Panelists at The Columbian’s 2019 Economic Forecast event all offered a reasonably cheerful short-term assessment of the economy, pointing to a variety of indicators that suggest that even though growth may slow a bit, a recession is not imminent.
But the long-term picture was comparatively bleak, highlighting concerns about the impacts of wealth inequality and climate change.
The event’s keynote speaker was Jason DeSena Trennert, the chairman and CEO of Strategas Securities, who gave a presentation that he called a “requiem for the ‘new normal,’ ” referring to a pattern of slower growth that he said tends to take place in the years following a financial crisis.
The U.S. economy has been experiencing the new normal ever since the 2008 financial crisis, he said, but, “President Trump was a disruptive force on the new normal” due to policies that have sped up growth.
“We’re going back to the old normal,” he said.
The growth has enabled the Federal Reserve to take more aggressive recent action to stabilize interest rates, he said, but it’s now poised to step back, marking a return to the “old normal” type of business cycle, which will mean stronger growth, more market volatility and a higher risk of recession.
Referring to the Federal Reserve policies of the past 10 years as “too much of a good thing,” Trennert said the gains of the economic recovery have not been evenly shared, with most of the benefits felt by people with investments.
“It helped the wealthiest people the most,” he said. “If you’re someone who has savings but doesn’t have financial access, you get kneecapped.”
When viewed through the lens of a return to the “old normal,” Trennert said recent increased stock market volatility — particularly in the final months of 2018 — is to be expected, and doesn’t necessarily signal the arrival of an imminent recession.
The keynote was followed by a panel discussion featuring Trennert, Nierenberg Investment Management Company President David Nierenberg, Meyer Memorial Trust Chief Investment Officer Rukaiyah Adams and nLIGHT CEO Scott Keeney, moderated by Fulcrum Wealth Management Group Chief Financial Officer Cara Samples.
Nierenberg said he agreed with Trennert that the economic indicators are healthy, but he opened the panel discussion by expressing strong concern about the potential economic impacts of the current U.S. political climate, and recalled the negative impact that the impeachment and resignation of former President Richard Nixon and other turbulent political events had on the stock market in the 1970s.
“I worry that there are elements of that pattern in our political environment today,” he said.
Keeney focused his presentation on the global economy and international trade, particularly in China, where nLIGHT’s industrial laser business has been rapidly growing. He described himself as optimistic about the future of the global technology sector, although he noted that there have been some challenges, such as a recent State Department travel advisory that warned that traveling Americans face an increased risk of being prevented from leaving China due to inconsistent application of local laws.
“It’s affecting real business,” Keeney said. “It’s literally a board-level discussion to decide whether we go.”
Adams offered a positive assessment, arguing that while there are some signs of trouble, investment managers remain confident due to the large amount of capital still available to invest. She said her focus was on finding ways to address longer-term risks such as environmental problems, and urged business leaders to consider the impacts of their work.
“I don’t want to be coy about the situation — we are taking seriously the signals,” she said. “But we think we’re going to be fine.”
In response to an audience question, she identified student debt as an economic warning sign, arguing that economists have no model to predict the result of a large-scale student debt default.
Multiple audience members asked about the economic impact of the ongoing partial shutdown of the federal government. Trennert said he expected to see negative secondary impacts, but that the direct impact of the shutdown on the economy would be difficult to quantify — but it’s likely not enough to trigger a recession, he added.
Keeney outlined several negative impacts on the business community, including licensing processes stalling out due to closures at federal offices and business travel prevented by delays at airports as Transportation Security Administration and air traffic control personnel continue to go without pay.
“It’s worse than we thought,” he said.
The event’s closing address came from Scott Bailey, the Southwest Washington regional economist at the state’s employment security department. Bailey agreed with the other panelists about the current crop of healthy economic indicators and the low risk of an imminent recession, and shared a number of positive statistics about Clark County’s recent economic fortunes.
“We’ve had five years in a row of 4 percent job growth,” he said. “That’s incredible.”
Many of the new Clark County jobs have been in the construction industry, he said, which has largely recovered from the massive hit it took during the financial crisis. And on the national level, the country saw even better job growth in 2018 than it did in 2017.
Still, he said, there are problems at both the local and national levels. Fifty percent of Clark County renters now spend more than a third of their income on rent, he said, and 25 percent spend more than half. An estimated 1 in 25 students in local school districts are homeless. And wage growth has been stagnant for years except at the highest levels, contributing to worsening income inequality.
“The research is very clear: (income inequality) slows down economic growth,” he said. It even affects life expectancy, he added — “people with money are living longer, but the average lifespan in this country has dropped three years in a row.”
Ultimately, Bailey described himself as pessimistic about the economy in the long term, citing both income inequality and the future impacts of climate change, for which he said the world is “absolutely unprepared.”
