The US Economic Outlook and Its Impact on Small Business

Thank you very much and good morning and good afternoon to everyone. As Alexa mentioned by name is Jay Hawkins, Senior Economist at Visa and I will walk you through the economic outlook and its impact on small businesses starting out with this disclaimer slide which allows me to share this forward-looking information with you. In terms of the agenda I typically start these presentations with a broad macro economic outlook sort of a view from 30,000 feet if you will. What I'm going to touch on initially here has to do with the uncertainty -- a lot of uncertainty around policy that could possibly be emanating but the reason I mention that is because I do think a lot of this uncertainty requires multiple economic scenarios. What I'm going to do initially is give three different scenarios from a vendor and in this case market and what I will do is walk you through these three scenarios. The baseline with the highest probability that the reason I'm doing this is because if you look at the pessimistic scenario, the probability attached is 25% and it hasn't been that high since before the recession began back in 2007. I will brief you walk through the assumptions behind those and how they may play out in terms of the economy. The good news is we expect a solid year of growth and it's important to note that as of next month , June, the expansion will be eight years long which is in fact the second-longest expansion on record only surpassed by the expansion in the early 1990s that was fueled by the.com boom. The one stalwart of this expansion has been job growth. Many of you are probably aware we saw a fairly sharp deceleration in job growth in the month of March. Just 98,000 jobs in a couple things impacted that. Number one, when an economist can't find any other excuse we tend to bring -- blame it on the weather. We had some unseasonably warm weather in the beginning of this year and what that did was it pulled hiring forward into the months of January and February. A secondary reason had to do with the late Easter holiday. The April employment job report is coming out later this week on Friday and we are expecting acceleration to about 180,000 jobs per month so we are expecting a rebound from those week numbers that came out in March. The one thing that has been missing in terms of the consumer has been very sharp wage and salary growth. A lot of speculation as to why that is the case. Some of it I think has to do with the large number of baby boomers highly compensated that are retiring in big numbers and being replaced by younger workers, millennials who are just starting out their careers and not earning the same type of salaries that the boomers were. There is still a lot of research and speculation going on there but the good news is I'm going to share two different wage metrics with you. We are seeing somewhat of an acceleration in wage and salary growth which is going to be supportive of consumer spending. I will touch on what's happening with spending and also what is holding back the housing market. The housing market recovery continues and it is proceeding in fits and starts. It's a very weak recovery as I describe it and I will pinpoint one thing I think is holding back the housing recovery and I will talk about the expectations for what the Fed will do over the balance of this year in terms of interest rate increases and how that might be impacting the dollar and outlook for oil prices. Then I will get into the second section which is going to be opportunities for growth. Something we've been working on for the past seven or eight years which is our Metro insights product. At high level just ranking 355 of the 380 Metro areas around the country in terms of their consumer economic health and what's really exciting about that particular product for this later update is we do have a fourth quarter forecast attached so it is a forward-looking component. Before I get to that , just a commercial here for some of the work we have been doing internally at Visa. If you go to Visa.com /economic insights you will see some of the latest economic resources we've been doing. The Chief Economist newsletter and the latest economic analysis we are sharing with clients as we travel around the United States and a product we are excited about is travel and tourism and you can get a sense of what that entails if you visit that website. I will get into the economic update with a discussion here on these economic scenarios and I think they will continue to evolve as we move through 2017 and 2018. As I mentioned at the outset, the baseline scenario which has the highest probability of occurring at 67% -- you see the assumptions. The Fed is going to gradually raise interest rates and we've already had one rate increase this year. The expectation is the Fed is going to raise rates two more times in the likely times for that to occur will be next month in June and again in the fall. The latest thinking is that will occur in June and September. We expect tax rates to be caught. That is not likely to occur till 2018 and that will support consumer spending or growth. The long-delayed -- awaited rebound in capital spending will occur and I will talk about GDP growth momentarily. One of the things that has been holding back GDP growth has been the lack of capital spending and business spending. I think a lot of that has to do with some of the uncertainty that's out there right now and finally we expect an acceleration in global GDP growth. There's a 15% probability, greater capital spending, the consumer and housing markets benefit from that and we get even stronger global growth which is going to help US exporters and what I really want to highlight most importantly is that pessimistic scenario. When we first pulled this presentation together two or three months ago, the probability of the pessimistic scenario unfolding was 20% and that has been elevated to 25%. Some of the assumptions behind the scenario, strained trade relations primarily with Mexico and China and we will see a correction in the equity markets and the one thing -- what is the outlook for the equity markets? One thing I don't like to predict . What I will say is that equity markets right now when you look at some of the traditional valuation metrics, they do seem to be very expensive and on average we get a correction about eight -- every 18 months and everyone