Economic Outlook

January 2019

NAIOP New Jersey Annual Meeting

January 24, 2018

Alexander Heil, PhD

Chief Economist

Port Authority of New York & New Jersey

Why is everyone so concerned now?

Slide 2

62 trading days

Total decline of 19.6%

4 days with more than 3% change

9 days with 2-3% change

12 days with 1-2% change

Last year:

0 DAYS WITH >1% CHANGE

Real GDP – Contributions to Growth

Slide 3

Fiscal stimulus to

diminish in 2019/2020

REAL GDP GROWTH

4.2% 3.5%

REAL GDP GROWTH

4.2% 3.5%

Government Shutdown – January 2019 Edition

• Economic Impact = 0.13% LESS GDP growth for every week [CEA, White House Estimate]

• As of now, growth will be 0.52+% lower growth in Q1 2019

Slide 4

Source: https://www.nytimes.com/2019/01/15/us/politics/government-shutdown-economy.html

Employment Growth & Wages

Slide 5

Average net gains of 220K+ in 2018

Benefits have not grown significantly in real terms

2.5% Growth

Slide 6

Labor Force Participation

Slide 7

-3%

Regional Employment Growth

Slide 8

Regional Employment Growth:

Reversion to the Mean

Average since 1991

NY-NJ 0.7%

NJ 0.5%

NYC 0.8%

Slide 9

Regional Employment Growth

Average since 1991

NY-NJ 0.7%

NJ 0.5%

NYC 0.8%

November ‘18 Y-Y

NY-NJ 1.2%

NJ 1.5%

NYC 1.5% [Oct]

Slide 10

Recession Indicator #1

Yield Curve

Slide 11

• Inversion likely by

mid-2019

Source: New York Times

Recession Indicator #2

Unemployment

Slide 12

Unemployment < Natural Rate

Tariff Impacts

• Effective tariff rate for US

triples [from 1.6%] as a result

of new trade policy

• Impacts on US economy still

relatively modest

• US growth lower by roughly -

0.25% in 2019

• CPI plus 0.2%-0.3% in 2019

Slide 13

ISM Indicators Richmond FED Survey

Slide 14

NY FED Empire State Manufacturing Survey

Slide 15

What about Housing?

Slide 16

Watch out for the 2018 Tax Returns …

Slide 17

Manhattan Office Market

Source: Cushman & Wakefield, Q4 2018 Market ReportSlide 18

New Jersey Office Market

Slide 19

Nort

her

n N

ew J

erse

y

Cen

tral

New

Jer

sey

Source: Cushman & Wakefield, Q4 2018 Market Reports

Sources: US Bureau of Labor Statistics, Federal Reserve

Recent decline in growth:Construction Employment in NYC has felt the sting of increasing interest rates

NYC Construction Market

0%

1%

2%

3%

4%

5%

6%

7%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Fed F

unds R

ate

NY

C C

onstr

uction

Em

plo

yment

(Y/Y

% C

hange)

NYC Construction of Buildings Employment Change and Fed Funds Rate

Y/Y Construction Employment Change Fed Funds Rate

Slide 20

0

10

20

30

40

50

60

70

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Warehousing EmploymentAll Employees, in Thousands

includes transportation*

New JerseySource: Bureau of Labor Statistics, Current Employment Statistics

A boom in New Jersey …

Slide 21

NYC Warehousing Space Driving the NJ Trends

Data Source: NYC PLUTO, Tax Parcel Data 2010 and 2016 Quote Source: New York Times “New York Tries to Revive Garment Industry, Outside the Garment District”By WINNIE HUFEB. 7, 2017

“The streets used to be lined with trucks that were picking up or delivering to the

garment district. Today, if you see 10 percent of what it used to be, that’s a lot.”

Frank Dara, 71, who spent decades cutting fabric for companies

Staten Island Bronx Brooklyn Manhattan Queens Total

2010 7.2 32.0 89.9 56.7 71.5 257.4

2016 7.4 31.7 81.0 32.8 70.7 223.6

Change 0.2 -0.3 -9.0 -23.9 -0.8 -33.8

% Change 3.0% -0.9% -10.0% -42.1% -1.1% -13.1%

Factory and Storage Space millions of square feet

Slide 22

New Jersey’s Warehousing Boom

• A Majority of Warehousing Is Built Along Major

Highways

• NJ Turnpike

• I-80

• I-278

• I-78

• Nearly 200 Million Sqft of Warehousing and Storage

Space

Built or Planned form 2000 – 2017 (More than 5 Central

Parks)

• Most Less Than ½ Hour From Port Newark

Source: New Jersey DCA

0

50

100

150

200

250

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mill

ions

New Jersey Warehousing and Storage Building Permits Issued

Cumulative Square Footage

Slide 23

And if you aren’t concerned enough …

Slide 24

January 2019 Economic Outlook

Thank you!

Any Questions?

Alexander Heil, PhD, Chief Economist

Planning & Regional Development Department

The Port Authority of New York and New Jersey

4 World Trade Center | 150 Greenwich Street,16th fl, New York, NY 10006

Are you receiving our Monthly Economic Indicators newsletter?

Newsletters - About the Port Authority - The Port Authority of NY & NJ

Econ Insight: The Planning Department's Monthly Podcast

Econ Insight Podcast

PA Website: www.panynj.gov

PA Twitter: @PANYNJ

Slide 25