“We are looking at a good year in 2018 for the US economy,” according to economist Robert Kleinhenz. “I like giving you good news.”
Vital signs good
And at the Feb. 22 IWV Economic Outlook Conference keynote speaker Kleinhenz had what sounded like a lot of good news. Overall, he said, “the vital signs of the economy look pretty sound.”
Kleinhenz is Executive Director of Research at Beacon Economics, LLC. He spoke on all things economic: the U.S. economy, the California economy, the local and regional economy, real estate and construction and looking ahead.
He noted that “we are expecting about a 2.5 to 2.8 percent growth rate in the economy this year” and the unemployment rate is at its lowest since over a decade and a half ago.
The news in California may be even better. According to Kleinhenz, the unemployment rate in California is the lowest it has been in over 40 years, since 1976 – 4.3 percent.
Ridgecrest and Kern County employment
Ridgecrest currently has an unemployment rate of about 6 percent as opposed to 12 percent after the great recession, he said.
Kern County, meanwhile, has shown a dip in job gains. “A lot of that is due to energy,” he said, adding the expectation is this will improve.
“Kern County's unemployment rate came down with the rest of the state and the Inland Empire until oil prices plunged and then you saw things go sideways,” he said. Kleinhenz added that this has stabilized as the price of oil became more stable and “job gains are occurring across most industries in Kern County at the present time.”
“The local economy is sound, this is a time to look ahead,” he later said.
Each of the sectors of the US economy are expected to perform well in 2018, he said. Consumer spending on both goods and services continues to be sustained. He also said household wealth is on the rise. “You can see the real estate [wealth] is coming back slowly.”
Things are improving in the business sector, he said. “All in all we are seeing the business sector is doing better and will continue to make a stronger contribution to economic growth in 2018 and even in 2019.”
Not due for a recession
Kleinhenz said that in his opinion the country is not due for a recession.
“If you take a look at what is happening in our economy, there are lots of job openings. So businesses would like to expand.”
He added, “we have widespread labor shortages. That is in no way indicative of an economy that is slowing down.”
Kleinhenz gave what he called “the quick and dirty” on the national debt. “I am less concerned with the size of the national debt. I am more concerned with servicing that debt,” he said.
Kleinhenz discussed the recent tax revisions. The cuts will benefit households he said, but the timing could be better because the economy is not ideal to benefit from the additional spending.
He said households stand to pay fewer taxes and thus have more spending money and “businesses are going to see their corporate tax reduced.”
The down side?
“Our ability to increase our production of goods and services to meet that increased spending is really constrained at this time. The timing isn't great for this kind of stimulus in the US economy. Don't get me wrong, I like tax cuts. I am just saying in the holistic view of things its a little bit problematic,” he said.
'We don't have enough people to fill the job ranks'
Things are looking good overall, according to Kleinhenz, “but the fact is both the nation and the state are constrained by labor force growth.” In other words “we don't have enough people to fill the job ranks.” A recurring theme in Kleinhenz' talk was that this is a limiting factor to economic growth.
He later noted that “You may be having difficulty hiring at this time. You are not alone.”
Kleinhenz at one point name-checked the Daily Independent, specifically John Watkins' column that talked about immigration and jobs.
“This is so big it made the front page of the local paper. We need a sound immigration policy that is going to enable us to fill the ranks of those jobs, those workers because we are not growing enough workers.”
He said California is not attracting workers from other states in the same numbers as in the past.
The state of California still has not seen its home prices recover to their pre-recession peak, although sales have increased. “But they are nowhere close to where we think they should be given the state of the economy.”
In December 2017 the median house price in California was $549,000 as opposed to $195,000 in Ridgecrest
“You may or may not know that Ridgecrest is relatively more affordable than the rest of the country, where the median price is about $260,000,” he added. “The bigger picture is that homeownership is still at a low we have not seen since the 1960s. There is still room for improvement.”
Real estate was a big theme of the EOC. NAWCWD Executive Director Joan Johnson spoke of an urgent need for more housing for young workers as soon as this upcoming summer. The Ridgecrest Area Association of Realtors was also one of the conference sponsors.
Kleinhenz also emphasized the need for more housing.”
“We really need to build more. We need to build more in a big way,” including Kern County, he said.
“We need to build more, we need to build more. And if I didn't say it already, we need to build more,” he said.
“We need to move forward with solutions to housing and then the rest of the [workforce/economic] problems will see improvement.”