probably remembers the start -- are correction in the beginning of this year so we are about 15 or 16 months beyond that and the only thing the market needs as a catalyst an excuse for profits and we will see a correction and it's just a matter of when that is likely to occur. Another assumption is a rise in oil prices, job market weakens and we will get a two quarter recession in the scenario in the good news is if it does occur it is a week recession of -- that will occur in the second and third quarters of 2018. In terms of what's happening with GDP growth, we did end up -- and you can see here under three different scenarios -- 1.6% growth in 2016 and as I mentioned previously one of the things that GDP growth resulted in was the lack of business fixed investment spending. The good news is when you look at the consumer, the consumer continues to do well. Under the baseline scenario an acceleration of 2.4% growth this year and then we are close to trend level growth -- about 2 3/4 -- 2.75% in 2016. Not surprisingly on the right-hand chart annual nominal personal consumption expenditure growth. That as opposed to retail sales because it includes spending on the services side of the economy. Not surprisingly with an acceleration of GDP growth we are also expecting the growth rates and consumer spending to accelerate and we see that up for point 5% in 2017. Highlighting here momentarily what's happening with the optimistic scenario, you see we have growth of close to [Indiscernible] and much stronger consumer spending growth north of 5% in 2017 and 2018. What I really want to highlight here is the pessimistic scenario. GDP growth this year on par with last year which is one point 6% and then you see negative GDP growth in 2018 but certainly not like what we went through in 2008 and 20 not -- 2009. Very mild recession retracts to 6/10 of 1%. Growth rates [Indiscernible] are going to be lower particularly compared to the optimistic and also baseline scenario. The good news is if the baseline scenario unfolds it is these process and still wins -- tell -- persistent tailwinds. One of the things that has been supporting consumer spending growth is consumer confidence. You can see we have a sharp rise in consumer confidence but going all the way back to the last two months of last year and in fact when we got the March numbers here they were at the highest level since 2000. Subsequently we did get the April consumer confidence numbers and we had a slight retreat and confidence but it was very small and instead of being at the highest level we are at the second highest level. Who those consumers are increasingly confident and that is one of the things that have -- has been supporting consumer spending. We can look at this data from the conference Board by age and looking at the change here from October last year to February of this year, you can see almost a 15 percentage point rising consumer confidence but very different when you look at these age breakouts. You can see for millennials, confidences down over that five-month period. A lot of speculation as to what might be causing that. It doesn't make intuitive sense to me because when you look at job growth for those ages 18 to 34, job growth for the past three or four years has been exceeding the national average so those millennials continue to do well and a lot of opportunities for them as they enter the labor force. There's definitely a disconnect between the finances of what's going on personally and how confident they are feeling. Nonetheless you can see they are confidences down especially when you look at people 55 and over. It is clearly a diversion of confidence between these generations since November. Switching to discussing job growth as I mentioned a fairly strong -- sharp deceleration in the month of March however the month-to-month numbers tend to be very volatile. Most people focus on three or six month moving average and what I'm showing you here is average monthly job grains going back to the first half of 2016. The good news is we saw an acceleration in job growth averaging over 200,000 jobs in the second half of 2016. You will notice we are expecting job growth to accelerate in 2017. Important to note it's not unusual and as I mentioned the expansion is almost 8 years long. Unemployment's -- unemployment rates are at or close to -- [Indiscernible]. As we enter the mature stages of the expansion and then you will see a further slowdown in the second half of 2018. What is important to note, job growth right now when you look at the three month moving average basis, right around 175,000 which I think is consistent with underlying job growth so even though we are expecting deceleration and job growth is going to remain at very respectable levels somewhere between $150,000 and hundred $75,000 on average over the next couple years. As I mentioned at the outset when I was going through the agenda the one thing that has been missing in terms of the consumer is robust gains and wages and salaries. I will show you two different metrics here starting out with average hourly earnings. I like this particular data point because it's timely and it also comes out with the employment report that is released on the first Friday of every month but much like the underlying job numbers average hourly earnings tend to be very volatile from month-to-month. You can see what I've done in this chart is to take a 12 month moving average of the data and when you do that you can see there's been a clear acceleration and year-over-year growth going all the way back to 2015 and the latest data point we have available is 2.7% growth year-over-year. Pulling in some data here, where they analyze ADP payroll data focusing on these people who have been employed at least one year . We want to do that to get a true sense of underlying wage growth with the labor market being as tight as it is when you look at those people who we define as job switchers. They are getting very robust salary increases just because of the tightness of the labor market but when you focus on these people employed for at least one year, you can see there's an acceleration going all the way back to early 2015 and has been north of 2.5 percent since the third quarter of 2015 and that's going to be supportive of's -- of consumer spending. Switching to what I consider to be the single biggest factor holding back the housing market, why the housing market while