Jackie Greene, Director of Economics at ITR Economics, joined us on the podcast to discuss the how the pandemic impacted the economy, where the economy is at now, and where the economy is headed.
Since 1948, ITR has provided business leaders with economic information, insight, analysis, and strategy.
ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, they have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Their reputation is built on accurate, independent, and objective analysis.
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November 17th - What the Election Means For Businesses Around The Country
In this episode Jackie mentioned the book: Prosperity in the Age of Decline.
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Jackie Greene (00:22):
The economy was broken in 2008, 2009, it's not broken now. But during normal recession, US disposable personal income declines but during this recession, it's actually gone up. So consumers are still relatively healthy.
Adam Hooper (00:25):
Tyler Stewart (00:25):
Hey Adam, how are you today?
Adam Hooper (00:25):
Tyler, I'm doing good. It's a day before election day recording while recording this one live here on the spot.
Tyler Stewart (00:25):
Yeah, yeah. Today we had Jackie Greene director of economics at ITR Economics.
Adam Hooper (00:25):
Yeah. So for longer time listeners of the show we had Jackie on almost about a year ago, I think it was, to give us a little bit of their take of what they were going to see coming in 2020. They were largely right in their forecast. They didn't necessarily know that it was going to be a global pandemic that caused what they were forecasting. But we talked a little bit about where we were at last time she was on, what's changed since then, and how that has maybe affected their outlook going forward. A really, really interesting conversation.
Tyler Stewart (00:25):
Yeah, for sure. And of note, Jackie and her team at ITR Economics are accurate 94.7% of the time as it relates to predicting the market.
Adam Hooper (00:25):
So incredible track record. So we talked again about the four phases of the cycles here, recovery accelerating growth, slowing growth in recession. Unfortunately, we are mostly in recession right now, but working towards a recovery. Make sure you pay attention to her longer-term call as to what we might see by sometime in 2030, talks of even maybe adding a fifth phase, I planted the seed. We'll see if they take it.
Adam Hooper (00:25):
But again, just really good conversation, dug into the factors that ITR is looking at some of the longer-term trends that are going to stick through this. I think one of the most interesting ones was just the behavioral changes of how we've spent money in this last seven, eight months with a crisis.
Adam Hooper (00:25):
This has been a really big shift in some of this kind of unintentional savings and how that's changed in patterns begin to get really interesting conversation with her about what we've seen in some of those things, again, that we've talked about on the show that might stick past this current crisis that we're in right now.
Tyler Stewart (00:25):
Yeah. And if you enjoy this episode, be sure to check the show notes, we'll post a link in there to a webinar ITR Economics is doing here in a couple of weeks to talk about what the election means for the coming business cycle.
Adam Hooper (00:25):
Absolutely. They've got a ton of great content, definitely check out. So I think that's enough of us rambling on here, Tyler, listeners as always, if there's anything that you want to hear us cover on the show, if you have any feedback comments we love your ratings and reviews on iTunes or Spotify or wherever you listen to the show send us a note to firstname.lastname@example.org and without Tyler, let's get to it.
Adam Hooper (00:25):
All right, Jackie, thank you so much for coming back on the show. It's been almost a year to the date that we had you on and a very different environment this time, this year. So we're excited to hear what you have to say and thanks again for coming back on the show.
Jackie Greene (00:25):
Oh my pleasure. I can't believe it's been a year already.
Adam Hooper (03:54):
I know, it goes by quick. This will be released end of October, beginning of November, I have no idea what the heck happened to 2020. [inaudible 00:03:54] this will go down as the last year. It's been a really interesting time dynamic of, it feels like we just left the office in March but that was seven months ago. It's a very weird time dynamic right now.
Jackie Greene (03:54):
It is crazy. And normally as adults, we feel that way all the time as the years fly by, but even my kids were saying like, "How's this the end of 2020 already?"
Adam Hooper (03:54):
Right. Well, I think we'll be happy though once it's no longer 2020, we're excited about 2021 here at RealCrowd. So before we jump into, why don't you tell us a little bit more about ITR for listeners that maybe didn't catch the last episode, some of the reports that you guys put out, trends that you track and then we can jump in.
Jackie Greene (03:54):
Excellent. Well, thank you. At ITR Economics, we are the oldest continuously operating privately held economic forecasting firm in the country. I know it sounds like quite a mouthful, but now we've been here a while; we've been doing this and we're pretty good at it. What we do is we provide economic intelligence, so our clients can reduce their risk and drive practical and profitable business decisions. So I personally like to think of us as economic information with application because what's the good in knowing what's going to happen tomorrow if you don't do something that actually gets some value out of it? Thinking of it, like if it's going to rain tomorrow and you're working a retail store, you better put those umbrellas out so people will buy the umbrellas. Putting them out two days later when it's no longer raining, doesn't really get you that same value.
