Sep 052013

After my talk to CFA Society Spokane last week, a member asked why my presentation didn’t emphasize more good news. I responded that as a former newspaperman, I’m a man-bites-dog type. Dog-bites-man, the ordinary stuff that happens every day, doesn’t make the paper.

I’m slow on my feet. In retrospect, there was a lot of good news in my prepared remarks and slides. Some bullet points:

• Nearly eight years of backlog at Boeing at current production rates. That will support a lot of high-paying jobs at Renton (737) and Everett (747, 777, 767, 787).

• hiring and building in Seattle like there is no tomorrow.

• Software employment in Washington setting a new high.

• Washington State is a leader in many areas of high technology, as well as in international trade.

• The value of Washington agricultural production for the first time exceeded $10 billion at the farm gate in 2012.

I’m a realist. My talks tend to take note of some of the problems that face us in the long term.

For example, because we are living longer in the rich world, and, increasingly in the emerging-market economies, each year there are fewer and fewer workers to support each retiree. Compare the change from year to year, and it doesn’t look like a big deal. Do the math at 20-year intervals, however, and you realize it is a really big deal.

In Spokane, I used a slide showing China overtaking the U.S. in GDP within a few years. I illustrated trends in Washington’s labor market in several ways. One slide noted that the number of wage-and-salary jobs in Washington is no higher than it was about six years ago. We have yet to overtake the high reached before the Great Recession of 2008-2009. Another slide noted that construction employment in Washington remains almost 30% below its pre-recession high.

I am a realist, but I’m also an optimist. The level of material plenty that we enjoy, even on the low rungs of the economic ladder, would have astounded our great-grand parents. We are in the early days of the positive impact that technology will have on health care and medicine.

I read voraciously, and I came across something yesterday that confirms my bias in favor of optimism:

The United States is on the threshold of a long-term economic boom, one that could rival the 1950s and 1960s era of industrial dominance. We can rebuild our middle classes, provide reasonable safety nets and healthcare, shore up our sagging infrastructure, and get our national debt under control.

The words are those of Charles Morris, banker-turn-author, from his new book, Comeback: American’s New Economic Boom. Gillian Tett of the Financial Times called my attention to the book.

As Tett reports, Morris argues in the book that “America is heading for a potential industrial renaissance on the back of an energy boom, centered on shale gas” and that if “hat can be combined with some modest reforms to healthcare and a little infrastructure spending, then America could also be poised to see a golden streak of growth that might even resolve the seemingly intractable problem of the national debt.”

Morris says that the shale gas boom has already created 1.7 million new jobs, and this figure should double by 2020, with another one million or so jobs in manufacturing too. Quoting Tett: “If this industrial renaissance manages to raise the growth rate by 1 per cent above current forecasts in the next decade, then debt to GDP will be nearer 60 per cent in 2020, not over 80 per cent as economists fear. The type of apocalyptic visions that are being bandied about in Washington – and which could inspire more political gridlock this autumn – may simply be wrong.”

Some of this ground is actually covered in my CFA Spokane slides. See Slide 10 in the handout, for example, on things that could go right in the U.S. economy. The fourth point — the re-shoring of jobs from China and other places offshore — is directly related to the shale-gas boom.

I’ll give the FT’s Tett the last word:

I happen to agree with [Morris’s] excitement about a shale-inspired industrial renaissance, but am less convinced that this will deliver such a boom for the middle class. Still, if nothing else, his book is a timely reminder that economic optimism and pessimism move in cycles. Or, to put it another way, as pundits prepare to wail about the horrors of Lehman Brothers next month, spare a thought for those drillers in North Dakota, too, even — or especially — given that most of us barely knew what “shale gas” was five short years ago.

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