the recovery continues it continues to proceed at a fairly weak place. This chart I'm showing you here shows the typical real estate spending cycle. In other words when there is the greatest demand for various types of real estate. For example, greatest demand for college at age 18. Greatest demand for office space at age 21 when people graduate. On average they move into their first apartment at age 26 and this is what's most important on this chart, starter home, between the ages of 29 and 33. You can see what happens with trade up home, vacation home, etc. The reason why the starter home age is so important is when you look at the medium millennial age it is age 27 and millennials are not quite at that age in that way that is holding that the housing market is it is preventing those people moving into their trade up home from doing so and the lack of that first-time homebuyer and the home sales data which I think is personally responsible for holding back the housing market. When you look at which metro areas are deemed most affordable, whether it is rent a income or home price to income -- starting out with renters we have the ability to look at different industries highlighting finance, technology and healthcare here. For example you can see if you look -- live in Texas, Dallas or Austin -- technology in healthcare rent is affordable and if you look at Pittsburgh, you can see similar results there with technology and finance. You can see a similar picture here emerges for homeowners but the single most important message on this chart is because of what's going on with the millennials, their median age and we do expect as a result of that we will have a muted recovery in housing until the millennials take off in 2020 or beyond. Much like we saw a rise in consumer confidence late last year, we did see a rise in CEO optimism. The data I'm showing you on this chart is a survey that's done by the business Roundtable of CEOs of very large companies. Very simple survey. They ask three questions and aggregate those responses into an overall economic outlook index with a graph -- value greater of 50 indicative of value optimism and you can see we had the first quarter data mid-March. You can see there was a sharp rise in CEO optimism and one of the questions they ask here -- and they are all forward-looking in nature -- whether CEOs are planning to expand employment over the next six months and much like we saw a sharp rise in optimism, there was a sharp rise in the number of CEOs going to expand employment and it's important to note that employment growth was very strong on top of that and I think that's why -- that is one of the reasons we expect job growth to remain fairly robust through 2018. In terms of the expectations for what the Fed is going to do, as I mentioned they raised rates once a share and they will raise them twice more. I didn't talk about 2018 but as of now I think the Fed will raise rates three more times in 2018 however, they continually stressed their decisions will be based on the strength of the incoming economic data and they have the ability to adjust the policy accordingly depending on how the economy is performing. But if that baseline scenario plays out, three rate increases this year and three next year, that will bring the rate to about one.75% at the end of 2018. That is at the short end of the curve and looking at the 10 year treasury note which is going to be influenced more by inflationary expectations, going back to November of last year, we saw a fairly sharp rise in long-term interest rates. However, recently we've seen interest rates backup somewhat. Nonetheless you can see in the forecast here we do expect the 10 year note to continue rising through 2018. Mortgage rates are tied to the 10 year note so this could have an impact on the housing market but we are talking about fairly muted increases in the 10 year treasury note here. And you can see if this forecast is accurate, we will just be over 3% long-term interest rates at the end of 2018. Interest rates are naturally going to have an impact on the strength of the US dollar. That will be by and large influenced by how the relative performance of economies around the globe -- the US economy has only been growing at about 2% GDP growth since the recession ended in mid 2009. Obviously not growing like gangbusters but when you compare that to some other economies around the globe, the US economy is doing better relatively speaking. As a result of that, we have more investment dollars flowing into the United States and that is driving up the US dollar. You see the forecast on this chart. We expect the US dollar to continue to appreciate through 2018 and stabilize and that will be one less headwind for the US economy particularly for those companies who export products abroad. Shifting to what's happening with oil prices, what the expectation is. A lot of you are probably aware that OPEC announced a production cutback back in January. Now we can debate whether you expect OPEC to follow through on those cutbacks. There's always some incentive for certain countries that are certain [Indiscernible- muffled]. There was almost an immediate increase of 10% in oil prices and what happened in response to that, US shale producers increase production. A lot of people think the's -- the shale producers are the swing producers. It is no longer OPEC. The reason they were able to do that is if you look at the break even for existing wells it is now below $50 depending on where they are located around the country. It is much easier to turn these wells on and off in some breakeven oil estimates are at $30 per barrel so certainly an incentive for them to increase her production. We are getting some continued technological advances here whether it is horizontal drilling and a term I learned recently, drilled but uncompleted wells that have been substantially increasing and it's very easy to turn those wells on. There's an increase in production, oil drops below $50 a barrel and we think the new ceiling here is somewhere between $50 and $55. I think it was $48 yesterday and when that happens you get this continuous loop and because of that I will share this forecast. Looking at Brent oil prices we ended at 44 dial -- $44 and 2016. Given where oil has been in the last month or so they will pull down that $55 and 2017 will be somewhat lower than that and as of now we will think it will end up at