Adam Hooper (03:54):
And just to touch on your track record, I think I recall the number was 94.7% from our last episode in terms of accuracy of forecasting. That's a pretty impressive track record. I am curious, based on where we were, again, this time last year and what we've seen today, did you have a global pandemic on the forecast? How was that held up? I mean, this was a very, very bizarre year from a forecasting perspective. So I'm just curious how things have tracked from where we were last year at this time.
Jackie Greene (03:54):
Well, global pandemic, no, that was not quite in the picture. There's a reason it's called the black swan, it's one of the things that no one really sees coming. However, I will tell you, we were expecting a recession. We had that in our forecast for the last couple of years in 2018 into 2020, there wouldn't be a recession. So the pandemic made it that much worse than we were expecting, but our clients already knew to expect some sort of recession during this timeframe. So it's hurting our forecast accuracy in that sense of the severity of it, but not really in the timing.
Adam Hooper (03:54):
And I'm curious to get your thoughts. One of the things that we've talked about a fair bit on the show is that the crisis has been an accelerant of some of these trends that were already in place, amplifying some of those things that we're already starting down that path. Have you seen that hold true or have there been some changes or some I guess, unexpected dynamics that you guys have seen in monitoring what's going on with the current crisis?
Jackie Greene (03:54):
So that's kind of a multi-layered question there.
Adam Hooper (03:54):
Jackie Greene (03:54):
And I'm going to do an economist answer with yes and no. Some things have held firm, like I said, we were already expecting a recession, so there were already some things happening that were leading us down that path and COVID intensified it and changed it. But what's very different about this recession compared to say 2008, 2009, even though it's being compared a lot in the media because of the severity, the economy was broken in 2008, 2009. It's not broken now. During normal recessions, US disposable personal income declines but during this recession, it's actually gone up. So consumers are still relatively healthy.
Jackie Greene (07:54):
I know we have a rather high unemployment rate at the moment, higher than we're used to seeing, but even that's coming back down very quickly, it's spiked up to what, 14.4% in April and it's already back down to 7.7%. I'm not saying we're going to get back down into the 3.5 range right away by any means, but our economy is still rather healthy with people going back to work and spending. And that's why this isn't a broken economy, we're actually seeing signs of recovery already. So like I said, it was a yes, no answer for you.
Adam Hooper (08:26):
I think again, that just is I think symbolic of what we're in right now. I mean, there's a lot of, yes, no, there's a lot of uncertainty still. There's a lot of unanswered questions and we certainly have, I think a better picture of what things are going on right now than we did maybe March, April, June but there still remains a lot of uncertainty going forward, and we'll touch on that here a little bit going forward. But there still remains a lot of uncertainty going forward, and we'll touch on that here a little bit going forward. But before we get too much into that, again, let's maybe, pardon the pun here, set the stage and break down the four different stages of the business cycle that you guys track. Walk our listeners through that, and then maybe we can dig in on where we're at in some of those different sectors that you guys are monitoring.
Jackie Greene (09:07):
Sure. I got to tell you, for the most part it's all pretty easy because most of them are in the same phase right now. But we have four phases, as you said. There's A, B, C, and D. We tried to keep it simple. So not even going too far into the alphabet. A, stands for recovery or that is the recovery phase, I should say. So that's when you're still below year ago levels, but your sales aren't declining as much as they have been. So they're not declining as quickly as they have been, I should say. So you're recovering, you're getting back to a better part of the business cycle but it's also a very dangerous part of the business cycle.
Jackie Greene (09:43):
Phase A recovery, is typically when most companies run out of business, excuse me, run out of cash. They had enough to get them through the downside, but they don't have enough to fund the growth that they're going to need to really be in place for the next phase which is phase B, accelerating growth. So that's generally most people's favorite part of the business cycle, that's when you're growing at a faster and faster rate. So you were up 6%, now you're up 7% from last year, now you're up 8% from last year. It's a very happy time in the business cycle, generally. Your strains are more, "Can I keep up with the volume?" Than, "Where am I going to find the next sale?"
Jackie Greene (10:20):
And then phase C, is slowing growth. So this is after your period of accelerating growth. You're still growing, you're above last year, but your rate of growth is slowing down. And it can be a very dangerous part of the business cycle especially at the top, because a lot of people don't realize they're tipping into that phase C, slowing growth, and so they're still in that mentality of being in phase B, accelerating growth.
Jackie Greene (10:45):
And why that's dangerous is, in phase B, accelerating growth, you can spend money because you still have a lot of cash coming in and a lot of funds coming in. But phase C, slowing growth, typically you're heading towards a recession, so your mindset needs to be very different. You need to be looking for what's next to help you avoid that recession or you need to be conserving cash, unless it's allocated towards what's next question. So it can be very dangerous in that sense.
