On the record: A new economic norm
The new economic norm, chewing frogs, CEO Tweets and English accents
Friday, December 06, 2013 7:00 AM
A new economic norm
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I had the chance to attend Wells Fargo & Co.’s 55th annual business trends luncheon, which featured Mark Vitner, the company’s senior economist, who gave an overview on the economic outlook for 2014. I took a ton away, and I’ll share some of it below, but the overarching theme?
Get used to the new normal.
Although Vitner thought 2014 would be a better year than 2013, due in part to less drag from global factors in Europe and China, he was very clear that he didn’t think we were heading back to pre-recession growth levels like we saw in 2006, or even 2003. Instead, we are heading someplace new and uncharted.
He cited uncertainty due to Washington gridlock, the farm bill, potential tax structure changes and the Federal Reserve’s tapering of bond purchases, as the main drag on the economy. When uncertainty is high, he said, it raises the hurdle for companies to hire new employees.
Vitner likened the economy to driving in the fog. You can drive in the fog; you just can’t drive very fast. The below-trend growth of gross domestic product, he says, bolsters the case that the type of growth we are seeing is the new normal.
Overall, Vitner said, there would be fewer bad economic signs in 2014. But, he said, “while less bad is good, more good would be better.” It looks like until the hiring rate goes up, the economy won’t be busting out of the fog.
"If you have to eat live frog, don't chew it."
I bet you need some context for that quotation. Vitner said the Fed consistently delaying its planned tapering of bond purchases reminded him of a Southern saying he picked up from a client in North Carolina. Vitner didn’t think tapering will be announced in December because of what could be a shaky holiday retail season, and though there is a belief that the best bet would be next March, that’s the start of house buying season. He doesn’t think there is ever a “good” time to start the taper. Rather, Vitner thinks it’s time to just rip off the Band-Aid. It will hurt, he said, but it has to start soon or the uncertainty will continue to be a drag on the economy. Our financial columnist, David Miles, wrote a piece about the taper back in September. It provides some good context: bit.ly/1cbgNoe
- In the fourth quarter, more small businesses say revenue went up than down. This is the first time that has happened since the recession, Vitner said.
- Oil production in Texas had been on the decline for 20 years. In the last three years, they made it all up. I’ll point those interested in why that’s the case to this article from The Atlantic titled “What if we never run out of oil?” bit.ly/XIr7Q0
- Stocks are roaring, and for many companies, earnings are up. But Vitner said to be wary and to take a look at the expense side of the equation, which could be the real reason for the higher earnings.
Lifelong learning from London
Rosemary Link, associate vice president for academic affairs at Simpson College, presented the Lifelong Learning award to Bankers Trust Co. earlier this month at the Greater Des Moines Partnership’s Celebrate Business Awards. The event had a number of great stories about companies doing fantastic things - we got a ton of seeds for future stories. Link was there to provide encouragement for businesses to invest in tuition reimbursement options for their employees. I found it fascinating that just 25 percent of Iowa’s workforce has a bachelor’s degree. Link wrote about the issue and how employers could help in a guest opinion in the Business Record earlier this year: bit.ly/XdXyVy. In a follow-up conversation, she said in terms of employers providing reimbursement options, Iowa actually fares pretty well in comparison to the rest of the country. I also had the privilege to interview her when I was just a new reporter, and she was just arriving at Simpson back in 2009. Not only is she an author, but she is originally from London, and has a simply charming British accent. She confessed to me at that time that when she goes back to England, they tease her about her “American” accent, and that she’d have to work on speaking Iowan. Trust me, the Iowan language hasn’t tarnished the English accent at all. Here’s my interview with Link from 2009: http://bit.ly/1g3uPuO
The sports record
The official paid attendance for Iowa State’s frigid home finale against Kansas was 54,081. I was there, 14 layers of clothing and all, to brave the coldest game in Jack Trice Stadium history (8 degrees at kickoff, 3 at half). How cold is that? Well, I cracked open my beverage of choice before heading into the game - and the foam froze. I digress. There weren’t really 54,081 fans there, but the crowd had to be 25,000-plus strong, well above my prediction of a sub-10,000 turnout when I stepped outside that morning. I forgot something, though. The fans have changed. It was insane to go to that game, especially with nothing of any substance on the line. But the rapid change in mentality of Cyclones fans is remarkable. And, now that change is being rewarded with a $25 million gift from Reiman Publications to expand seating and bowl in the south end zone. This season’s record-setting attendance was impressive, but not nearly as impressive as the turnaround effort for the whole athletic department by Athletic Director Jamie Pollard since he arrived in 2005. In the end, winning always drives attendance, and the team will have to improve on its 2013 season, but the stadium expansion, which can lead to greater ticket revenues, is a huge step forward for the program.
@JayByers talks CEOs on Twitter
Jay Byers, CEO of the Partnership, stopped me at an event to pass on a story idea about CEOs’ usage of social media. The Forbes article (onforb.es/1cvOILL) he shared with me stated that fewer than a third of CEOs at America’s 500 highest-grossing companies have at least one social media account. Byers is, of course, active on Twitter, but it would be interesting to look at area CEOs who are on social media. I’m sure there are some in the metro area on Twitter, but I’d guess Byers is in the minority. People want to follow and connect with celebrities and sports stars, so why not CEOs? Warren Buffett has tweeted just twice, and has 540,000-plus followers according to the article. It seems like a good opportunity for someone willing to put in the time. In fact, our own Connie Wimer, owner of Business Publications Corporation Inc., just signed up for Twitter recently. She’s a bit short of Buffett’s 540,000, so follow her at @conniewimer.