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welcome everybody is oregon's business bank we are proud to be able to host dr bill connerly for our clients our future clients and community members we like to say bankers sometimes forget that they're businesses we really think of ourselves as a growing organ business that just happens to be a bank and to that end we're very pleased to report our fiscal year in results yesterday before the market open summit bank experienced overall growth in assets of 50 for the year ending at 761 million in total assets we are proud to be now the third largest bank headquartered in our state of oregon net income was up 41 to 8 million and the bank is built on a very strong foundation of over 60 million dollars in capital we're equally proud of our work in 2020 by helping over 440 oregon businesses through the ppp loan process those loans enabled non-profits and businesses to retain their employees or hire them back and we figure that was thousands we want to thank all the businesses nonprofits and individuals who work with us and we look forward to working hard every day to continue to earn your business and with that i'm going to now introduce the main event uh dr bill connery before i do that though if you do have questions please input them in the q a section dr bill connerly connects the dots between the economy and business decisions i think we've all heard him and that is true he's a senior contributor to forbes.com holds a phd from duke and has over 30 years of helping businesses address challenging economic conditions dr connerly is the author of two books including the flexible stanch which explains how to run your business if you don't believe his forecast he has spoken to business audiences from moscow idaho to moscow russia he's been quoted in the wall street journal fortune and even willamette week he's a father of two sons and the husband of one wife it's my pleasure again to introduce dr bill connerly thank you craig wonderful to be here with all of you virtually i was chatting with a buddy of mine who runs a mid-sized company and he says this is must be a hard time to be an economist hard time to be a forecaster and i of course said uh yeah that's certainly the case and uh then he said i wouldn't want your job but i had to tell him i said you do have my job kind of you don't write down a numerical forecast and you don't go talking about your forecast but every business decision is about the future and so every business decision requires a vision of what that future is going to look like it may be a murky vision we may not be quite sure what is going on but every business leader needs to have a vision of the future in order to make today's decisions and tomorrow's decisions what i'm going to do is share with you my vision of the economy to help you get a sense of what's going on and uh let me give you a plan for the overall um hold on a second working with the technology there we go a plan for the overall presentation i'm going to be talking about uh the growth that i believe is going to happen in 2021 and 2022 i do think that we're going to be better this year than in 2020 but isn't that kind of a low bar most any year without a major war would be better than 2020 was but i think we're going to have growth so if you're anxious to run out and get an early lunch you can leave right now 2021 going to be better there has been some political change in washington dc i'm going to talk about that and how it will impact businesses including companies here in oregon and then i'm going to talk about our land use challenge here in oregon i believe that there will be some persistent changes from the pandemic even after the disease is behind us there will be changes in how we work how we live and that will set up a disagreement about oregon's land use policy i'm going to leave time for uh questions and answers at the end on the bottom of your zoom screen is a an icon for q and a please use that um it's easier if we put them all in one place so put it in the q a not the chat and we'll address as many of those as we can as we move on so let's talk about what the economy is doing this is a picture of the u.s economy gdp gross domestic product inflation adjusted and those of you who check the news knows we got that latest observation release today four percent growth at an annual rate and the point here is that we had a very severe dip in the second quarter the worst month was april and then we've had a rebound that was partial but sharp sharp but partial rebound and that's the dollar side of the economy if we look at employment employment actually had a more significant decline and the reason it had a more significant decline was because the people who lost their jobs were mostly lower wage workers not entirely but mostly so the dollar impact was less than the number of workers impact and that's not to minimize that those people really were impacted but for those of us who are uh keyed to the overall size of the economy uh it's that dollar impact that's a little bit more important so the key point is uh the overall economy is better than you would think just by looking at the employment numbers now what has driven the downturn and the recovery of course is kovid and i'm going to talk about a hospitalization at first we were talking about cases but you know that testing has been inconsistent we didn't have enough tests in some cases we still don't there's variation in testing so i'm looking at hospitalization what we're really most concerned with is i'm sorry i think i uh muted myself uh i know many of you would like me to do that but uh i'm not going to do it for this this version we're going to talk about mortality and the reason we're talking about mortality you know that that's what counts but mortality is not an apples to apples measure over time because the doctors and nurses and other health professionals have done a really good job at saving lives they've learned new techniques we also have some new treatments so mortality is down but the hospitalization number is the thing that gives us a measure of where we are the third wave nationally was very bad but look at oregon oregon has done much better than the nation we've always been better than the nation and um there we go always been better than the nation and i think that's going to continue well we started declining before then the nation started declining in this third wave uh well i'll talk about vaccines in in a moment and why i'm optimistic about that here in oregon we've had the same general pattern as the rest of the country and the rest of the world and i know people really want to know about my community i want you know i live in bend or eugene or portland i want to know about those communities but the fact of the matter is these charts would look the same whether we were in croatia or south korea or the united states so it's all pretty much the same story this chart shows changes benchmarked from january 2018 so we can put areas of different size on the same chart the blue line is the united states and that's a good benchmark and i'm going to talk about what's been going on in our different communities