Jackie Greene (11:11):
And then phase D, the fourth phase, is recession. And that's a pretty cut and dry one, most people are very familiar with, where your sales are going down, they're going down faster and faster. That's where most things are right now, for the big picture of things. We are starting to transition to that phase A, recovery. But if I had to peg most parts of the economy on a little chart right now, I'd put them pretty much all in phase D.
Adam Hooper (11:36):
So, in recession, but trending towards in certain sectors less bad, which is that recovery.
Jackie Greene (11:43):
Adam Hooper (11:43):
And that's you said, again, not trying to blanket everything, but most generally that's the in recession right now but with a trend towards maybe some sector sneaking into that recovery stage A?
Jackie Greene (11:57):
Yes. Even some of our big macro outlooks for the economy are showing some of that phase A recovery trends already. We use US industrial production and US GDP as our key benchmarks for the overall macro-economy here in the US. And those were showing some of those signs of turning towards that phase A recovery already, in some of their internal trends.
Adam Hooper (12:23):
And now, maybe go a little bit deeper into, what are the key metrics that you guys are tracking across the sectors? Are there macro-factors that have impact every sector? Is it entirely sector specific, in terms of what you guys are tracking?
Jackie Greene (12:37):
It's sector and company specific, and we have some that work on the whole macro-scale as well. So what we do is we look and we all start macro, because what's happening in the big picture generally impacts everything down the chain. So we have a large collection. And that's part of what's making me feel very confident about this recovery actually being sustainable is that 12 plus, actually more than 12, of our key series of leading indicators, are all showing green. They're all showing some good signs that we are going to be hitting that recovery.
Jackie Greene (13:13):
Some of those are our own proprietary leading indicators such as, ITR Leading Indicator. We were very creative with that naming trend right there. There's also the PMI that a lot of people are familiar with and the US leading indicator, the G7 leading indicator, is also giving some of that positive signal and US housing starts, single family, excuse me, housing starts and another one. Like I said, we've got over 12 of them that are giving us these positive signs.
Jackie Greene (13:40):
So those are on the macro side, but then getting more down into the different layers you're going to see some of those fit better with different segments of the economy than others or even different companies. And then we start looking at more specific; if it's a construction industry, there's going to be construction indicators and different ones per each company.
Adam Hooper (13:59):
So one of the things that I'd love to get your thoughts on, that we talked about on a prior episode, was this concept of how far are you looking back in terms of these relative indicators? Mostly anything looking back three to six months is going to look great by comparison today, relative. Anything looking a year back is probably going to look pretty bad, relative by comparison. So how do events like this crisis that we're going through right now, impact some of that forecasting? And do you you modify anything on your end to accommodate for such an acute impact that this external health factor has had on a lot of those factors, those metrics?
Jackie Greene (14:42):
Well, I got to tell you, it's one of the things that helps me stay employed because it is constantly changing. The relationships are variable such as; most of our key leading indicators have about a six to 12 month lead-time to the macro-economy, but during different times, different recessions, different periods of growth, that relationship might change. So if ITR leading indicator were to lead by nine months through most cycles, there'd be somewhere it leads by six months or it leads by 12 months. So we really have to keep watching and monitoring. And when there's such an extreme shock to the system, like COVID, those relationships are likely to change as you said, but they don't deviate so far outside the norm that we can't still utilize them. And that's what we've been doing, we're just watching those relationships a lot closer and a lot tighter.
Jackie Greene (15:36):
I swear if you could picture a whole bunch of Econ nerds circled around the computer anxiously waiting for a data point to come out and that's what we look like some days, waiting for that number just to see how those indicators are doing and see what it holds for our trends. Still using the same indicators we've been using, but we've looked for new ones. We found some weekly ones that were able to give us more quick insights to some of the different aspects of the economy, such as recall. Most have all been crucial through this whole thing. But our basic methodology didn't change, it's just having to keep monitoring everything like we do through every business cycle. And you asked me how far back we look, as far back as we can get because history doesn't repeat itself but it's sure does like to rhyme. So we look into all sorts of past scenarios and cases, and so as far back as we can get that data we use it.
Adam Hooper (16:26):
And one of the things that you mentioned was the frequency that you guys are monitoring data. It seemed like earlier in this pandemic, the data was coming so quickly and it was wildly swinging. There were just huge variations in the data that we were getting at a very, very high pace. And maybe it's just because we were paying attention to a lot more data than we were before, but it seemed like every day there was a new piece of data, a new input, that was just, again, very volatile. Have you seen any difference in the pace of data? It sounds like you're all looking at it very closely and intently on those new data points coming out, but has this crisis shifted anything from that perspective of availability or variability in that data?
Jackie Greene (17:16):
Well, I'll be perfectly honest. It was very challenging in the early days because the normal data lags, it wasn't giving us enough insight fast enough into what was actually going on so we were looking for all sorts of different data sets. And as I mentioned, some weekly retail numbers we found were very useful. And I got to tell you, never in my career did I ever expect to be monitoring death rates either. As awful and horrific as it was, it was one of the things we had to keep an eye on.
