History indicates recessions are inevitable — and it’s just a matter of time before the next U.S. economic downturn. Tatiana Bailey, director of the UCCS Economic Forum, believes there are several factors hinting at a slowdown.
“The low unemployment rate, more inflation due to trade wars, interest rate hikes, and the leveling of worker productivity,” she said. “We do have an aging population and a low labor participation rate particularly for young people, and then, on top of that, a skills gap.”
About 600 attendees gathered Thursday for the 22nd annual UCCS Economic Forum at the Ent Center for the Arts, which included an overview of the national, state and local economies.
Bailey said other factors that may indicate a possible downturn include: further reductions from immigration restrictions, overexuberance in stock market synchronized global growth of today will be the synchronized contraction of monetary policy tomorrow and downgrading of U.S. treasuries because of high debt.
“What I pay attention to is the number of factors that we have here and the possible confluence of these factors,” she said. “Could two or three or four hit at the same time?”
At the event, Bailey focused on the state and local economy and invited Tim Quinlan, director and senior economist for Wells Fargo Securities, to give a national and international outlook.
He started by sharing a couple of former President Ronald Reagan quotes, including one about economists not being able to agree on the economy’s forecast.
“If you put three economists in a room, you will probably get at least four or five opinions on where the economy is heading,” he said. “One thing that all the economists will agree on is that trade tariffs are a bad idea.”
Quinlan said the National Association for Business Economics conducted a survey about a month ago and that 95 percent of the business economists responded tariffs aren’t a great idea.
“I suspect the other 5 percent of those misunderstood the question,” he said.
The trade tariffs have been going on since about the beginning of November 2017, Quinlan said.
“However, more recently, we really significantly up the ante with this $200 billion that just went into effect last week,” he said. “That effectively tripled the size of all the outstanding tariffs.”
There still are more tariffs under consideration, Quinlan said, adding President Donald Trump’s administration also has talked about increasing the tariff rate on goods already in effect.
“Sort of the conventional wisdom that you will hear is that these trade tariffs are a means to an end,” he said. “They are an effort to kind of influence trade policy in a broader sense and cooler heads will eventually prevail. …I don’t think that’s true., especially in terms of trade policy. Anybody who thinks cooler heads are going to prevail has been wrong so far in this administration.”
In the near term, Quinlan doesn’t anticipate tariffs may not be that disruptive to the nation’s economy.
“Perhaps a less dramatic way of saying it is these tariffs alone will not bring the U.S. economy to its knees,” he said.
Colorado has about the same amount of countries it exports to as the U.S., Bailey said.
“Although, the percent from our Gross Domestic Product that comes from exports in the U.S. is 8 percent and in Colorado it’s a lot lower at 2.3 percent,” she said.
Bailey said the state’s most impacted industries include: agriculture, aluminum, industrial machinery, plastics and furniture.
“Those are the top five that we estimate would be impacted the most especially by China tariffs,” she said.
Arrow Electronics, one of the largest employers in the state, indicated they would relocate to another country and move a 1,000 jobs if the tariffs aren’t resolved, Bailey said.
“That would take some high-paying jobs, employment decreases, our output decreases, and the jobs potentially go to another country,” she said. “Then that country benefits from tariffs that were supposed to help us out. That’s why 95 percent of the economists who understood the question actually said they don’t like tariffs.”
The Colorado Springs area’s exposure to trade wars is similar to Colorado’s in terms of total output attributable to exports.
“But we have a larger exposure to Asia, so we will have to wait and see how that plays out,” Bailey said.
Go to uccseconomicforum.com for more information and data from this year’s UCCS Economic Forum.