Unemployment at seven percent … the Dow Jones average above 16,000 … sound unrealistic?
It is very realistic and soon, according to Joseph P. Quinlan, an economist with U.S. Trust, Bank of America Private Wealth Management at his annual presentation to CREW San Diego last month. In fact, Quinlan predicts that when he returns in 2014 for the same presentation, those will be the stats.
Quinlan is a CREW San Diego favorite, having addressed the organization for several years each January with his economic trends forecast. Although no one is keeping track, the general consensus is that Quinlan’s predictions are accurate.
According to Quinlan, currently the U.S. economy is “like a car stuck in third gear that can’t quite get into fourth (high) gear.” Hiring is trending up, consumers are spending and saving more and exports remain strong, yet some are left wondering what is likely to go wrong next, and this is holding us back.
Reflecting back on 2012, a year he calls the “energy revolution,” the United States made great gains in producing more natural gas, keeping our electricity costs low -- 50 percent lower than Europe and 60 percent lower than China -- and decreasing our carbon footprint faster than Europe. The result is that the United States is changing the dynamics of global competition.
Quinlan also noted that wages in the United States are 75 percent of those in Germany and the cost of capital is lower in the states than in many other countries. The result is more foreign companies are and will continue to come to the United States. For the commercial real estate industry the outlook is good as these companies need office, retail and industrial space.
“The fly in the ointment,” according to Quinlan, is Washington D.C. He views the dysfunction in our leadership at the national level as weighing on the markets. With revenue at 16 percent of GDP and spending at 24 percent of GDP, the gap must be closed. The question in D.C. is how. While there is recognition that taxes must go up, the tension point in Washington is what else must be done, including cuts in spending.
The national debt is also a source of concern, with four years in a row of trillion-dollar deficits. Quinlan reasons that by growing the economy, we are reducing the debt. Given the outcome of the presidential election of 2012, he states “we have at least four years to get this right and get things done.”
Entrepreneurialism should be a source of pride for the U.S. economy, as it has helped drive growth. As Quinlan says, “No other economy does it better,” making us a beacon for other countries to do business here.
When asked about rising interest rates, Quinlan responded that this is a good development given the artificial environment we are in now in terms of interest rates. He hopes that the federal government will put an early end to QE3 (Quantitative Easing -- a monetary policy under which a central bank tries to stimulate growth by lowering borrowing costs by buying up debt, thus pushing yields lower). The result may be a little more inflation but, in Quinlan’s view, that isn’t a bad thing: “(Inflation) is good and a healthy indicator that things are getting better.”
Warren is president of TW2 Marketing Inc. and provides public relations support to CREW San Diego.