about $54 a barrel in 2018. To quickly summarize the macro economic outlook, the good news is I do think 2017 is going to be another solid year for the US economy. Odds of a recession, six months, are very low. The latest numbers just came out last week and those odds were reduced to 9% to 8%. These adjustments to shifts in fiscal and monetary policy, the Fed raising interest rates, could get bumpy and the most likely place we will see that play out is in equity markets. The economy isn't overheating and consumer leverages low. Some of this was forced on households going back to the great recession who saw consumers walking away from that. Nonetheless, households are in much better financial shape and that's going to be positive for consumer spending. If you look at the financial arc -- obligations ratio which is the broadest measure, it is close to a 35 year low so that gives you an indication of what consumers have done and what a good job they've done in terms of repairing their balance sheet. No asset bubbles. You could argue that equities are in somewhat of a bubble now when you look at forward-looking P/E ratios. We could see a return in volatility and that could create some issues in terms of consumer spending but then this section on a good note, global business and consumer confidence is as strong as it's been since before this recession. Now I will get into the second section which I'm calling Metro insights. What this analysis is designed to do is help you position your business for growth. We do thing people that participate in this pilot is helping them make more informed business decisions. It is a real-time analysis and what I mean by that is we get this data about three weeks after the quarter and we have the ability to turn it around a week later. It's only about a one month lag. As I mentioned at the outset, the value add to this latest update is it does include a four quarter forecast. We are measuring consumer economic health and covering 355 out of the 380 Metro areas around the country defined by the US Census Bureau. The drivers in the analysis include retail consumer spending. This is based on something we developed at Visa seven or eight years ago designed to replicate the Census Bureau's retail sales report and it includes spending on all forms of payment and the other variability used is job growth because that will have a big impact on consumer spending. And how can Metro insights be used? How can it benefit your business? It can help you optimize expansion, marketing and advertising plans. It can use the Metro economic forecast to aid in your business planning identifying the Metro areas -- which Metro areas will be doing well and finally it can help you understand the drivers and relative performance of local economies where you might be located. Where has new retail sales growth occurred during this economic expansion? If you look at the right-hand part of the table what I'm showing here is the share of growth of retail sales excluding automobiles from 2010 to 2016 and what I've done is divide these 355 Metro areas based on population. If you look at the top row in the table highlighted in red, looking at those MSAs around the country with over 1 million in population, that is only 15% of the 355 Metro areas yet they are responsible for 73% of growth from 2010 to 2016. Definitely a disproportionate share. If you look one wrote down you can see the Metro areas between 0.5 million and 1 million were 15% of venture areas and they were responsible for 12% of that share from 2010 to 2016. This is the only metro areas responsible for proportionate share of growth over that time period. Then we ask the question of whether it was always the large metro areas that had been driving growth and you can see it is the case here. You look at the data beginning in 2011 through 2015, you can see an increase in share of growth going to those metro areas and over -- in over 1 million a population in that shifted. We saw a decline in the share growth from the largest metro areas and who benefited? It was the midsize metro areas between [Indiscernible] and we saw an increase in share go to those midsize metro areas. Looking at the share of retail sales growth by metro area population, just focusing on these midsize areas starting with the smaller one, the left-hand part of the chart, between 100 K and 500 K, you can see their share of growth basically doubled from 2015 to 2016 from 7% to 14% and we did see an increase for the larger metro areas, we certainly didn't see a doubling in their share. It went from 10% to 14%. Nonetheless I think it's fair to say that retail spending in these midsize cities is on the upswing. When you look at what's happening around the country here, looking at the ranking of consumer economic health, this is based on the year-over-year change from the fourth quarter of 2015 to the fourth quarter of 2016. Focusing on those smaller, midsize metro areas initially you can see three of the top four were located in Oregon. Bend, Salem and Medford. When you look at the larger midsize metro areas around the country, you can see they are located in the south southeast. Cleveland, national, Baton Rouge and Charleston are all in the top 10. In fact I'm ranking all 355 Metro areas, not just these midsize metro areas. You can see that seven of the top 10 healthiest metro areas are in fact these mid tier cities. And then expanding the -- that here, looking at the top 50 metro areas around the country. Looking at the year on year change in the fourth quarter of 2016. Those metro areas that are shaded in dark green, those are in the top 10 and then you see the scale here on the right hand portion of the screen. You can see all the way down to the yellow or gold -- those are 41 through 50. You can clearly see there's a concentration of these metro areas on the West Coast and in the southeastern states. A good example of metro areas that are doing well. We get a couple here in the Midwest and it looks like we have one in taxes but it is not surprisingly -- I think this mirrors population shifts. A lot of people moving to the Western states and the southeastern states and obviously more people in metro areas will translate into additional consumer spending and that in fact is what's occurring in these metro areas. It is one thing to look at what's happening on a year-over-year basis, which I think is indicative of continued economic