Every January for the past several years, San Diego’s Commercial Real Estate Women — CREW — has invited economist Joseph Quinlan to speak at the annual Economic Trends Forecast event.
Each year, Quinlan, who is managing director and chief market strategist of U.S. Trust, Bank of America Private Wealth Management, shares his perspectives and predictions. Some years the presentation is positive and some years, not so much. The 2014 comments were upbeat and encouraged confidence in the economy. Quinlan warns, however, that we shouldn’t get too comfortable.
Nearly six years ago, in the fall of 2008, times were bad and getting worse. Dark times followed and now, in retrospect, we have a benchmark for how things have improved. Today we are looking at a good economy, so much so that no economists are forecasting a recession for this year.
Quinlan attributes the positive position we find ourselves in today to three key drivers that helped get us here.
1. Ben Bernanke. The outgoing Federal Reserve chairman’s “stewardship during the last five years really saved the day,” Quinlan said. Bernanke’s extensive banking background allowed him to “rip up the playbook and create his own” when dealing with the fiscal crisis and ultimately made the banking system more stable.
2. Energy revolution. The United States’ low energy costs (as compared to other countries) and many resources are bringing foreign investment to the United States and helping to revitalize the economy. In the past five years, the United States has created two super oil fields — in Texas and Montana — that produce more than 1 million barrels a day. By 2016, Quinlan predicts that the United States will be producing more oil than Saudi Arabia.
3. U.S. resiliency. When the financial crisis hit, U.S. households “sucked it up” and cut back while U.S. companies made hard decisions. “No one resets better or faster than the U.S.,” Quinlan said. “We moved very quickly out of the crisis and while we take for granted how we operate, this is one of our strengths.”
However, if Quinlan’s predictions come true, 2015 or 2016 may reset us in a different direction. In his view, the United States will experience tapering that will likely result in the economy tightening. One example that Quinlan cited is the government “taking the [stimulus] money off the table.” He also expects to see interest rates rise, though he doesn’t expect them to “go through the roof” the way many economists have speculated.
When asked about the expected impact of the Affordable Care Act, Quinlan responded that he doesn’t know and neither does anyone else. Calling ACA “a grand experiment,” he acknowledges that something had to change in the United States in terms of health care access, adding that he is afraid that the quality of health care may eventually be determined by income, though he admits this is not currently happening.
Quinlan has discussed education in previous CREW presentations and addressed it again at the 2014 forecast. With the standard price tag for a college degree hovering around $200,000 or more, he predicts the education bubble will burst, resulting in a big mergers and acquisitions boom among higher education institutions.
With jobs at both ends of the labor spectrum going unfilled in the United States, he sees community colleges being an important part of the future, as such institutions can better prepare the workforce with vocational training. He noted the mindset of parents as well as their children needs to change, as most parents don’t want their kids to be skilled laborers. “We need people to pick apples and work for Apple.”
Teresa Warren is president of TW2 Marketing, a San Diego-based marketing and public relations firm that provides services to CREW San Diego.