Economist sees uncertainty, but no immediate Trump disaster

Affordable Care Act, Bill Watkins, Center for Economic Research and Forecasting, California Lutheran University, Economic Forensics Analytics, Sonoma State University, Center for Regional Economic Analysis, Robert Eyler, 2017 North State Economic Forecast Conference,

By Laura Urseny
Chico Enterprise-Record

With an eye to economic uncertainty, the national and California economies can be compared to a big truck, says one economist.

“It’s like a big truck. It’s hard to turn quickly,” economist Robert Eyler told the 450-plus who gathered at the 2017 North State Economic Forecast Conference Thursday hosted by the Center for Economic Development at Chico State University.

Eyler, who is director of the Center for Regional Economic Analysis at Sonoma State University, said there is plenty of uncertainty about what’s going to happen, but it’s not going to happen immediately.

“It looks good next year, regardless of uncertainty.”

Over all, he sees a slow, incrementally-improving national economy where consumer spending is the driver.

NO RECESSION

“We’re in the eighth year of economic recovery but we haven’t seen a boom period, and don’t expect to see that in the next three years. But we’re not seeing a recession either.”

Expecting interest rates to rise, he thinks the Federal Reserve might schedule at least two hikes during the year.

Expect to see the Republican-promised attack on the Affordable Care Act, which will have impact on medical communities. He expects an aggressive fiscal policy that will broach lowering taxes and increase spending. There will be more discussion of spending on infrastructure improvement, and of course immigration reform.

“Expect debt to rise during Trump, especially with the discussions surrounding the reform of Social Security and possible trade wars.”

TRADE WARS

“Trade wars scare economists.”

Eyler sees Trump’s foreign policy as the possible catalyst of trade wars, which would have negative impacts for California and California agriculture. Trade wars could reduce port activity, reduce the flow of finances, and reduce the offshore movement of manufacturing, he suggested.

However, that doesn’t mean companies would be pulling manufacturing jobs back to the U.S. or California, especially with California’s increasing minimum wage laws. Likely, manufacturers would turn more to further mechanization of their processes.

“We’re not seeing a supply side change which is the marker of boom periods that the U.S. has had. No recession in the U.S. is predicted through 2020, but it won’t be a wild growth phase.”

Eyler sees a “rebounding” of the U.S. dollar, although a lower dollar helps with exports.

He watches auto sales as an indicator of consumer action. The sale of SUVs and trucks are increasing, but not cars, which he interprets as the slowing of consumer spending.

As far as small business growth, he again dinged banks for having cash that could help small firms, but not wanting to release it. He also blamed regulators for wanting banks to keep more cash on hand to battle emergencies.

WEST IGNORES EAST

California is a dichotomy, with the wealthiest west of the San Andreas Fault, and the poorest to the east, according to economist Bill Watkins, director of the Center for Economic Research and Forecasting at California Lutheran University in Thousand Oaks.

California tops other states in “wealth, poverty and inequality.”

Watkins said the latter two traits can be seen in a recent job opportunities report that noted Detroit is 150th in the nation. Modesto is 146th and Fresno is 149th. A slow California recovery, as forecast by Eylers, isn’t so good for the lower percentile in California, he noted.

Clustered along the coast, the rich don’t see the other California and its problems, and likely don’t care.

Along the coast, there is “unimaginable wealth.” Eastward, “there’s some place completely different.”

“That divide is a problem for Northern California because decisions are being made by people who don’t understand your situation.”

The California way is not understood by others in the nation as well, he pointed out. While he was born in Chico and lived much of his life in California, he did live a few years in Tennessee. In the East, it’s hard to understand California, he said.

California’s wealth also influences policy, pointing to the state’s environmental regulations that are out of kilter with the rest of the country. Wealth allows Californians the luxury of arguing over issues that are nonexistent in other places, he said.

“California is increasingly a difficult base for some businesses to do business,” hence the exodus to places like Texas.

Regulations that burden small businesses are like “subsidies to big businesses,” he said, because they have the substance and resources to plow through them.

Much of California’s recovery has been based on the job production and investment in Silicon Valley and the Bay Area, but Watkins sees that backbone standing not as strong.

“You don’t need venture capital to design an app.”

Nevertheless California will always shine, he noted, with better weather, appealing terrain and opportunity.

One area of opportunity he sees for economic growth in California communities is for the aging population, with “migrating retirees.”

Americans are looking for places to retire that are safe, have access to medical services, and hosts amenities, such as cultural or entertainment venues.

Offering the example of “a dusty cow town” and “a dead lumber town,” places like Paso Robles and Bend, Oregon, rebounded with new niches, such as wine in the former and breweries for the latter.

That kind of development appeals to retirees he said, who bring wealth from outside the area and help local economies.