strength, economic momentum, but we also want to get a sense here of the possibility of identifying metro areas, maybe those metro areas haven't been doing that well on a year-over-year basis but there economic growth might be accelerating. You see year-over-year growth here on the horizontal axis and I will pull up vertical axis here which is showing quarter on quarter growth. I have this divided into four quadrants. The upper left-hand quadrant is negative year- over-year growth. Positive quarter over quarter, so we label them as rebounding. Lower left-hand quadrant are lagging. Negative on year- over-year and quarter on quarter. Those are declining in the lower right-hand corner. The upper right-hand quadrant -- growing on year- over-year and quarter on quarter basis. As I make these dots move, you can see if you focus on the upper renting contract you can -- right- hand quadrant you can see that Phoenix, Houston and Miami are growing. Those metro areas are doing exceedingly well especially compared with some of the others run the country. You can track that with the metro area in the lower left-hand corner, Minneapolis contracting on a year- over-year basis and quarter on quarter basis. A couple things driving the Minneapolis economy. The headquarters -- target is headquartered there and they are not doing that well. Apparently there's a big healthcare provider in Minneapolis that is instituting layoffs as well and those are two of the primary reasons the economy there is lagging. Obviously you would want to avoid metro areas with a lagging economy such as Minneapolis. Now I will get into the small business section. Starting out with some data here from the national Federation of Independent business. Much like I highlighted on the consumer side and also the business Roundtable survey of CEOs of how we saw a sharp rebound and optimism going back to the last couple months of last year we saw that on the small business site as well. You can see what I've done here, highlighting a couple things here. The long run average in the optimist and index which is based on aggregation. They asked 22 different questions and the aggregate that to an overall index. We get the January data. 105.nine was the highest level of optimism since 2004. What we were seeing was a disconnect between what I call the soft data, survey data and some of the hard data. That was definitely a disconnect so one had to catch up to the other and what we have seen here in February and March -- and we are expecting the April optimism numbers next week -- we saw a slightly -- slight retreat incompetence over that two-month period. That was not experienced -- expected. Looking at some of the small business components that are driving those numbers up and down here, what's interesting is when you look at the numbers in November and compare them to what's happening in March, you can see here small business owners much more optimistic. They expect better business conditions in the future. Sales expectations are higher, hiring plans marginally higher, you can see hiring plans are up at the number of job openings is actually down. Just an indication of some of the disconnect within the internal survey data. A good time to expand and that is firmly positive now but by and large you can see some of the indicators are driving the small business optimism higher going all the way back to November of last year. Why are these small business owners optimistic? Looking at the percent of firms expected in the economy to improve, what we saw in December is the largest one- month increase ever going back to December of last year and much like we saw a slight retreat in the overall optimism index, a small decline here on the percent of firms expecting the economy to improve in both February and March. Looking at the percent of firms expecting hire sales in the next six months, obviously a forward-looking component, when we got the December data we saw a one-month gain of +20%. A sharp increase in this metric and an even more pronounced decline here in the months of February and March. Confidence amongst small business owners remains high, we are starting to see that slip and in my mind that is more consistent with the economic data that we have seen come in recently. Pulling in some data here from several different sources including the Visa small business payment behavior report. Looking at the distribution of small businesses here by Ford testing geographic regions, you can see that 34% of small businesses in 2016 were located in the southeast. Overlaying that with the rank of small business optimism, this is data as of February of this year. You can see the states that are highlighted in red had the lowest level of optimism. You contrast that with the bright green and you can see Alabama, South Carolina, Tennessee and Texas are the southern states that are more optimistic and you can save -- see they had the largest share in the distribution of small businesses in 2016. Looking at some data here that came from Moody's analytics and relationship with experience, looking at small business barring growth on eight quarter over quarter change. A couple things I want to highlight here. You can see in the third quarter of 2016 we had negative quarter over quarter growth and then a very sharp rise in the fourth quarter of last year when I initially saw that data I was worried it was because there was a lot of seasonality that we tend to get a sharp rise in the fourth quarter of every year so what I did then was to look at the year-over-year growth and you can clearly see that is not the case. Sharply up on a quarter over quarter based over a percent. Small businesses are borrowing more compared to what was happening in November. And then taking that one step further looking at where small business -- businesses are barring the most. Looking at the change in small business balances, fourth quarter this year. You can see those highlighted here in the darker shade of blue are seeing the strongest growth. In fact if you concentrate on those states we looked at earlier, what are defined as being more business friendly states, Alabama, Georgia and South Carolina -- their average quarterly growth was close to 3% -- 30% and that is where we are seeing the strongest rates of borrowing. With that I'd be happy to take any questions. I believe we wanted to end with about 15 or 20 minutes for questions. We are right on schedule to do that.

