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2019-12-29 21:30:00
Recession or growth for San Diego? What economic indicators the experts are watching in 2020
 

We asked this panel of San Diego experts to predict what the economy will look like in 2020. Look at the bottom of the article for detailed predictions.

Question: What economic indicator will you monitor most closely in 2020?

Chris Van Gorder, Scripps Health
Answer: GDP growth
I would say that the most important economic indicator in 2020 will be the GDP growth rate. While the U.S. economy has performed well in comparison to that of most other countries, if the GDP growth rate continues to decline in 2020, we will likely be heading into a recession. The most influential factors will be the resolution of the trade conflict with China and the outcome of the presidential election.

Norm Miller, University of San Diego
Answer: Several
As usual I will monitor the economic signals that most closely tell the story of economic progress for average Americans: total employment, wages, productivity and labor participation. I will closely watch the U.S.-China trade talks, which could spell more need to subsidize farmers and others hurt by tariffs, any modifications to the SALT limits, which will matter to CA residents. I will not watch consumer confidence, which is a lagging indicator nor unemployment, which are not reliable signals.

Jamie Moraga, IntelliSolutions
Answer: Consumer confidence
One to track would be the Consumer Confidence Index. Consumers usually spend more money when they feel optimistic in their future financial outlook, which helps fuel the economy. When consumers are more pessimistic, they usually restrict their spending and tend to save more, which can impede the growth of the economy. This monthly survey can be a good pulse of the U.S. economy and serve as a warning of turning points in economic activity.

James Hamilton, UC San Diego
Answer: German bond yields
Europe has been the weak sister that will fall first if there is a global downturn. If Europe goes into recession, they could bring us down with them. The depressed yield on German bonds is a sign that people are still afraid to invest in other European countries. Sweden has seen enough growth to escape from its negative interest rates, and I hope the same will soon be true for the broader Euro area.

Phil Blair, Manpower
Answer: Unemployment
Maybe it’s because I am in the HR business, but I think having a job is key to so many other issues we face in our daily life. Gas can be expensive, housing can be high, stocks can be low, but if I have a job and feel like I can support myself and my family I am much more comfortable weathering just about anything that comes my way. Out of a job and no good prospects then cheap gas, cheap housing, and high stocks really don’t matter to me.

Lynn Reaser, Point Loma Nazarene University
Answer: Business capital spending
This will signal if companies are again confident enough to invest in their own companies, expanding facilities, buying new equipment, and incorporating new technology. That investment could help boost economic growth beyond what consumers can do by their spending. It also will critical to reviving productivity growth.

Bob Rauch, R.A. Rauch & Associates
Answer: Purchasing Managers’ Index
While I believe that the Purchasing Managers’ Index (PMI) is the most accurate predictor of economic activity in the U.S. going forward, this year might be different. The PMI measures new orders, production, employment and supplier deliveries but trade, employment, election year economics and consumer confidence will play significant roles in 2020. This will be the most divisive election year we have ever seen and politics will play a large role.

Alan Gin, University of San Diego
Answer: The unemployment rate
While I don’t expect the economy to go into a recession in 2020, I do think it will slow. One impact of this will be slower job growth, which will lead to an increase in the unemployment rate both locally and nationally. Employment is critical to the economy as it affects things such as the housing market, retail sales, car sales, etc. Weakness in those areas due to higher unemployment could lead to more layoffs and a continuation of the cycle.

Austin Neudecker, Rev
Answer: U.S. trade deficit
I am interested to see what impact the various (completed and looming) trade negotiations will have on the balance of imports and exports, especially with our core trading partners (China, Canada, Mexico). I am also interested in trade with the E.U. and how it might be effected by Brexit.

David Ely, San Diego State University
Answer: Nonresidential fixed investment
After rising by 6.4 percent in 2018, real nonresidential fixed investment declined in the second and third quarters of 2019. Uncertainty arising from trade tensions and concern over global economic growth caused businesses to take a more cautious approach toward investing. If the passage of USMCA and the U.S.-China Phase One trade deal lowers trade tensions, then business investment should contribute more toward GDP growth in 2020 than it did in 2019.

Gary London, London Moeder Advisors
Answer: Consumer spending
I believe that consumer confidence, expressed in our spending levels, will determine economic trends over the next year, and this is a huge part of our economy. I am tempted to add manufacturing output, which I believe will continue to decline since we are already in a full-employment economy with little room to grow without much immigration. But 2020 is shaping up to be the peak of the cycle. Coupled with this being an election year, consumer confidence should drive the economy in one direction or the other.

Kelly Cunningham, San Diego Institute for Economic Research
Answer: Inflation
The economy continues to be propped up with extraordinary stimulus — both monetary and fiscal. This amount of stimulus usually follows steep economic downturns, not during healthy growth. Interest rates have never been close to zero for so long. With inflation near 2 percent, the Federal Reserve has little leeway to further cut rates to bolster economic momentum. When inflation accelerates, the effect on the economy with household and corporate debt at all-time highs will be disastrous.

Predictions for year-end 2020

San Diego County unemployment rate

Chris Van Gorder: 3 percent
Norm Miller: 3 percent
Jaime Moraga: 3 percent
James Hamilton: 3.1 percent
Phil Blair: 3.2 percent
Lynn Reaser: 2.7 percent
Bob Rauch: 3.1 percent
Alan Gin: 3.6 percent
Austin Neudecker: 3.2 percent
David Ely: 3 percent
Gary London: 3.9 percent
Kelly Cunningham: 4 percent

San Diego County median home price
Chris Van Gorder: $613,000

Norm Miller: $616,000

Jaime Moraga: $605,880

James Hamilton: $615,000

Phil Blair: $585,000

Lynn Reaser: $613,000

Bob Rauch: $624,500

Alan Gin: $600,000

Austin Neudecker: $570,000

David Ely: $609,315

Gary London: $580,000

Kelly Cunningham: $605,000

Dow Jones Industrial Average

Chris Van Gorder: 29,900

Norm Miller: 27,500

Jaime Moraga: 30,520

James Hamilton: 29,000

Phil Blair: 28,500

Lynn Reaser: 29,000

Bob Rauch: 29,138

Alan Gin: 25,600

Austin Neudecker: 27,350

David Ely: 29,250

Gary London: 28,000

Kelly Cunningham: 30,000

Oil price (per barrel, West Texas Intermediate crude)

Chris Van Gorder: $60

Norm Miller: $60

Jaime Moraga: $60

James Hamilton: $58

Phil Blair: $60

Lynn Reaser: $59

Bob Rauch: $63.30

Alan Gin: $55

Austin Neudecker: $65

David Ely: $61

Gary London: $50

Kelly Cunningham: $70

 

 
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