment – US and Kentucky(Fiscal Year Growth Rates, IHS Markit and KY MAK Model)

0.9%

1.6%

0.6% 0.15%

1.4%

1.9%

-1.7%

-2.5%

1.4%

1.7%

3.0%2.8%

2.1%

0.3%0.5%

-4.0%

0.23%0.16%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%



34

Kentucky Manufacturing Employment Forecasts(KY MAK Model, Annual Growth Rates)

0.5%

-4.0%

0.23% 0.16%

0.5%

-4.0%

0.8%

1.3%

0.5%

-4.0%

-0.3%

0.8%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

FY2019 FY2020 FY2021 FY2022


35

Kentucky Personal Income(Millions of Dollars, KY MAK Model)

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000



36

Personal Income – US and Kentucky(Fiscal Year Growth Rates, IHS Markit and KY MAK Model)

3.0%

6.1%

3.4%3.7%

5.4%

4.8%

5.1%

1.3% 1.3%

2.3%

5.4%

2.9%

2.4%

3.5%

3.7%

5.4%

0.9%

1.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%



37

Kentucky Personal Income Forecasts(KY MAK Model, Annual Growth Rates)

3.7%

5.4%

0.9%

1.2%

3.7%

5.4%

1.4%

1.8%

3.7%

5.4%

0.2% 0.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY2019 FY2020 FY2021 FY2022


38

Kentucky Wages and Salaries(Millions of Dollars, KY MAK Model)

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000



39

Wages and Salaries – US and Kentucky(Fiscal Year Growth Rates, IHS Markit and KY MAK Model)

3.3%

5.6%

3.8%

3.6%

5.2%

4.9%

1.7%

3.1%

4.7%

2.3%

4.8%

3.8%

3.2%2.9%

3.5%

0.8%

1.4%

4.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%



40

Kentucky Wages and Salaries(KY MAK Model, Annual Growth Rates)

3.5%

0.8%

1.4%

4.5%

3.5%

0.8%

2.1%

5.1%

3.5%

0.8%

0.3%

2.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY2019 FY2020 FY2021 FY2022


41

national outlook...national outlook j. michael jones, phd december 4, 2020 office of state budget...

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