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The Next Decade:What Washington Bankers Should Do
TODAY to Prepare for Tomorrow
Dr. Bill Conerly
for
Community Bankers of Washington
September 15, 2017
Issues for the Next Decade
•Current Outlook
• Economic environment
• Taxes
• Labor Force
•Real estate & autonomous cars
• Your grandchildren’s lives
Long-run Average
0
1
2
3
4
2014 2015 2016 2017 2018 2019
% c
han
ge
GDP ForecastInflation Adjusted
10-year Treasury
Fed Funds
0
1
2
3
4
2014 2015 2016 2017 2018 2019
perc
en
tInterest Rate Forecast
0
1
2
3
4
2014 2015 2016 2017 2018 2019
% c
han
ge
Washington Job Growth
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
-10
-5
0
5
10
15
1950 1960 1970 1980 1990 2000 2010
% c
han
ge
Economic CyclesGDP growth adjusted for inflation
Shaded areas
denote recessions.
0
1
2
3
4
5
6
7
1950 1960 1970 1980 1990 2000 2010
40-q
ua
rter
roll
ing
sta
nd
ard
devia
tio
nCyclicality of Economy
Standard deviation of % change
The Great
Moderation
Washington Cyclicality
• Wood Products
• Boeing
• Tech ?
Retail sales
Advertising
Business productivity
How to Manage in a
More Cyclical Economy
• More tuned in to customers
• More capital
• Big projects fast & modular
• Shift to less cyclical sectors
0
10
20
30
40
50
60
70
80
90
1980 1985 1990 1995 2000 2005 2010 2015 2020est
perc
en
tFederal Debt
% GDPWhite House
projections
Social Security
Medicare
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
1970 1990 2010 2030 2050 2070
% o
f ta
xab
le p
ayro
llEntitlement Deficits
Washington Issues
• Public Pensions: Unfunded liabilities
= $103 billion (28% personal income)
•Other benefits: Unfunded liabilities =
$11billion (3% personal income)
• Seattle: $3.2 billion pension deficit
0
1
2
3
4
5
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
mil
lio
ns
US Births
Baby
Boomers Millennials
0
2
4
6
8
10
12
2000 2005 2010 2015 2020 2025
mil
lio
ns
Population Change Ages 25-645-year increments
0
50
100
150
200
250
300
350
2000 2005 2010 2015 2020 2025
10
00
sWash. Pop Change Ages 25-64
5-year increments
Strategies for Tight Labor
• Retain good workers
• Keep seniors working longer
• Look for the overlooked:
Immigrants, handicapped, rural
• Technology for productivity
Labor
Computers
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
2014 2015 2016 2017
ind
exed
to
2014=
1Cost Trends
Seattle Surface Parking Lots
Marysville Surface Parking Lots
Real Estate Implications of
Self-Driving Cars
• Urban real estate prices fall
• Low-value space in existing
underground garages
• Transit-oriented development dies
• Easier commutes = higher
demand for suburban living
200
300
400
500
600
700
1996 2006 2016
per
10
0,0
00
in
hab
ita
nts
Violent Crime Rate
-100
-80
-60
-40
-20
0
20
40
60
80
1990 1995 2000 2005 2010 2015
% a
bo
ve
/belo
w n
ati
on
al
sta
nd
ard
National Air Quality Concentration Averages
CO (8-hour)
NO2 (annual)
NO2 (1-hour)
O3 (8 hour)
PM2.5 (annual)
PM2.5 (24-hour)
PM10 (24-hour)
SO2 (1-hour)
0.5
1.0
1.5
2.0
2.5
3.0
1950 1960 1970 1980 1990 2000 2010
ind
ex:
1950=
1.0
U.S. Agricultural Productivity
1.9
0.8
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1990 2000 2010
bil
lio
ns
World Poverty<$1.90 / day
Questions?
Bill @ ConerlyConsulting.com
one “n”
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