Sounds great. Thank you so much, Jay. We will now start the Q&A portion. I will read the questions that the participants have sent an. Everyone please continue submitting questions using the chat function on the left-hand side of your screen. In the time remaining we will addressed as many as we can. Please note if we don't have time to get your question, I encourage you to connect with a SCORE mentor after today's webinar . Mentors are available online or at a chapter near you to help you apply the strategies that have been presented today. Let's go ahead and jump into these questions. Jay, our first question comes in from Christina. Does job growth take into consideration the automation of many jobs or is that considered to be too small of a matter? Also what about the large number of retiring baby boomers? I will take the first portion initially and going back to some of the losses we are seeing particularly in manufacturing -- it is not just a US phenomenon. We are seeing it happen in China and that really gets to the automation angle here and in fact I think it is safe to say the US is not losing manufacturing jobs to lower-cost countries such as China, Mexico, etc. A lot of that displacement is taking place because of technology in the reason I mention that is because those jobs are coming back. Once you outsource something, that is going to continue and what we have seen here is an increase in the number of manufacturing jobs in the US and when you look at some of the data when you take into account productivity, a big difference in the wage rates between the US and China but when you take into account how much more productive the US workers, that narrows the gap and that's one of the reasons we haven't seen more jobs moved to China but I think the more overriding issue is we are losing a lot of those jobs automation as opposed to other countries. I'm sorry can you repeat the second question?