Jackie Greene (17:44):
So during this pandemic, yeah, we had to look for some other data sources and be more creative with it. But the data is settling down quite a bit. The monthly numbers are showing a lot more, they've caught up to what's actually going on with the economy and it seems like it's not a new twist or a new data point every month anymore. A lot of our clients are finding things settling down. A lot of their forecasts are much more stable and predictable at this point, because the data is much more reflective of what's going on. And I think as the general population has gotten a better sense of it and has gotten to just accept what's going on, there's not this constant barrage of new data points trying to explain everything.
Adam Hooper (18:28):
And I think, again, maybe it was, we just became hyper aware of data that maybe we weren't paying as much attention to before, and it was because we had so many unanswered questions there was such a thirst for new inputs to try to make sense of what was going on that it got kind of crazy there for a little bit.
Jackie Greene (18:51):
It sure did.
Adam Hooper (18:53):
So for the listeners out there that are watching or following some of these trends or stats or metrics, what are some of the signs that you are looking for and some of the signs that maybe they can pay attention to, again, talking about paying attention to data, that are indicating we're moving towards that next stage?
Jackie Greene (19:16):
Three of the things that really sparked with me on that are, I look at the leading indicators and as I mentioned a moment ago, we've seen at least 12 of our key ones already giving us that positive signal that recovery is coming. Actually, those were all highlighted in the last ITR trends report, the October ITR trends report that went out. And then I look at internal trends. So if this was a company, they'd be comparing their trends to those key indicators to see what it means for them. But you also look inside to see, "Is my quarterly data giving me that signal that rise is coming? Is my monthly data giving me that sign that rise is coming?"
Jackie Greene (19:56):
So we look at external, we look at internal. And then, we also look at the fact that the economy isn't broken. It's been hurt, think of COVID as a natural disaster but it's not broken like it was during the great recession of 2008, 2009. So there's the, I don't want to say logical piece of it, but it is more positive that we're getting back to business prevailing. We're able to actually spend. We're able to produce.
Jackie Greene (20:28):
When we were shut down, it was just the economy shut down. There was nothing we could do like we normally would do, but by lifting those shutdowns we're able to get back to actually producing and shopping and spending. Now, I won't say that there isn't some risk to all of this. I am very confident that this is a solid recovery, but the reality is if there's another government mandated shutdown for businesses that is going to be a significant risk to the ability of this recovery to be sustainable.
Adam Hooper (20:59):
So two things there, I'd love to learn more about your thoughts on the relative brokenness of the great new global financial crisis versus right now, and then also the idea that these stages are not necessarily always linear forward, you can go backwards. So if we get into recovery, possible to go back into recession in the stages. What are your thoughts on the fragility of these signs that you're seeing right now?
Adam Hooper (21:27):
And again, when we talk about stimulus, that had a huge impact on getting us to where we are early in this crisis; there was so much money, there was so much stimulus that came into the system so quickly, that was able to head off maybe some of the pain that we would have seen otherwise with no real clear picture of when or if we'll get more of that, how does that weigh into some of those forecasts?
Jackie Greene (21:52):
Very challenging, is how it'll always end. So you're right, let me break some of those down. The phases don't have to go A, B, C, D. They can go from a recovery back to a recession, or they can go from an accelerating growth period to that slower growth and instead of going to recession they can go back to accelerating growth. There are different ways that they can accompany or market can move through it.
Jackie Greene (22:21):
Now, as you said, it'd be very easy for some segments of the economy to go from that recovery right back into a recession and it really depends on some of the underlying fundamentals for those industries and those companies. There are the big picture factors such as if there's another government mandate shutdown that would make that a pre-unilateral aspect of it, but a lot of the governors saw what pain it did for their states or unemployment rates. We're not really thinking that that's going to be the high risk during this whole thing because of the damage it did to so many businesses. It's just one of those things that it is a risk factor that we're watching, but it's not as high risk as it was earlier on. That's why we are constantly watching the COVID rates; how many people have contracted COVID in some of the hotspots, we're constantly watching where the hotspots are.
Jackie Greene (23:17):
But also the death rates, even though we're seeing some of those trends increasing in how many people have contracted COVID in the more recent days, the death rates aren't as horrible as they were early in the pandemic and even the hospitalization rates across the country aren't where they were early on. So we're watching those things very closely because it's more than just how many people have contracted COVID, it's really a matter of the hospitalization and the death rates that would drive more of that second shut down. And you had asked also about the stimulus side of things too.
Adam Hooper (23:54):
Jackie Greene (23:54):
Man, that is one very interesting aspect.
Adam Hooper (23:58):
Jackie Greene (24:00):
We're Austrian leaning here at ITR, so that means we typically prefer the government not to intervene. We're also realists though and recognize that the government intervenes, and so we have to deal with that and acknowledge that.
