ONTARIO, Calif. — While the timing of the next economic downturn has been discussed at several recent CU meetings, credit union leaders who gathered for an event here were just as concerned with how such a slowdown might look and feel, as well as with a host of other issues.
Attendees at the Your Economy—Your Credit Union conference here also discussed a number of other issues at the national, state and local levels that are just as important, according to the California and Nevada leagues, which hosted the meeting.
Among those issues: interest rates, labor force viability, worker mobility, wage growth, housing supply, inflation, the California-to-Nevada family migration phenomenon in search of "better opportunities," and additional factors.
Also on the agenda: state and federal politics, international trade conflicts, and preparing for both the predictable and unpredictable.
“We are looking at a mild slowdown sometime between 2021 – 2023 if our current situation doesn’t stray too far from where we are today,” said Dr. Robert Eyler, the first keynote speaker who is economics professor at Sonoma State University and board member of Redwood Credit Union in Santa Rosa, Calif. “This would be our nation’s longest business-growth cycle since the 1800s. It is slow growth, which Americans typically don’t like. But it’s predictable growth, and predictability is what monetary policymakers at the Federal Reserve need to see.”
Risk From Trade War
During the meeting it was acknowledged that a major event could change the positive outlook for an economy gearing up to make its entrance into record territory, at least by modern standards. One of those risks is a potential “trade war” between the United States and other countries, or possible trade tension that eventually builds to an inflection point, according to leagues’ Chief Economist Dwight Johnston.
Johnston added that putting aside this geo-political anxiety—and the domestic dread by some experts on U.S. fiscal and budgetary pressures—every indicator seems to be riding smoothly, even as some national voices keep cautioning the opposite. Johnston said credit union leaders need not panic but must be ready for a variety of economic scenarios, as well as interest rate possibilities driven by the Fed and bond-market “what ifs.”
No ’Screaming’ Indicators
“No indicators are outright screaming that the economy is getting close to the top,” Johnston said. “Our economic boost is partially coming from tax cuts directed at businesses, but equally is the sharp increase in business and consumer confidence after President Donald Trump’s election. However, if confidence by businesses starts eroding because of increasing trade pressures, or an actual trade war, this could all change. We’d probably get some very stunted job growth, if not outright job losses.”
Johnston added that businesses still have tax-savings money to spend on expansion and hiring, but they could decide to hoard it if they feel threatened by international trade issues.
According to the leagues, credit union executives and professionals who attended the all-day conference said “connecting the dots” and considering “the larger picture” through an economic lens has become a priority as they head into strategic planning season later this summer—especially the potential impacts from a natural disaster.
The event’s “Forces of Nature” panel in the afternoon showcased how four different credit unions across California (Patelco Credit Union, Redwood Credit Union, Community First Credit Union, and Sierra Central Credit Union) dealt with the economic and member-service impact of wildfires, hurricanes, earthquakes, flooding, and potential dam breaks in 2017.
The Credit Union View
A handful of credit union executives at the conference shared their individual perspectives in interviews with the league.
Among those in attendance at the meeting was RaAnn Wood, CEO of Alta Vista CU in Redlands, Calif. Wood said the speakers dispelled some myths her board of directors have been debating, such as the false perception that an “exodus” of people are moving out of California, or that rising interest rates will have an immediate negative effect on housing prices.
“We still see challenges for our membership, even with low unemployment rates,” Wood said. “We still have lower-wage earners who need transportation for getting to work, so rising interest rates will definitely impact how much they can qualify to borrow. Overall, our focus is on becoming more efficient and keeping expenses under control as we build capital.”