Yes, anything to do with the age bracket discrepancy?

The impact on the labor market -- I think that was the question. I think what's interesting is this is good news for the economy because when baby boomers retire in large numbers and I think the statistic is 10,000 people in the US are turning 65 every day. They have obviously rebuilt the retirement savings with equity markets close to record high now. That is opening up opportunities in the labor market for these younger workers. The millennials are coming out of college and when you look at the size of the generation the millennial generation is larger than the baby boomer generation so I think that is good news, but another point want to make has to do with the fact that the economy is close to full employment which means basically anyone who wants a job is working and if anything is going to hold job growth back it's probably going to be the fact that we are entering the mature stages of this expansion. Close to full employment as I mentioned it's difficult for a business owner corporation to find the right individual to fill that position and that is one of the things that is naturally resulting in slower job growth now.

Our next question comes from Michael. What percentage of consumers are millennials?

That I don't know the number of the top of my head. When I think of the number -- it depends on how you define consumer. If you look at the prime age which is up to 55. If you look at the size of the generations, I believe millennials -- 91 million people and baby boomers are about 87 million people. Another thing I've learned about these generations, they are completely arbitrary. One reason you don't hear about generation ask, 55 million people, it has to do with the fact that they are a smaller generation based on what somebody decided was going to be the definition for these various generations. It's one of the reasons you don't hear much about generation X. >> Are there any factors besides potential trade barriers that went into the pessimistic scenario of 25% probability every session this year? Any other individual sectors? They tend to keep these assumptions at a very high level. Some of them might have to do with border tax adjustments which is going to hurt certain industries in the US that do a lot of exporting and that sort of thing. Some of the assumptions might be centered around that which people don't think that is going to see the light of day. We are seeing a lot of things that were going to happen with this incoming administration and they are backtracking on those. The reason I say that is the analysis is still fairly fluid. We don't know what's going to happen with repealing the Affordable Care Act and when tax cuts are going to be taking place. The magnitude of the tax cuts and who that is going to benefit. We are trying to hold back on that a little bit because it's a very fluid situation and we need more clarity before we can quantify the impact on the consumer and particularly which industries might be put -- hurt by some of these policy initiatives.

What are your predictions for the new sales and leasing markets for the rest of 2017 and 2018?

I don't have the numbers off the top of my head. I think most people think that automobile sales have probably peaked. We did see over the last two months -- and they always annualize these numbers so I think we are around 16 point some million units. We just got the April numbers last week for the previous month and I think a more overriding concern has to do with credit quality. The reason I mention that is because when you look at delinquency rates on automobiles you've seen much sharper rises relative to credit card or mortgage rates when there are restricting credits but the reason we are seeing a sharp rise in the delinquency rates is because auto lenders were the first to extend credit particularly captive auto lenders. Mercedes-Benz financial services where you get financing at the dealership tend to play more and that sub prime space and that's going back three or four years now. We saw increasing credit extension to subprime households and another thing they're doing is extending the terms of the loans to make those monthly payments affordable. You have people doing 6 to 8 your loans and they realize they been driving that car for five years and they no longer want to drive it. I think that's another thing contributing to the rise in delinquency rates. Bottom-line is auto sales have peaked and there's a concern of credit quality in lending at this point.

How do you think this forecast will help businesses -- business success that provide a lifestyle service such as a cigar lounge?

If I was able to present the second section of our presentation that we are sharing with clients right now, one of the things we are sharing is particularly for millennials's people are more interested in experiences at this point. This isn't a recent phenomenon. We have pulled in some survey data here that asks the question of millennials -- if you were given $10,000 would you rather receive something like a luxury watch or car or would you rather have some type of experience? Increasingly the case -- not just for millennials -- that consumers have enough goods if you will or things and they are looking for experiences. I think that would probably play well into that seeing a shift away of goods into services and as I mentioned that is consistent across all age groups but particularly pronounced for millennials who are more interested in vacations and the number of countries they can travel to and that sort of thing.

With the unemployment numbers, does it include people that have dropped off because employment is no longer available? Doesn't include the underemployed numbers?

That is an excellent point and the unemployment rate I mentioned, the headline unemployment rate is the use three. The use six rate which is the discouraged workers because they can't find opportunities in the labor market and also the people who are working part-time for economic reasons. They would rather work full-time. When you include those people the employment rate is elevated and much higher and in fact it has come down sharply since the recession ended but it is still elevated compared to where it was prerecession. That's another reason people think the wage and salary growth has been fairly anemic since the recession ended because the so-called U 6 rate might be indicative of the current state of the labor market as opposed to the U 3 rate.

How can a local small business use these metrics to build business and participate in employing people?