Adam Hooper (24:13):
And this was a big intervention.
Jackie Greene (24:15):
This was unprecedented.
Adam Hooper (24:17):
Jackie Greene (24:17):
This was the largest ever. So there's going to be a lot of unforeseen consequences. One of them was that it became harder to get people back to work when they were starting to get that $600 a week, in additional unemployment benefits. We heard from countless companies where they were struggling to get employees to come back to work because they made more by staying home. So one of the things that came out early in this pandemic, was with the high unemployment rate many businesses who had been really struggling to find qualified employees the instant thought was, "Great. I'm going to have more selection in my employees, I'm going to be able to fill those vacancies that I was having." But companies really still struggled with that, because you either struggled with getting someone to come back to work after that extra unemployment benefit or there's still that skill shortage.
Jackie Greene (25:11):
So while on the surface it might look like there's a large workforce ready to be utilized, it's still a matter of finding the right person, the right place, the right time, the right skills, all those aspects. So the stimulus didn't fix that part. So we still have that as an issue, but now we have all this more money in the economy which I will admit seems like it did help. I give the government credit in the sense that in 2008, 2009, there were stimulus injected into the economy and it did help pull the economy out of that recession. This time they knew that that was a tool that they could use, so they acted very quickly. That did have an impact on us getting out of this recession a lot faster than a typical recession would be, but it also is going to have some lingering consequences.
Jackie Greene (26:03):
So there's going to be some halo effect where this lasts into '21, '22, because the money takes time to work its way through the economy, and we've seen during past stimulus that it does help boost the economy and give it a little extra edge later on. Now the biggest unforeseen consequence or maybe not unforeseen that's probably the wrong word, but one of the consequences that scares me the most is, that's a massive amount of debt that we are now going to have to fund somehow.
Jackie Greene (26:33):
And so it's not a today problem but it's a future problem and especially for our children, it certainly makes me worried. And I think it's going to be one of those things that's going to fuel that fire of the 2030 depression that we're expecting, and I say 2030 with a little hesitation there because I don't want anyone to pinpoint me on that date. But around the 2030s, we are expecting another Great Depression type scenario, so the debt load is not helping ease my mind on that.
Adam Hooper (27:02):
And was that something you guys had in the models before COVID, and if so how has the happenings of these last seven, eight months changed or modified what that forecast looks like?
Jackie Greene (27:19):
We have had that in our mind and actually been in print, Oh goodness, for at least five years. So that would be actually, 2014 or 2015, Brian and Alan Beaulieu wrote a book called Prosperity in The Age of Decline, and it really goes into great detail about the drivers of the great recession, excuse me, Great Depression scenario and more of that input and careers that will be less prone to the pain of such type scenario. Which I got to tell you, I keep trying to get my kids to read so that they will go into those careers and be able to support me, but so far they're not buying it.
Jackie Greene (28:01):
But this recession here with COVID and the changes, it didn't change our expectation for a Great Depression type scenario because this was such a unique situation and like I said earlier, the economy wasn't broken. However, I will tell you, we received, I don't even know how many, phone calls and emails and concerns from our clients who have been hearing this talk about the Great Depression scenario for so long that they were very concerned this was pulling it in and that we were embarking upon it now. So that's a very common thought and concern. The reality is no, that's still is lingering out there, that's still going to be a pain point about 10 years from now that we all need to be preparing for. But COVID and the intensified recession this year, did not change our outlook on it.
Adam Hooper (28:49):
And what are the drivers of the call there? Are there certain major factors that are pointing to that day of reckoning or just generally, it has to happen at some point?
Jackie Greene (29:03):
Well, it doesn't have to happen that's for sure. Man, you're making me give away the whole book. It's like telling you the last chapter of a book.
Adam Hooper (29:12):
Just tease it, we'll put a link in the show notes but you can tease it here.
Jackie Greene (29:16):
All right. A few aspects of it is not given, there are things that can change the future because really, it's pretty bleak to think that we can't change and adapt and avoid problems in our future, but it would be difficult to do. And there's a lot more in the book that talks about really, those actions that could help us avoid it. Our debt load is certainly a big factor into it. And so increasing the debt load is going to intensify the risk of that recession. One of the ways to avoid that recession type scenario, excuse me, depression scenario is accepting some pain now so that we have more money left in social security when we get to 2030, that we have more of our programs funded by that point.
Jackie Greene (30:02):
Whereas right now, we're trending more in line of being underfunded for those and the ramification's there. People in their 30s and younger really shouldn't be expecting social security to be a reality for them. So it's a lot of these social programs that are going to be the problem, I mean, problem from a financial perspective not a social perspective. Please make sure I'm not hung on that one.
