The full Business Record newsroom was on hand for our 2017 Economic Forecast Luncheon on Thursday. There were a number of great insights shared by the panelists, way more than we could possibly write about. But our writers were each on the lookout for a handful of their own takeaways from the panelists and from talking to audience members after the event. 

Panelists warn of potential volatility, job loss from pulling trade agreements
Gardyasz: Jim McCaughan said he has revised the forecast for Iowa’s economy that he originally provided to the Business Record from “slightly optimistic” to “stay about the same” in the past week based on President Trump’s stance on trade protectionism. “The danger here for Iowa is if we have tariffs put on,” he said. He also noted that the unpredictability that Trump has cast on the future of trade agreements such as NAFTA could lead to volatility in the financial markets. 

If the United States is going to re-examine its trade agreements, it needs to move quickly or it’s going to lose its competitive position in the global economy, Debi Durham observed. 

Peter Orazem said he hopes that the Trump administration doesn’t opt for the “nuclear option” of completely rescinding trade agreements. If NAFTA were rescinded, “the number of jobs you would lose would swamp the gains you could have from reversing that position,” he said. 

Debi Durham, director of the Iowa Economic Development Authority and a panelist, said a ditching of NAFTA and other trade deals would be a blow to Iowa, which exports to Canada, Mexico and beyond. “We are concerned about all the rhetoric.”

“It was great to hear the panelists recognize the importance of international trade,” said Jay Byers, Greater Des Moines Partnership CEO, following the luncheon. “Trade is vital to Iowa’s economic growth, which is why the Partnership is focused on helping our companies increase exports and focused on attracting more foreign direct investment and top international talent to Central Iowa through its Global DSM strategies.”

Professional help wanted at ISU 
GARDYASZ: Peter Orazem put on his professor hat for a minute during the panel and encouraged business leaders to get involved at Iowa State. “We love having people from the business community come here and speak,” said Orazem, who serves as the faculty adviser for ISU’s Economics Club. “We have 500-plus clubs at ISU with people like me who don’t know what they’re doing and need help,” he joked. 

A 20 percent chance of major European bank failure? 

GARDYASZ: In response to an audience member’s question about whether European banks are on the edge, Jim McCaughan said he believes there is a chance of a “significant” bank failure in Italy, “and if not Italy, then Germany.” He noted that when he was recently asked whether Deutsche Bank needed more capital, his one-word response was “Yes.” Although the U.S. economy is about as isolated as can be from the European financial markets, “it would still hurt,” he said.

$10 an hour minimum wage OK, but not $15

GARDYASZ: Raising Iowa’s minimum wage to $15 an hour would be “devastating” to rural Iowa communities, Peter Orazem said. Less than 1 percent of the state’s population earns the current minimum wage, he noted. While $10 an hour would not create any problems, once you get to the high double-digits in percentage of population affected — which a $15 minimum would — it would be devastating in its impact on job creation, he said. Debi Durham said she thought that implementing a mechanism to regularly review the minimum wage level, with input from a panel representing the business community, would be a good move. 

More older workers re-entering the workforce 

GARDYASZ: Peter Orazem, Iowa State University economics professor and a panelist, said he’s heard the talk of 9.2 percent of the nation’s workforce being underemployed. “But there is a very big question mark about how many of those will come back when a job is available,” he noted. Considering a question about whether the low unemployment rate will drive up wages, Jim McCaughan said “a very big question mark” is how many Americans may re-enter the workforce as a result. He noted labor market participation by people in their 60s and 70s is increasing, “which I think is a good thing because I think it’s an indication that health is improving.” 

Durham: Does Branstad know what he’s getting into?

BEEMAN: Debi Durham recalled visiting New York City with Gov. Terry Branstad to call on financial companies as President-elect Trump moved to assemble his administration.

“I am with Gov. Branstad in New York and we were there to do our annual visit to basically the insurance and finance space,” Durham recalled. “He had to depart from one of our meetings to go meet with President-elect Trump. The funny thing was when I told the chief of staff that I could give him this time to go meet with the president-elect, because I had the governor’s schedule, I was told it didn’t work that way, right?” (Laughter).

“So I’m getting dressed that morning and I hear on Bloomberg News that the governor is going to be the next ambassador to China,” Durham told the audience. “He and I had breakfast that morning, and we were alone, and I said, ‘Governor, do you have something to tell me? He said, ‘Yeah, I do, but need to have the president-elect announce it.’ I said, ‘Are you sure you want to do this?’ 

“You know, honestly, he does think he’s going to have an impact,” Durham said of Branstad. “I have been on every China trip with Gov. Branstad. I have been in the room when he has been there with (Chinese) President Xi. And there has been a personal warmth between these two individuals. They trust each other. And I also know that President Trump does listen to Gov. Branstad when it comes to policies such as ethanol and renewables and some of those things, and our relationship with China.

“This is what I can say — if anyone can do it, I think Gov. Branstad is the best person to be between President Trump and President Xi,” she said as some in the audience laughed, then applauded.

