Brian Andrew, SVP, Chief Investment Officer, Johnson Financial Group
Lawrence, Wis. (October, 10 2016) – Business owners and investors concerned about the presidential election's impact on the country's economic growth need to focus their attentions elsewhere.
That's the message Johnson Bank Chief Investment Officer Brian Andrew shared with the Racine‐based bank's Northeastern Wisconsin clients during a forum last week at The Marq.
Andrew said Donald Trump and Hillary Clinton may help some specific industries as president, and that economic uncertainty is a given during a presidential election season. But in a conversation with USA Today Network‐Wisconsin, he said business owners would be better served if they focus on millennials and global markets.
Andrew said the U.S. economy is intertwined with emerging markets, the European Union, Russia, Southeast Asia, China and the United Kingdom after two decades of globalization. It's a reality neither presidential candidate can undo, he said.
“You don't change this, you learn to participate,” Andrew said. “The genie is out of the bottle.”
Does one candidate concern you more for the impact they could have on the economy?
I don't know that I have concerns one way or the other because they don't alone have a dramatic impact on the economy. I think more about it in terms of what sectors of the economy will do better or worse as a result of which party ends up controlling Congress and winning the presidential election.
What kind of industries are you suggesting should watch this election cycle closely or be prepared for some major impact once Nov. 8 comes around?
I think the one area that will likely see an increase in spending from a federal perspective has to do with infrastructure. Both candidates, and also their parties, are recognizing that there needs to be more fiscal stimulus in the form of spending as opposed to just the form of lower interest rates. Both candidates have prescribed an increase in infrastructure spending that's pretty significant — one double the other — but in both cases, very large numbers. Think about construction, design/build engineering firms, those kinds of firms will benefit regardless. And I think because we're at this point of very low economic growth, we're likely to see those kinds of spending bills move more quickly through Congress.
How do you view the economy right now? Are we really still struggling in the United States?
I think we are in a period of very slow growth. If you look at this in a historical context, the average growth rate for the last several years for the U.S. economy is around 2 percent. Normally, seven or eight years into a recovery, it would either be over or we would have seen a peak growth rate between 3 to 4 percent. So it's growing, but slowly.
If you look at the employment picture, we're at the lowest level of unemployment since 2008. Employment has improved, but there's still a group of people who are either underemployed or not employed in jobs they'd like, at an income they want. But the bigger issue is wage growth is around 2.5 percent and normally at this point in a cycle, you'd expect to see it over 4 percent.
But that segues into the biggest structural issue we have: This change in demographic between baby boomers and millennials. In 2015, millennials actually became a larger group than baby boomers. In a variety of ways, we're viewing this tug of war between generations and it's having an impact on things like growth.
Do you see that struggle in businesses Johnson Bank deals with? Is Wisconsin struggling with this more than other states?
I'll give you an anecdotal example: I recently did a forum in Green Bay with a number of business owners that Johnson Bank works with in this area. There was an individual who owned a manufacturing business who I think was maybe between 30 and 35 sitting around a table with people in their 50s and 60s. He was the youngest person in the room.
And they started talking about matching individuals and their skill sets with their need to hire people. It was interesting because everybody in the room was talking about how challenging that was except him. He went on to describe an entire social media campaign he put together and how he used things like Facebook to attract the type of employee he needed. You could see the difference in approach.
What are you hearing in these forums that business owners and bankers are concerned about? What are they asking you about in terms of the future economy?
There's probably three things: One, people are having a hard time finding the skilled labor they need to grow. Two is there's some concern about the pace of growth in the economy, so business owners are more cautious about making investments because of how slow growth is. And third, the political environment feels more contentious, which, even if it's not true, causes business owners to think about regulation and which agency will change how they have to do business and that restricts business investment further.
If you were to recommend or suggest something to businesses, where would you suggest they invest time and money to go with the flow?
One of the areas is to think about how you can broaden your customer base. Not everyone needs to be global, but people can look outside the state, for example, or globally. People, I think, also need to think a little bit differently about how they acquire the labor they need.
One thing that's interesting about that is this notion that millennials are hyper‐mobile and will go anywhere, do anything. (A Manpower study) found the opposite is true. They'd prefer to stay in one place, but they're very thoughtful about seeking the training and skills that they need from their employer and if they're not getting it from their current employer, they'll go where they can. But I think the study said 70 percent of the 20,000 people they interviewed said they'd prefer to live and work close to their family and where they grew up.
So are you bullish on future economic growth?
I think the whole idea that we're in this transition phase is the biggest issue for people to get comfortable with going back to the election. It feels like we've been caught in a malaise for a long time. But that will come to an end. I think we'll get back to a 3 to 4 percent growth rate... because we have this large group of people who are entering the workforce, creating families, forming households and all of that requires consumption. And at the end of the day, that drives the economy.