Adam Hooper (30:24):
Jackie Greene (30:26):
The other aspect of it too though is, right now the US government can take on debt and debt and debt because the US economy is still seen as strong, is still seen as a viable option for investors. And so what's going to be another driving factor is, we're going to get to a point where our debt load is so high that other governments and investors aren't going to want to buy US debt and we're going to be seen as a less favorable return. And that's going to be part of the pain that leads us into that great depression, not being able to service that debt load anymore.
Jackie Greene (31:00):
The book talks a lot about all the different dynamics and the baby boomers and how all the changing demographics are also playing a part, not just here in the US but all around the world and how that's going to be a driving factor. I will tell you though, for everything going on, I mean, the US is certainly going to go through this great depression but it's not going to be the worst hit by any means, there are certainly many countries that are harder hit than we will be.
Adam Hooper (31:25):
And so do you guys create a phase E for depression or does that just become a very deep recession, what happens there?
Jackie Greene (31:38):
I like that. I'm sorry, I'm still picturing it, phase E. We keep it as phase D; recession, but now I'm really reconsidering if we should do craft something else.
Adam Hooper (31:47):
Okay. I'll take a mention for that.
Jackie Greene (31:50):
You got it.
Adam Hooper (31:52):
So part of this, and we were talking a little bit before, this episode should be released just before the election wraps up, early November. What are you guys paying attention to there? I know you mentioned you will be doing a webinar afterwards, and we'd love to make sure that we get a link for that and we can send that out to all the listeners as well. What are some of the factors or impacts that you're paying attention to with the current election going on?
Jackie Greene (32:17):
Well, the election is always something on everyone's mind. There's this very common thought that whether it's a Republican in the White House or a Democrat in the White House, it changes the economy. Now, the reality is whether you elect one person to the White House, it's one person up against a $19 trillion economy, or $19 trillion pre COVID. So it's really very difficult for one person to really impact the entire economy to such an extreme magnitude that people seem to expect, based on the elections. And our research has shown that whether it's a Democrat or Republican in the White House, it doesn't impact a recession. It's not going to drive us into a recession one way or the other, I should reword that.
Jackie Greene (33:05):
But we are watching it, because if you have Republican and Democrat and Congress controlled the same way you start to have more of an impact, you can get more things through. The other aspect of it is, our clients are in the real world. So while we as ITR Economics are a political, we need to study what's going on because policy changes, while they take time, they do have an impact on our clients. So we need to be watching them and understanding them and that's why we're having the webinar on November, excuse me, in November. It's about two weeks after the election, since that'll give us time. We're really hoping that it is clear who's actually won the election two weeks after the fact.
Adam Hooper (33:48):
Jackie Greene (33:49):
So we'll have that webinar talk about what that means for some likely implications, for businesses around the country.
Adam Hooper (33:57):
And again, hopefully we can get a link to that and send that out to all of the listeners here too, I know I will certainly be watching that and paying attention to it. So we'd love to be able to share that with the listeners as well. So as we wrap up here, I think it would be good to get or testing out a standard closing set of questions here. Basically, what factors are you paying most close attention to? What's keeping you up at night? Where's the opportunity going forward?
Adam Hooper (34:24):
So let's start with, we've talked about a lot of the factors currently, but what are the handful of factors that you are paying most close attention to and maybe are the most indicative metrics or factors that some of the listeners can be paying attention to here as we round out 2020?
Jackie Greene (34:42):
For me, some of the things I'm paying the most attention to are those leading indicators, they really give great insight, give you time to react and plan. And you never rely on just one, you have to have a collection of them that are giving you strong, reliable inputs to really trust there's a recovery coming or it's the next phase is coming. So that's something I'm watching very closely because the other aspect of it is, data doesn't lie. There's a lot of emotion in the world but data is a fact, it's something you can base your decisions on because it's more clear cut for you. So that's something we watch a lot.
Adam Hooper (35:16):
Before we go on, data doesn't lie but people can use data to tell stories. So how as a savvy consumer of data, can you try to sift through some of the narratives that are trying to be told through data or how do you look at it with a skeptical eye to really get to the underlying factors of the data?
Jackie Greene (35:36):
I've had to do that many times because, well, data as a point it can be interpreted in many different ways. And that's why I use a collection of leading indicators and that's part of ITRs methodology, is because there can be times when an indicator gives you a false signal and that happens. That's why when we do an analysis for a client we're providing at least three to five indicators for them, to give them an insight into where their business is going because you really need that collection to be confirming those signals.
Jackie Greene (36:08):
It's really too easy for one indicator to give you that false signal and I've seen it happen so many times, that I won't make a move, I won't make an action by seeing just one indicator give me some input. But seeing that first one happen gives me that ray of hope, it gives me that signal to start thinking about what I'm going to be doing because this is giving my indication that things are likely going to be changing six months from now, am I ready? Is my business ready? Can I capitalize on this and get ahead of the rest of the competition?
Adam Hooper (36:40):
A prompt for further research, but not a story in and of itself necessarily.
Jackie Greene (36:46):
Adam Hooper (36:47):
So what is keeping you up at night right now?