I think it's important to note and I would pull you back to the Metro insights portion of the presentation I did, it's important knowing which metro areas around the country are doing well -- not only doing well now but expected to do well over the next year. That might help you position where you can expect some growth whether it is opening another store. Where you might want to position your business back -- based on the fact it is not a coincidence that those metro areas I highlighted in the upper right-hand quadrant are doing well on a year- over-year basis and quarter over quarter. They've got economic momentum and doing well year-over-year but they also have some [Indiscernible] economic meant him which means they will be doing well a year from now. It's more of a geographic push based on the Metro insights data.

Do you think there's a trend for companies to have contract or temporary employees versus permanent? I think you see more of that coming out of a recession. Businesses obviously -- a lot of businesses were hit hard by the magnitude and length of the recession and what we typically see coming out of a recession is that companies are very hesitant to commit to full-time hires so they will go down that contract initially until they are convinced the economic recovery is sustainable. Once they know the recovery is sustainable is when we see them historically more willing to commit to full-time employees and that's when they will hire. We see things like temporary help is typically a good indicator of what to expect in terms of permanent hires and things like that. That is something we definitely parse in the employment data when it comes out every month but I don't think it's a concern right now until we see employment growth began to slow and there are signs a recession might be on the horizon. I don't think it's the case you will see -- not just small business but business owners in general look to hire contract work. There's another reason you won't either -- the unemployment rate sitting at four.5% -- there's no reason for somebody to leave a job for a contract position absent the fact that some people who do these temporary type assignments like to do these things. That is certainly the case of regardless -- regardless of what's happening.

A small business owner -- how can we best keep up with the trends and analysis as was presented and thanks for your insights today?

I think one of the things -- obviously I follow this closely because this is what being an economist -- I share this with a lot of our clients. One thing I would suggest is the NFIB data is publicly available. I believe it comes out on the 10th or 12th of every month. We will get the a potato -- data sometime next week. That is one way to keep up and there's a lot of detail and a writeup that goes up with it. It's about a 20 page document. They discuss white might -- what might be driving some of these survey results of these small business owners but also as I mentioned the employment report comes out the first Friday of every month and we can certainly go to the website to see what's happening with employment growth and also the economic analysis Bureau. We get the GDP report. That just came out last Friday. It is a government agency. You have the ability to look at that and they do a fairly short writeup so it's not something you have to spend a lot of time reading. Just spending time understanding what's going on with the economy and they are good about talking about nuances. We saw -- we got the first quarter numbers last week. For the past five years we've seen a sharp slowdown in GDP growth in the first quarter and a lot of this has to do with the seasonal adjustment factors. Very difficult to estimate Q1 growth. Some of this is a result of the great recession in 08 and 09. What we have seen unfold here is GP -- GDP [Indiscernible]. It is really understanding some of those nuances. If you saw the headline and press highlighting that, saying the economy was basically stalled -- you really have to truly understand what's driving that week growth to get past the headline number and truly understand what's happening with the economy.

We had time for one more question. This is from Chris. We covered geography and where growth is occurring but do we know what industries are expected to boom in the coming years?

Unfortunately we don't have access to that type of data. They used to be a service provider by moody analytics and what was happening on a sector by sector basis. [Indiscernible] produces something like that but we don't have the ability -- we don't subscribe to that services what I'm trying to save. If you look at some of the employment numbers that come out you can see they have sector by sector analysis and you can see that healthcare jobs continue to do well and it's not surprising given the aging population. Those employment numbers give you an indication and obviously retail is one that is not doing well but in fact is prior to this call I read an analysis of what's happening with certain retail -- certain types of retail segments are doing well and some are not such as malls and things like that. It's important to understand the nuance as well because some of the headlines is that retail isn't doing well when in fact when you look at some of the detail there some retail segments are doing well and some are not so you need to truly understand what you are doing well -- which are doing well and which are not.

Jay, those are all the questions we have time for today . Ladies and gentlemen, on behalf of SCORE I would like to thank you all for attending today's SCORE Live webinar. A brief survey will launch when we sign off and we would appreciate your taking a couple quick minutes to complete the survey and tell us your thoughts and suggestions. In closing I would like to give a big thank you to Jay Hawkins for presenting today.

Thank you, my pleasure.

We wish you all a wonderful day and we look forward to seeing you next time. Thank you, everyone. [ Event Concluded ]