Is a recession inevitable? Aw, c’mon. Life is good. Unemployment is low. Growth is moderate but steady. Economic creativity is busting out all over.
Only a genuine disruption could divert those promising trendlines. But what’s looming out there? You got it — lots of possible disruptors.
Such perils are not hiding in the shadows, they’re the game-changers we worry about daily, such as trade uncertainty, the housing crisis and erratic growth in some personal-income categories.
That was the consensus struck by a team of economists who delivered an upbeat-but-cautious projection — steeped in real-world caveats — during the Friday, Oct. 25 business forecast titled “Get Ready for 2020,” at the 31st Annual Valley Industry & Commerce Association Business Forecast Conference at the Universal City Hilton.
“Recession is caused by shock,” said Sarah House, director and senior analyst with Wells Fargo Securities, describing the national landscape as navigable but fraught with potential shockers.
Though the economy has already endured some pain amid the U.S.-China trade war, she warned more aftershocks were possible until consensus is attained. It’s hard, she warned, for businesses to commit to capital spending to pace the way to growth if decision makers are worried about the open-ended drama of the current international political scene.
While the Southern California economy is paced by trade — from the twin ports of Los Angeles and Long Beach to the warehouses and logistics centers of the Inland Empire — the worst turbulence may not yet have hit because many importers front-loaded their commerce trying to stay ahead of plot turns between President Donald Trump and Chinese leaders.
She added, though, that consumer spending is still in good shape, which could stave off a recession because many households still have a spending “cushion.”
“Consumers have means to spend,” she said, “but the question is ‘Do they have the will to spend amid financial and political volatility?’ “
Assessing the state outlook, Jeffrey A. Krevetz, regional investment director with U.S. Bank – Private Wealth Management, cited an eruption of creativity in the business world, with California as its frequent focal point.
“People move here to make dreams come true,” he said, with venture capitalists still eager to fund the next big high-tech thing, whatever it turns out to be, collecting innovators from all over. He gushed over breakthroughs in such sectors as life sciences, virtual reality and on-demand entertainment.
With streaming services in need of more and more live-action TV programming, Krevetz declared “In Hollywood, the future is digital.” With voracious audiences willing to pay for streaming shows from all over the digital dial, the result has studios in Southern California operating at capacity — and generating jobs galore.
Nonetheless, Krevetz warned, many are still fleeing the state, landing in such places as Nevada, Arizona and even Texas. What’s chasing them away? High housing costs.
Although he expects the state’s economy to outpace the nation’s, “housing affordability will continue to raise alarm,” he said. “We need to step up the pace in building more multiple-family and single-family homes.”
Economist Somjita Mitra, who will soon join Gov. Gavin Newsom’s administration, addressed the complex job growth in the San Fernando Valley. Economic growth will likely continue but slow and steady, but potential pitfalls loom.
As an image of Godzilla hit her video screen, Mitra said “if I had a sound effect for this message, it would be ‘dah-dah-dahhhh!,” mimicking dramatic movie music when talking about the region’s housing costs.
We need to build more homes, she said, because we need them, we need to be able to pay for them — and we need the construction jobs that come along with them.
While unemployment continues low, she expressed concern about part-time, “gig” and temp jobs — especially those that don’t requite a college degree — that don’t necessarily add up to household income that can purchase a house or pay the state’s rising rents.
She worried that unless such issues are addressed, recession could become a self-fulfilling prophecy. If businesses are reluctant to takes risks necessary to grow, she said, “a recession could become the consequence of fear of a recession.”