Jackie Greene (36:52):
Besides my children, I'm guessing you're meaning [inaudible 00:36:55]. Doing the things we've actually already touched upon, really. The election's keeping me up, because it's an unknown and I like to plan. I like to know what's coming that's why I do what I do, is I get to know what's coming in the world. So I like to know what's coming and this election, not knowing and this ramifications, something that keeps me up.
Jackie Greene (37:19):
And partly, it's also because I know so many other people are worried about it. But I worry because I want to make sure that I can give them proper advice, and help them plan their businesses for it. So that's one of those things keeping me up at night, because there's lots of different ways things could go. The second is that debt load we talked about, where the stimulus really was beneficial in helping people in the moment, the PPP program was certainly beneficial for many companies, but it has a large amount of debt that is going to be problematic in the future. So, it's those pieces always keep me up at night.
Adam Hooper (37:52):
And then again, we mentioned mid-October we're recording here still no… I mean, depends on, again, what minute you look at the news. There's talks of more, there's talks are off. It's going to be more, it's going to be less. So with the uncertainty of any future stimulus, do you have any comments or thoughts I guess, on which direction it could go either way? Again, if we get stimulus what might that impact be? If we don't get stimulus what might that impact be?
Jackie Greene (38:24):
Right now, we're forecasting as if there is not more stimulus and that's how we typically do things is the business as usual. If we were to forecast based on every proposed legislative action, we would never be right.
Adam Hooper (38:40):
Could be crazy making.
Jackie Greene (38:41):
Yeah, there's just so much. We were even talking to the other day about an infrastructure spending bill that's being discussed and batted about. And one of the team goes, "So here we are again." Because it seems every few months we're still talking about this-
Adam Hooper (38:54):
Jackie Greene (38:55):
… has the potential impact but it just doesn't come to fruition that frequently.
Adam Hooper (38:59):
Yeah, okay. So where we're at right now and given everything that's going on, trending towards getting into that recovery phase of stage A, where do you see some opportunities going forward as listeners are trying to make sense of it in Q4 2020 and heading into '21?
Jackie Greene (39:22):
It depends on how much people can actually pivot and adjust. There's only so much a company can do, depending on its size and where it's already involved. But at the same time, if there's a way you can take what you're doing and capitalize on what's going on around you, by all means. And one of the things I've actually discussed with one of my colleagues just a few minutes before we started talking was, they were talking with one of their clients that was dramatically outperforming their forecast because when COVID hit they increased their internal sales team and started heavily pushing products that were touchless.
Jackie Greene (39:58):
So here's a client who had this product line all along, but it had only been a small part of the business and now they were really promoting it and cold calling people they'd never talked to and really pushing this because it was an opportunity they could go after and they are dramatically outperforming the forecast as a result. It really highlights one of the things that I love about business, there's always opportunities. The world is full of people with innovative ideas who see a need and fill it or create an item that people didn't even know they needed and COVID didn't erase that and in fact, it likely created some new ideas and some new needs.
Jackie Greene (40:38):
So I don't want to pigeonhole where there's some opportunities, because it could be so far outside what someone can pivot to but certainly, high level health and safety such as the personal protection equipment, that's going to be something that people are going to stay focused on for a little bit. If you're not near that industry already I wouldn't say necessarily pivot to it now, but if it's something that you can be tangential to, you'll likely see some growth there.
Jackie Greene (41:05):
Another aspect is, and this has actually encountered some area that is going to be hurting, is office space. There's so many more people working remotely and even when there is a vaccine at some point, you're likely to still have less people in offices and more people working remotely because they've adapted to it, they like it and it could be seen as a large benefit. You're also able to pull from a talent pool that doesn't have to be near your physical location anymore. So things that make it easier to work remotely, are going to be very beneficial as well in an area of opportunity.
Adam Hooper (41:39):
I think underlying both of those from business owners and listeners out there, it's paying attention and staying nimble. Being able to keep an eye on where those trends are and having the ability to be nimble and react to whatever does come next.
Jackie Greene (41:55):
Adam Hooper (41:58):
Also curious, is there anything that you've seen that's come up from the crisis in terms of metrics or factors that you're tracking that are longer-term trends that'll stay after this crisis has gone? And that's one of things, again, in the real estate space, like you just mentioned office space. Yes, a lot of people are working remote. We just saw Dropbox today is now going to be permanently work from home as an option. Do you see things like that, that are going to be long-term changes just the fundamentals of how the economy works or will this be more of a speed bump than a permanent change?
Jackie Greene (42:37):
I think it all depends on your time horizon. I've learned to say that nothing is permanent. And the reasoning for that is, we have a tendency to swing. Think of a pendulum, and if you think a few years ago the office space thing was to be much more open concept where there was a lot of shared space, and then it was trending back towards cubicles and more closed private office space because people found that it was less productive for them to be in an open environment.
