The Innovation Economy:

New Opportunities and Risks in the

Evolving Business Cycle

Dr. Bill Conerly

for

Regional Economic Forecast &

Innovation Expo

December 11, 2014

• The Global/National Economy

• The Five Counties

• Economics of Innovation

2011 2012 2013 2014 2015 2016-1

0

1

2

3

4

5

World Economic GrowthIMF forecast

an

nu

al

pe

rce

nt

ch

an

ge

2011 2012 2013 2014 2015 2016-3

-2

-1

0

1

2

3

4

U.S. Real GDP Growthp

erc

en

t c

ha

ng

e

Average of other forecasts

Nov-11

Feb-1

2

May

-12

Aug-12

Nov-12

Feb-1

3

May

-13

Aug-13

Nov-13

Feb-1

4

May

-14

Aug-14

Nov-14

0

5

10

15

20

25

30

Risk of RecessionWall Street Journal survey

pe

rce

nt

November: 12%

U.S. Economy: Major Sectors

,

Sector 2015-16 Outlook

Consumer spending Spending grows w/ income

Housing construction Stronger in 2015-16

Non-res construction Light growth

Bus. Capital Spending Strong

Exports Moderate growth

Federal Gov’t Cuts in goods, services(but entitlements grow)

State & Local Gov’t Slow growth

2011.01

2011.02

2011.03

2011.04

2011.05

2011.06

2011.07

2011.08

2011.09

2011.10

2011.11

2011.12

2012.01

2012.02

2012.03

2012.04

2012.05

2012.06

2012.07

2012.08

2012.09

2012.10

2012.11

2012.12

2013.01

2013.02

2013.03

2013.04

2013.05

2013.06

2013.07

2013.08

2013.09

2013.10

2013.11

2013.12

2014.01

2014.02

2014.03

0

1

2

3

4

InflationConsumer Price Index

% c

ha

ng

e 1

2 m

on

ths

2011.01

2011.02

2011.03

2011.04

2011.05

2011.06

2011.07

2011.08

2011.09

2011.10

2011.11

2011.12

2012.01

2012.02

2012.03

2012.04

2012.05

2012.06

2012.07

2012.08

2012.09

2012.10

2012.11

2012.12

2013.01

2013.02

2013.03

2013.04

2013.05

2013.06

2013.07

2013.08

2013.09

2013.10

2013.11

2013.12

2014.01

2014.02

2014.03

2014.04

2014.05

2014.06

2014.07

2014.08

2014.09

2014.10

2014.11

2014.12

2015.01

2015.02

2015.03

2015.04

2015.05

2015.06

2015.07

2015.08

2015.09

2015.10

2015.11

2015.12

2016.01

2016.02

2016.03

2016.04

2016.05

2016.06

2016.07

2016.08

2016.09

2016.10

2016.11

2016.12

0

1

2

3

4

5

6

3-month T-bill

30-year mortgage

Interest Rate Forecastp

erc

en

t

2007

.01

2007

.08

2008

.03

2008

.10

2009

.05

2009

.12

2010

.07

2011

.02

2011

.09

2012

.04

2012

.11

2013

.06

2014

.01

2014

.08

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

Federal Reserve Stimulus$

tri

llio

ns

Commercial Bank Assets$ billions

2007 2013

Cash 482 1,632

Investments 1,591 2,722

Loans 6,537 7,120

Inflatio

nR

ecession

• The Global/National Economy

• The Five Counties

• Economics of Innovation

2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 20

1

2

3

4

5

6

7

8

9

10

Thurston

Unemploymentp

erc

en

t

Grays Harbor

Lewis

Mason

Pacific

Thurston

-5 0 5 10 15 20

Population Growth2004-2014

percent

Rural & Urban Issues

• Fewer location-specific jobs

Farming, forestry, fishing, mining

• Most folks like cities

• Much work can be done anywhere

• The Global/National Economy

• The Five Counties

• Economics of Innovation

Offshoring

Labor cheaper, but rising

Cost of quality higher

Regulation more lenient

Overseas markets growing

Onshoring or Reshoring

Labor cheaper, but rising

Cost of quality higher

Regulation more lenient

Overseas markets growing

Onshoring or Reshoring

Labor cheaper, but rising

Cost of quality higher

Regulation more lenient

Overseas markets growing

More flexible:

Quantity & specs

Quality cheaper to attain

Great for low labor content

Innovation: Customization

Customization: Manufacturing

Customization: Information

Customization: Medicine

The Nutshell

Most likelyStronger growth in 2015-16Higher interest ratesStable inflation

Rural communities levelUrban areas expanding

Opportunities through innovationCustomization

Questions?

Bill @ ConerlyConsulting.com

one “n”