Talk on March 30 in Vail examines economic impacts of new administration
March 24, 2017
If you go…
What: The economic impacts of a new administration
Who: Scott Anderson, EVP & Chief Economist at Bank of the West
When: March 30, 5:30 pm reception and 6 pm program
Where: The Grand View in Lionshead
How Much: Tickets are $25 before 2 pm on the day of the event, $35 at the door, $10 for students and teachers
VAIL — Economic forecaster Scott Anderson will speak at the Vail Symposium on Thursday. That discussion is previewed by the following Q-and-A
Life's abuzz with questions of America's economic future under the new administration — already the U.S. Federal Reserve has voted to raise interest rates in 2017 for the first time since 2006 and jobs reports signal strong economic growth. While mentioned policies from the Trump administration have seen their initial impact on the market, those policies taking root or evolving stamp a question mark on what the U.S. economy might look like in coming months or years.
Unveiling his educated interpretation of the economic impacts of a new administration in a Vail Symposium program on Thursday at the Grand View in Lionshead Village will be Scott Anderson, executive vice president and chief economist at Bank of the West based in San Francisco. The program takes place with a 5:30 p.m. reception with Anderson taking over the mic at 6 p.m.
At the root of monetary theory, or sets of ideas about how monetary policies or investments should be conducted within an economy, are economic forecasters like Anderson. Their role is one part analytical — digging through economic and financial data — and one part philosophical — connecting the dots and theorizing how one economic trend may impact existing scenarios or create new ones.
Anderson was named as one of the "Top Economic Forecasters in the Country" by Bloomberg and USA Today and his research is widely read by the financial and business community. He has appeared in numerous media including CNBC, Bloomberg, MSNBC, CBS Market Watch, BBC, and NPR, and publications including the Wall Street Journal, New York Times, Financial Times, Washington Post, Los Angeles Times, Chicago Tribune, USA Today and San Francisco Chronicle.
Here, Anderson elaborates on some questions prior to his talk with the Symposium.
What is your general summary of the economy in the near term?
I guess, when I look in my crystal ball for the next two years, I see that right now we are benefiting from a synchronized global growth rebound. The outlook for developed economies is looking better than it did even six months ago. Even before the Trump election, we've seen a nice acceleration in the global economy from the loose monetary policies in Europe and China improvement in many Emerging Market economies as oil prices have increased and stabilized at around $50 a barrel.
Beyond that, there is the tightening of the U.S. labor market after nearly eight years of economic expansion. There are more possibilities for the average consumer. Average hourly earnings are picking up. Consumer confidence is at new highs for this expansion. Household wealth is hitting record highs, with household net worth being nearly 40 percent above previous peaks. Debt levels and service burdens are at their lowest since the 1980s. Consumers are in good shape and 68 percent of the U.S. economy is consumption. That is a huge part of the overall forecast.
With the market so healthy, are we do for a correction sometime soon?
Things are overvalued in the U.S. equity market especially, but we aren't in bubble territory yet in my opinion. Valuations are expensive even from a forward-leaning basis. The market right now is focused on proposed tax cuts and that has already boosted valuations. The market priced as high as it is, we could be in an unsustainable Goldilocks scenario with a lot of room for disappointment down the road.
What parts of the economy do you expect to see President Trump's influence first?
I think, first of all, there is a tremendous amount of economic policy uncertainty right now. The Trump administration appears to be pulling every major policy lever there is in Washington. We're dealing with healthcare policy changes, potential tax reforms at the corporate and individual level, immigration policies and trade policies are being changed. There is a full suite of potential areas where the Trump Administration will have significant impact on the U.S. and local economics. In my opinion, it is a little too much to put on your plate all at once.
Being in Washington for 15 years and analyzing economic data for 20 years, it is easier to say than do these things. Getting through Congress with something like healthcare could take time. I feel some of these ambitious policy initiatives could be pushed in to 2018.
What policies has Trump put forward, or positions has he taken, will then most effect the economy?
I worry about the signaling effect and retaliation from protectionist trade policies. Things like the border adjustment tax or an import tax on Mexican imports, or even putting tariffs on Chinese imports are popular policies, but they could do long term damage to the U.S. Economy and our standing in the world.
Negative factors of these policies haven't full been priced into the market. Other countries could retaliate against us by raising tariffs of equal or greater value on U.S. Exports. Agricultural exports are a likely target and that could hit parts of the country worse than others. There are a host of industries that could be impacted.
With the current distrust of information where does a forecaster like you get their information?
I try to be as objective as possible. It is better that I am on the west coast than the east coast now. I look for objective sources like government data sources and try not to read much of other economists' stuff. I'm focused on doing my own analysis of the numbers. I have a good role at a bank with a good view of bank balance sheets, credit trends, auto loans, and mortgages and get to spend a lot of time talking with clients, corporate boards and private customers and looking at all that data.
What do you make of the Fed's interest rate hike?
Yes we expected it. They haven't changed their views much since December but seeing cumulative gains in the labor market and inflation moving up closer to their 2 percent target, we expect them to keep raising rates this year. Probably twice more this year, one in September and another in December, and then three more in 2018 and possibly two times more in 2019. If you are thinking of refinancing a mortgage or buying a car, the cost of financing will start rising. Interest rates are on a gradual climb.
Can you give us a regional view of Colorado?
Colorado is a mixed picture as you look around area by area. Colorado in general is outperforming the nation in job growth, but we predict Colorado's economic performance will get closer to the national average going forward. In terms of areas, Boulder is growing strongly, Denver is slowing down, and Colorado Springs and Fort Collins are also growing fast. Grand Junction, on the other hand, is pretty flat over the past year.
The unemployment rate is also very low in Colorado at about three percent compared to about 4.7 percent in the nation. Places such as Fort Collins are as low as 2.6 percent. The labor market is healthy and is attracting a lot of young people to the state. Homebuilding is almost fully recovered from the crisis Colorado and building permits are up six-fold since the bottom of 2009. We are back to levels we saw in the mid-2000s.