Jackie Greene (43:03):
So I think we're trending towards this working remotely. And I think that will stay for quite some time and I don't expect it to ever go back, I shouldn't say ever, but I don't expect it to jump back to where we were but we may find that people do start swinging back towards the physical office at some point, I just don't have that timeframe it's too new.
Jackie Greene (43:23):
One thing that I've been watching a lot of is, travel. International travel was a large piece of the economy before COVID, it was quite the growing industry globally. Now, even after a vaccine, I don't expect that's going to jump back to where it was. And it's not just a fear factor, it's as consumers we couldn't spend our money that way anymore. We still can't, and I don't know when I can spend my money that way again. But we're finding other ways to spend our money, we're still finding things that bring us joy.
Jackie Greene (43:55):
Personal watercraft sales were way up this past year, so were RV sales. So those are industries that really capitalized on because people could still vacation and do fun things but do it socially distanced. So we saw those as things that really ramped up this last year, and now you have a whole bunch of consumers that just put a lot of cash into those industries and they're going to take time to jump back into the international travel pool because they've now found new ways to spend their money. So things like that, where people have found new lifestyle things or new ways to spend their money that's diverting it from [inaudible 00:44:27], those are going to be harder to come back because consumers get used to things pretty quickly.
Adam Hooper (44:34):
Yeah, that's fascinating. Again, those are the behavioral changes of this whole experiment that's being run right now. To me, those are the interesting parts, of seeing what sticks from that behavioral side. Like you said, the behavioral change of where you're spending your money to get that enjoyment and that fulfillment is very, very different these last six, seven, eight months than what it was this time last year. That's a fascinating point. Any more of those? Any more nuggets like that, because I liked that one.
Jackie Greene (45:02):
Well, you'll like that one until you're trying to buy a boat for yourself. I [inaudible 00:45:07] on the lake where my father lives, he was telling me that there was not a boat available for sale on the entire Lake, and it's the largest lake in New Hampshire there were just no boats available. It really created some odd shortages that you wouldn't have expected.
Adam Hooper (45:18):
Okay, interesting. Got to build one. Get a shop and get the tools out, right?
Jackie Greene (45:23):
There you go, or actually servicing those things though is going to be something going forward, because now you have the initial purchase down. But anyone who buys a boat will tell you, a boat… Do you know what a boat stands for?
Adam Hooper (45:38):
I hope you'll tell me.
Jackie Greene (45:39):
Bring on another thousand, and it's always been just putting more money into it. There's a lot of service industries that are going to continue to be high needs that were impacted by COVID, because now the consumers have purchased other things. You're going to see that need going on longer, as consumers are there.
Adam Hooper (45:58):
Okay. So there it is, boat servicing, marine repair, that'll be the next one. We'll check in next year and see how the marine repair industry has shaped up.
Jackie Greene (46:06):
Okay. Sounds good.
Adam Hooper (46:09):
Anything else that we haven't touched on that you want to discuss here, before we let you go today?
Jackie Greene (46:17):
The world changes quickly, and that's what makes what we do so interesting. Whenever we're growing our team here at ITR Economics, we're always looking for someone who likes change and wants to constantly be learning because we often find that what we thought we knew yesterday isn't exactly the same tomorrow, there's always a new twist in your wrinkle. And that's why we always go and look at our data or inputs and just keeping up on it. Literally it's a full-time job, that's why I'm here.
Adam Hooper (46:46):
Always be learning, that's definitely something that… One of those silver linings of what we've been through the last several months is, again, it's really given me, and I think a lot of people in our industry, the ability to put that student hat back on and just become a learner of all these different factors and things that are impacting these decisions going forward.
Adam Hooper (47:07):
I think that's definitely been something I've enjoyed. And again, getting to talk to folks like you and learn a little bit more, is always a pleasure to have you on. Before we wrap up, how can listeners learn more about what you're up to with ITR Economics? And then obviously again, plug the post-election webinar, we'll have that in the show notes for sure.
Jackie Greene (47:29):
Well, thank you. We have our website, itreconomics.com and our app, those are great ways to stay up to date. Well, we talked about that November webinar and we do lots of webinars; generally, there's at least one a month. But also, we have a whole group here that's constantly putting out blogs, myself included. And those are going up on the app on our website every month and they're a great way to stay up to date with what our thoughts are, our takes on what's going on in the news and how to just keep using the information and help your business be more prepared for what's coming next.
Adam Hooper (48:02):
Perfect. Well, listeners, definitely check that out. Jackie, pleasure to have you on. Thank you so much for spending some time with us today, and we'll be sure to get you back on next year and see where everything's at.
Jackie Greene (48:13):
My pleasure. Thank you very much for having me. It's been fun.
Adam Hooper (48:16):
All right, listeners, that's all we've got for today. As always if you have any comments, questions or feedback, please send us a note to email@example.com. And with that, we'll catch you on the next.