CA Economy Poised to Grow as CUs Report 4Q Trends

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Credit union leaders can look forward to California’s economy continuing to grow well into 2019 as the state may receive a short-term stimulus impact from federal government spending. However, some sectors may feel the fallout from U.S. immigration policies as they are slated to impact California’s labor force.

That was the synopsis according to the UCLA Anderson Forecast team’s bi-annual economic outlook released last week, which says California’s economy will keep expanding as U.S. Growth Domestic Product (GDP) averages 2.5 percent annually from 2017 - 2019. (Click here for complete news coverage by the California and Nevada Credit Union Leagues)

For CA Credit Unions: The Outlook
A few select touchpoints for credit unions from the 2017 – 2019 forecast revealed that:

  • California’s job base will rise an average 1.4 percent annually as employment in the state hits a record level of 18.4 million jobs (surpassing its previous peak of 17 million). The state’s unemployment rate will decline from 5.5 percent to 4.6 percent.
  • The U.S. unemployment rate could drop as low as 4.1 percent before gradually rising. Jobs are expected to post national 170,000-per-month gains in 2017 and 2018 before slowing down to 110,000 per month in 2019.
  • California’s “hot” job sectors are transportation/warehousing, utilities, and professional/business services. “Cold” job sectors are manufacturing of nondurable goods and the federal government. Lukewarm-to-moderate job sectors are manufacturing of durable goods, construction, trade, information, financial services, education, health care, leisure/hospitality, “other” services, and state/local government.
  • The interest rate on an average 30-year fixed-rate mortgage will hit between 6 - 6.3 percent by 2019, and the yield on a 10-year Treasury bond will reach 4.3 percent by 2018.
  • On average per year, approximately 116,000 residential building permits (60,000 single-family and 58,000 multi-family) will be pulled in California. This figure has steadily built up from 33,000 in 2009 to 101,000 in 2016. (Also, U.S. housing starts will rise to 1.24 million in 2017 before steadily dropping to 1.16 million in 2019.)
  • After hitting a peak of $320,000 in late 2016, the median U.S. price of a single-family home will drop to $300,000 in 2017 and to $275,000 in 2019.
  • U.S. automobile and light-truck sales will hit a calendar-year peak of 17.8 million in 2018 before dropping to 17.1 million in 2019.

Latest CA Credit Union Trends
The latest year-over year, fourth-quarter 2016 trends in lending (click here for the Leagues' quarterly report) reveal that California’s 328 credit unions continue breaking records. They:

  • Had more than $112 billion loaned-out within the local community—a 13 percent increase. Historically, this $112 billion figure has jumped 62 percent since a post-recession low in 2011 of $69 billion and now represents a record outstanding dollar amount.
  • Experienced a 13 percent increase in first-mortgages, hitting a record outstanding dollar amount of $56 billion and rising 65 percent from the most recent low in 2010 of $34 billion.
  • Saw a 2 percent increase in the combined category of Home Equity Lines of Credit (HELOCs)/home equity loans (second-mortgages), as the outstanding dollar amount ($10 billion) hasn’t been seen since 2012 and has risen 9 percent from the most recent low in 2013. (The record high was $14.8 billion in 2008)
  • Experienced a 31 percent increase in new auto loans, hitting a record outstanding dollar amount of $15.3 billion and more than tripling (rising 203 percent) from the most recent low in 2011 of $5.1 billion.
  • Saw a 16 percent increase in used auto loans, hitting a record outstanding dollar amount of $18.3 billion and doubling (rising 100 percent) from the most recent low in 2010 of $9.1 billion.
  • Experienced a 6 percent increase in credit card lending, hitting a record outstanding dollar amount of $5.5 billion, rising 33 percent from the most recent low in 2010 of $4.1 billion
  • Saw a 6 percent increase in business loans (non-real estate), hitting $850 million (This category has fluctuated greatly between 2001-2016 from $587 million to $3.7 billion)

The same year-over-year trends in membership, deposits, and operations show that California credit unions:

  • Were serving 11 million members—a 5 percent increase not seen since before 2002 (or 569,000 new members), and a record high in membership.
  • Held more than $150 billion in deposits for local consumers—a 9 percent increase, hitting a record outstanding dollar amount ($150 billion).
  • Reached individual record outstanding dollar amounts in checking ($20.2 billion), savings ($54.6 billion), and money market ($39.7 billion) accounts (for other deposit accounts please inquire)
  • Spent $1.3 billion on employees and operations during the fourth-quarter (and $5.3 billion for the entire year).
  • Employed 28,200 individuals—a 4 percent increase.