Economic Forecast: Slower Growth a Good Thing?
Is a looming recession about to hit? That question was on the top of everyone’s mind this morning as the Bay Area Council Economic Institute convened top public and private sector leaders to give their economic forecasts for the region, California and the nation. In a conversation moderated by Stanford Institute for Economic Policy Research Director Mark Duggan, Federal Reserve Bank of San Francisco President Dr. Mary Daly offered an exclusive perspective from the Fed, assessing that an economic slowdown is a good thing and could help prevent a recession. She remarked that in 2018, the economy grew at close to a 3 percent annual rate, which Daly said is well above a sustainable level by a full a percentage point.
“We want it to come back down,” Daly emphasized. “Two percent is the consensus of what the economy can sustain, so coming back down can help prevent a recession or make it less likely.”
President Daly also addressed the impact of the government shutdown on the economy as two-fold: what has and what might happen. The economic impact to the economy in Q1 should be modest and will recoup by Q2; however, the impact of another shutdown could be much worse. “When the government shuts down, this is not a confidence-boosting event,” she quipped. “When uncertainty goes up, businesses stop taking entrepreneurial risks. They do just what they need to do to keep their business going. That can have negative impact on the economy.”
Zooming in on a more micro level analysis of the regional economy, Jonathan Levin, Dean of Stanford Graduate School of Business, and Kausik Rajgopal, Western Regional Manager of McKinsey & Company, addressed wealth disparity, education, innovation and housing among other key factors impacting the Bay Area’s economic health. The emergence of artificial intelligence and how we prepare our future workforce for an environment where computers are taking on more and more was also a hot topic. Levin reflected that non-routine and skills social in nature cannot be automated and that there will always be a need for critical thinking and leadership skills among others.
The Bay Area economy is deeply interconnected to the global economy, serving as the epicenter for technology, entrepreneurship and all things digital. Canada Consul General Rana Sarkar, German Consul Hans-Ulrich Sudbeck, Japan Consul General Tomochika Uyama shared their perspectives on why they are in the region, highlighting how their presence builds connections supports innovation at home, supports trade and investment, and contributes to shared approaches to emerging issues.