Meyer ‘Bullish on ’17’

BEEMAN: Greater Des Moines Partnership President Gene Meyer was shaking hands in the hall before the event. We asked what kind of a year he expected, economically speaking. “2017 will be more exciting than 2016,” Meyer predicted, noting new towers planned near the Polk County Courthouse and on the old Younkers site, Hubbell’s plans south of Martin Luther King Parkway downtown, discussion of a new federal courthouse site, continued work on the Kum & Go headquarters, a Microsoft expansion in West Des Moines and projected completion of the convention center hotel. “I am bullish on 2017,” Meyer said. 

Colwell: Avoid turmoil, and it’s a solid year
BEEMAN: Mike Colwell, executive director of the entrepreneurial initiatives at the Greater Des Moines Partnership, said President Trump’s election stirred some uncertainty into a good run. “Things have been going well, up to the election. Now it’s the problem on the unknown.” Colwell said he hopes that state and federal loans for startups will survive looming budget cuts. “It could be a very solid year if we don’t face turmoil” in government, he added. “In uncertain times, people hold.”

Rich: All eyes on ag
BEEMAN: Terry Rich, who runs lotteries for a living, said the odds of a good year are a bit longer due to weaknesses in the agriculture sector — a big deal in Iowa. “All eyes are on the ag market. I feel optimism. We are in an era of angst from the past national election. We are in a perfect position in the U.S. to show leadership. We are having a strong year. I am hearing about driving internal innovation.” 

Bridgewater: It takes a team
BEEMAN: The Deloitte CFO of the Year, Diane Bridgewater, executive vice president and chief financial and administrative officer at LCS, said it’s important to collaborate. “Anything of significance is never accomplished on your own.”

Coffin: A good year, but watch headwinds

BEEMAN: Panelist Don Coffin, president of Bankers Trust Co., said the economy looks strong, but there are elements to watch. “We have headwinds — the ag economy and the trade war piece,” Coffin said. Nevertheless, he added, “We have a chance at a real solid 2017. Tax reductions could be a real game-changer.”

Are we losing our edge?
BEEMAN: At one point in the panel discussion, McCaughan said many businesses aren’t fully using technologies, such as internet access and sharing applications. “I do believe that most businesses, investors and policymakers are grossly underestimating the impact of technology in the economy,” he said. At another point, ISU’s Peter Orazem had another issue: “I have a concern that we have lost some of our entrepreneurial edge as a nation,” he said. “We have become static.”

A lot of data with doses of humor
DARR: Christopher Stafford, senior vice president and director at NAI Optimum, appreciated that the panel was able to work some humor into the discussion of economic data and trends, a discussion that can carry a snooze factor if you’re not careful.

Here are a few examples:

Bankers Trust Co. President Don Coffin provided his analysis of the state economy after offering up his qualifications. “Sitting here, I had a flashback to when I was called to be a dessert judge at the Iowa State Fair,” he said. He was in the company of culinary professors and chefs. “It got to me and I said I was a banker and I’ve been eating for 53 years. The qualifications seemed about the same.”

During a discussion of faltering economies in Italy and Greece, Iowa State University’s Peter Orazem provided some humor and offered a history lesson. He noted that countries, including the United States, have lots of assets, which could be sold. “We can always sell Wyoming,” he said. He pointed out that Iowa was purchased for about 2 cents an acre from France as part of the Louisiana Purchase in the early 19th century when France was attempting to finance an invasion of Britain. Orazem also pointed out that the United States bought Alaska later in the century from Russia, which was financially strapped at the time.

Orazem, who also is a member of the Ames City Council, also noted that Ames has the fastest-growing labor market in the state. “As a politician, I take full credit for that, although as an economist I know that some of it could be just dumb luck.”

Coffin doesn’t detect a bubble in the single-family housing market
DARR: Hubbell President and CEO Rick Tollakson said there has been big growth in the speculative construction of single-family residences — more than 1,000 houses were on the market at the end of November — that was supported by a lot of lending. He asked Coffin whether there was too much building and too much lending. “I don’t think there is a bubble in the single-family home piece of that,” Coffin said. “It think those are being digested fairly quickly, and in fact the supply is not all that great.”

A burst of retail
DARR: Tollakson also remarked that research compiled for his company’s commercial brokerage identified nearly 40 strip shopping centers in various stages of planning or construction in Greater Des Moines. That number could be more than the market can support. “I’m worried about it,” Tollakson later told the Business Record.

Greater Des Moines not prime for commercial real estate investment from afar
DARR: There is little question that Greater Des Moines commercial real estate has attracted the dollars of investors from major cities as well other countries, but not in a big way. “We have had some equity investments from the coasts here, but we’re not getting our fair share of that,” Coffin said. McCaughan said education and technology should draw significant investments. Here’s why: “There are a number of problems here for the commercial real estate investor. There is a lot of land; you can always build more. If you are in San Francisco or Seattle, that is emphatically not the case. So I don’t think commercial real estate is where it will go with Iowa. I think the opportunity here has to be around education and technology because that’s where you’ve really seen quite remarkable achievements. ... So I would be more bullish on that side of the economy rather than Iowa as a commercial real estate play, which I really don’t see happening. But I think the technology side has a lot to go for it here.”

It boiled down to this
DARR: John Bergman, vice president of real estate management at Hubbell Realty Co., provided a tidy summary of the discussion. “Cautious optimism. We have some challenges, but Iowa is well positioned to deal with the challenges.”