IS AN ECONOMIC DOWNTURN ON THE HORIZON?

The question of a coming downturn was among the main topics addressed today (Jan. 15) at the Bay Area Council Economic Institute’s 9th Annual Economic Forecast presented by Accenture and hosted by the Federal Reserve Bank of San Francisco. Fed President and Council Executive Committee member John Williams opened the conference with his insights on the U.S. economy and federal monetary policy. Williams talked about the dynamics surrounding the U.S. labor market, including weak labor force participation despite growing employment. On interest rates, Williams said he expects the recent increase will be followed with continuing “gradual” increases over the next three years.

On the California and Bay Area fronts, UCLA Anderson Forecast senior economist Jerry Nickelsburg said employment growth will continue, but that it will slow in the next 2-3 years. Part of the slowdown, he said, is tied to an historic shortage of housing that is pushing prices into the stratosphere and discouraging workers from coming here. Housing starts, he said, are starting to rebound but not at sufficient levels to make up for deficit. Nickelsburg didn’t put a timeframe on a possible economic downturn, but he outlined some key indicators he said would signal a recession, including the implosion of overvalued startups – unicorns, pentacorns and decacorns – fear of global problems (China slowdown, Middle East turmoil, Euro uncertainty) and declining consumer demand for technology equipment and software.

Tracey Grose, Chair of State Controller Betty Yee’s Council of Economic Advisors, talked about the Bay Area’s innovation economy, the continuing emergence of advanced manufacturing and the growing “gig” economy. Accenture Managing Director Eric Wittke then moderated a discussion on the “gig” or “platform” economy with Kaiser Permanente Chief Information Officer Dick Daniels and Lyft Director of International Government Relations Mike Masserman.