It would seem shallow to say the timing of the next economic recession is what worries credit union leaders the most, according to attendees of this year’s Your Economy—Your Credit Union conference on June 20th. Another downturn is inevitable, but how it looks and feels is the much bigger question gaining traction.
Participants of this special annual event hosted by the California and Nevada Credit Union Leagues learned there are other pressing issues to stay aware of at the national, state and local levels that are just as important as “when” the economy starts retrenching. This includes the future of interest rates, labor force viability, worker mobility, wage growth, housing supply, inflation, the California-to-Nevada family migration phenomenon in search of "better opportunities," and additional factors.
State and federal politics, international trade conflicts, and preparing for both the predictable and unpredictable were also topics of concern at the event as attendees realized the economy is continuing down a narrow, untraditional path of expansion somewhere between boom and bust.
“We are looking at a mild slowdown sometime between 2021 – 2023 if our current situation doesn’t stray too far from where we are today,” said Dr. Robert Eyler, the first keynote speaker, who’s also an economics professor at Sonoma State University and board member of Redwood Credit Union in Santa Rosa, CA. “This would be our nation’s longest business-growth cycle since the 1800s. It is slow growth, which Americans typically don’t like. But it’s predictable growth, and predictability is what monetary policymakers at the Federal Reserve need to see.”
This year’s conference touched upon all these issues, as well as specific onsite questions by participants. Now in its third year, it was the largest-ever event after being launched in 2016 and was attended by more than 60 registrants and other credit union leaders in the industry at the Leagues’ headquarters in Ontario, California.
It was acknowledged that a major event could change the positive outlook for an economy gearing up to make its entrance into record territory, at least by modern standards. One of those risks is a potential “trade war” between the United States and other countries, or possible trade tension that eventually builds to an inflection point, according to Leagues Chief Economist Dwight Johnston.
Putting aside this geo-political anxiety—and the domestic dread by some experts on U.S. fiscal and budgetary pressures—every indicator seems to be riding smoothly, even as some national voices keep cautioning the opposite. Johnston said credit union leaders need not panic but must be ready for a variety of economic scenarios, as well as interest rate possibilities driven by the Fed and bond-market “what ifs.”
“No indicators are outright screaming that the economy is getting close to the top,” Johnston said. “Our economic boost is partially coming from tax cuts directed at businesses, but equally is the sharp increase in business and consumer confidence after President Donald Trump’s election. However, if confidence by businesses starts eroding because of increasing trade pressures, or an actual trade war, this could all change. We’d probably get some very stunted job growth, if not outright job losses.”
Johnston added that businesses still have tax-savings money to spend on expansion and hiring, but they could decide to hoard it if they feel threatened by international trade issues.
Credit union executives and professionals who attended the all-day conference said “connecting the dots” and considering “the larger picture” through an economic lens has become a priority as they head into strategic planning season later this summer—especially the potential impacts from a natural disaster. The event’s “Forces of Nature” panel in the afternoon showcased how four different credit unions across California dealt with the economic and member-service impact of wildfires, hurricanes, earthquakes, flooding, and potential dam breaks in 2017 (Patelco Credit Union, Redwood Credit Union, Community First Credit Union, and Sierra Central Credit Union).
A handful of credit union executives at the conference shared their individual perspectives in interviews with the Leagues’ weekly e-publication, Credit Union Weekly:
- Chaffey Federal Credit Union (Upland, CA)—For CEO Kevin Posey, the conference “provided some great insights for the next three years and will help us in strategic planning in the coming months,” he said. “Some of the information was more optimistic than other forecasts I’ve seen, and that helps shape a range of scenarios for strategic discussions.” He said his credit union faces the same economic issues that most face—a strong economy with good prospects, but a level of risk if that growth is not properly managed. “We’re seeing good deposit growth and have been able to begin restricting our balance sheet to focus on core member loans,” Posey added. “A strong understanding of the macro forces of this economy is essential in risk management as we build a stronger balance sheet.”
- Alta Vista Credit Union (Redlands, CA)—CEO RaAnn Wood said the speakers dispelled some myths her board of directors have been debating, such as the false perception that an “exodus” of people are moving out of California, or that rising interest rates will have an immediate negative effect on housing prices. “We still see challenges for our membership, even with low unemployment rates,” Wood said. “We still have lower-wage earners who need transportation for getting to work, so rising interest rates will definitely impact how much they can qualify to borrow. Overall, our focus is on becoming more efficient and keeping expenses under control as we build capital.”
- Vons Credit Union (El Monte, CA)—“This conference provides value to our industry by dispelling a lot of noise in the economic news that’s coming out these days,” said Controller Hugo Sanchez. “It gave us a clearer picture of how the national and state economies directly affect credit unions.” He said the outlook for Vons Credit Union is “very bright.” It recently added some major grocery-chain employer groups to its membership and is pursuing others, as well as branch additions to serve members better and provide shared-branching.
- Redwood Credit Union (Santa Rosa, CA)—Tony Hildesheim, CIO and a natural disaster panelist, said his credit union’s outlook also remains “very positive.” The credit union is maintaining course on its current strategy in tandem with various possible economic scenarios. “The information from the economists is vital in planning and strategy,” Hildesheim added. “It allows us to create a variety of stress tests and gives some indication on what we can expect.”
- Antioch Community Federal Credit Union (Antioch, CA)—CEO Anna Tellez said the afternoon panel on credit unions’ economic response to natural disasters “was extremely eye-opening and very beneficial.” The credit union has a disaster recovery policy plan but needs to make some changes and additions. Regarding the local economy, the City of Antioch has an extremely competitive financial services space all competing for approximately 110,000 residents. “We’ve been in asset-growth mode recently, which is good,” Tellez said. “But we need loan growth the keep up with deposit growth. We are looking to target those businesses, individuals, and areas of the city that others have not penetrated.” Overall, the conference gave her a roadmap for picking up on the warnings signs of a future economic recession.
'Your Economy' speakers and panelists.JPG
CAPTION: Credit union panelists, keynote speakers, and representatives from the California and Nevada Credit Union Leagues who helped host the 3rd annual “Your Economy—Your Credit Union” Conference, which attracted more than 60 credit union industry leaders from across California.
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