Economists offer key evaluations of global, national and Phoenix economies
By Terrance Thornton | Digital Free Press
The American economy is not in recession — yet.
The global economy, however, is and the pending energy crisis coupled with growing food inflation on the heels of the largest military action on the European continent since World War II will have reverberating effects on global economics for years to come, experts reported Friday.
The Phoenix economy is not in recession, but analysts contend calendar year 2023 will be tough and the American economy may see indicators suggesting a shallow recession is imminent.
An estimated 500 Phoenix business leaders came to the Sheraton Phoenix Downtown for a panel discussion hosted by the Greater Phoenix Chamber featuring three keynote speakers covering the wide gamut of global economics. The event is an annual one providing local business leaders of the Grand Canyon State a glimpse into what the economy may have in store for the coming calendar and fiscal years.
For about 90 minutes, three keynote speakers delivered a staggering amount of data points, expert analysis and comical quips en route to conclusions of where they believe the American economy will ultimately land following actions at the federal level to curb inflation. They were:
- Joe Brusuelas, chief economist and principal, RSM US LLP, who spoke to the global economy;
- Steve Wyett, Chief Investment Strategist, BOK Financial who spoke to national economy; and
- Elliott Pollack, CEO at Elliott D. Pollack & Company who spoke toward Phoenix economics.
Points of Phoenix economics
Mr. Pollack, economist and educator, offered the final keynote address delivering a boiled-down version of what is happening right now in the local economy.
“Are we in a recession? No. The indicator that a recession is defined by two quarters of less GDP is not true. — that is nonsense,” he said plainly during his opening remarks. “Essentially, this is the way the labor market is: If you don’t have a job, you don’t want a job.”
While Mr. Pollack reports the Arizona economy is not in recession, he warns the next six months could be when the current period of stagnant growth can fall into the realm of “recession.”
“We have never tried to induce a recession with so much investment in the system,” Mr. Pollack said of the Federal Reserve’s slow march toward a 4.5% interest rate coupled with the federal infrastructure dollars.
“Federal interest rates are historically low. Period. I have a slightly different conclusion than other people. Consumers, who are two thirds of the economy, it is tough. You are pummeled daily by bad news in the media and when people get nervous they pull back. Real consumption is a little below level — this is essentially cash in consumers pockets.”
Mr. Pollack offers a snapshot of where impacts of the Arizona economy stand:
- In this cycle, housing has taken the brunt of the hit despite the fact that there is a significant shortage of housing throughout the country.
- We have never tried to induce a recession when there 11 million unfilled jobs and only 6 million unemployed.
- We have never tried to induce a recession when the federal government created a situation where consumer have $2.5 trillion dollars more in cash than normal.
Inflation, gasoline and housing prices are key economic data points under scrutiny today, Mr. Pollack explains.
“The real rate of inflation in this country is more around 5 or 6 percent,” he said pointing out the 2% government goal for inflation is a figment of imagination. “My thing is this 2% number was picked out of thin air, if we are to believe Paul Volcker’ memoir that is. It is going to be very difficult to get back there. If you really want to turn the screws on the economy, interest rates need to be positive. I think the odds the fed stopping at 4.5% interest rates are slim. I think it really needs to higher.”
If inflation continues to grow it will be painful for the everyday consumer and small business owner, Mr. Pollack opines.
“We are just at the beginning of the disruptions,” he said.
“I am probably the only the guy in the room that lived through this as I was a working economist in the ‘70s and ‘80s,” he said. “The results can depend on what the reserve resolves to do. Most people don’t have any idea what this was like because they haven’t lived through it. The good news is we are only dealing with something that is only six [fiscal] quarters old, so it won’t get baked in.”
Mr. Pollack was very evident in his address pointing out the Phoenix metropolitan area has many positive attributes.
“We are sixth in job growth — effectively we are doing well,” he said. “Phoenix is one of the fastest growing areas and is doing well because the nature of Phoenix has changed. The economic development teams have done an incredible job at explaining the nature of Phoenix has changed.”
Mr. Pollack also suggests the makeup of the employee and the job pursued is widely diverse throughout Phoenix compared to years before.
“The nature of jobs coming here has changed and that is a huge deal,” he said. “In the near term, things are going to be difficult but absolutely necessary to avoid further pain later. But by the end of 2023 we will normalize, and we will continue to do well.”
The modern global economy
For Mr. Brusueles, energy is the No. 1 commodity destined to shape the economics of Europe.
“The largest war is going on right now on the European continent since World War II,” he said of the Ukraine war. “The Europeans are going to go through a bit of an energy shock. We, the global economy, will be in a recession for the next year.”
Mr. Brusueles explains the economics of the world has just undergone a massive shock to the system.
“What has happened is we all suffered a shock and it was called a ‘pandemic,’” he said, pointing out he believes the American economy will enter a recession in coming months.
“I suspect by this time next year we will be in a recession,” he said. “I think you need to look at it that way.”
But Mr. Brusueles explains the American labor marketplace will be shifting as the Baby Boomer generation begins to exit the workplace as fast as they entered it decades ago.
“Here is a really good takeaway: things are slowing or about to slow,” he said. “We don’t have enough native-born workers. We have known that eventually we would get here, but we can’t turn on the immigration safety valve like we have historically. Anything that doesn’t require a cognitive task will be automated. That is as serious as a heart attack. Either your company keeps up or you will lose your business.”
Mr. Wyett, who hails from Tulsa, Oklahoma, says in his neck of the woods experts opine a 50-50 chance the American economy slips into recession sooner rather than later.
“It is really about exasperating inflation markets,” he said of macroeconomics with global impacts. “The bigger issue might be food inflation — there are people in this world who are spending 40% of their income on food. Food inflation, historically, has been a major issue and a catalyst of civil and political unrest. It is going to be a long, cold winter in Europe.”
Stateside, Mr. Wyett contends: “We are done with COVID-19.”
The local and national jobs report remains positive adding hundreds of thousands jobs thus far this year.
“For every unemployed position there are two job openings,” he said of the significant statistic. “I am skeptical that the fed can get the outcome they want as the avoidance of one risk is the acceptance of another.”