served by a summit bank bend in the brown line or maybe that's a gold line has been going faster growing faster than the nation growing faster than the rest of oregon for the last few years a friend of mine who lives there said it's a a zoom town but actually uh bend was booming before we started zooming and it was 2000 2018 and 2019 when ben really took off since then uh ben's job count declined uh as did you know the rest of the country but ben just had more of a rebound i'm optimistic about bend in the future but i do not see a really sharp rise in bin's economy because a sharp rise would require housing a lot of people want to move to bend but uh it's hard to find a place um to live if somebody waved a magic wand over bend and added 10 000 housing units i think that they would fill up immediately and the population and then employment would grow but ben will be constrained by housing growth the developers there seem to be doing a a a job but you can only build houses so fast so i'm optimistic about boom but i think that the sharpest growth is maybe behind it for a little while now let's talk about um what are we going to talk about next portland yeah portland so portland was doing better than the nation better than the oregon average in 2018 2019 had a decline uh like the rest of the country but its rebound has been a little bit softer and i'm wondering gee why is portland a little softer but if you put 60 or 100 major cities from across the country in this kind of chart there'd be variation and i think what we're seeing is normal variation portland is maybe at the lower end of that portland of that normal variation but there is a concern that portland's a little bit different than the rest of the country the riots in particular have led real estate developers to drop their estimates of the attractiveness of portland uh there's also of course the severe uh homelessness problem on top of high housing prices i think that portland is going to get its act together but it's going to take a change in the attitudes of the the leaders and i'm not just talking political leaders but also the business leaders civic leaders non-profit leaders uh there needs to be an attitude that hey things have not been going in the right direction if you're interested in more detail about my portland view uh an article just came out that i wrote on forbes.com today if you just google connerly forbes portland it'll show up at the top the bottom line is i think that for that portland is not dying but i raised the question can you die by shooting yourself in the foot and the answer is yes if you don't seek treatment and i think portland has a a decent future ahead of it growing at about the pace of the national economy but it needs to seek treatment for the problems that it has and now let's talk about eugene eugene is the line in green it had a picture kind of like everybody else but a much slower recovery from the pandemic i think what's going on is students and when people had to work from home most people across the country who could work from home were working from home at home but for college students working at home does that mean in the dorm does that mean in your campus you know off-campus apartment or does it mean moving back to mom and dad and um maybe to the happiness of parents or the unhappiness of parents a number of students move back with mom and dad somebody to cook form do laundry perhaps uh so i think that is what's going on in eugene um maybe more so than any underlying economic concerns uh with when the pandemic gets behind us i think um eugene will bounce back i have a friend um who went to college on the east coast which i thought was good have a different experience he was in new england somewhere came back spring break last year and got the word do not return to campus your classes are going to be on zoom and he had thought he was an unfortunate student because he had signed up for an had to sign up for an 8 30 a.m class 8 30 a.m eastern standard time so here's a college kid getting a zoom class at 5 30 in the morning i i you know one of the few times i felt sorry for college kids anyway i think that eugene has some potential in the future we're seeing a number of people wanting to leave the high cost high congestion areas san francisco manhattan seattle and they're mostly looking for cities a few of them are trying small towns i have lived in a small town and i tell you i think those who are heading to really small towns are going to come back to a city they want some city amenities some cultural amenities and i think eugene is well situated the university provides a lot of cultural activities i think eugene could conceivably be a um a zoom town but that's yet to be seen uh in the next year or two i think that um uh eugene will grow a little faster just so that it comes to the recovery well i've been talking about the regions but let's take i know what what you're really looking for i know you're really looking for me to look into my crystal ball and come up with a more detailed forecast i've got the crystal ball there so let's talk about what's going on this is my forecast of the u.s economy i'll get to oregon in just a moment we have the solid blue is the actual and we just got a data point and then my forecast is that dotted line and if you let your eyes sort of trace the history before the pandemic and imagine the trend we don't quite get up to that trend at the end of 2021 but we're pretty close to there by the end of 22 and that depends critically on the vaccine but let me also add we'll probably never get back to the trend we would have been on because of some permanent changes there was some re lower level of business capital spending early in the pandemic that will have lasting effects on our ability to produce goods and services some people a lot of people actually retired earlier than they otherwise would have so the labor force isn't quite as big so we have a little less capacity so we're not going to get back up to that trend line but i think that we are going to get there critical to that is vaccinations and there's been a lot of frustration and irritation with our slow pace of vaccines i think that the professionals in healthcare are going to figure it out in healthcare and in public policy are figuring it out let us talk about one of the worst mistakes in new york the governor said if you vaccinate somebody in the wrong order that is a one million dollar fine if however you waste a vaccine that is a one hundred thousand dollar fine so these vaccines are thought out they have to be used in a very short time period what do you do if you have an extra dose that you don't have a person to vaccinate uh in new york it's better to throw that dose away for the 100 000 fine than to give it to some random person for a million dollar fine uh they have backed the governor has backed away from that but israel has the attitude that we need to drop more adopted more broadly in the united states there was a clinic with a dose that was about to expire everybody in the clinic had already been vaccinated so a nurse went out on the street and sees a young man on a bicycle delivering a pizza and she yells pizza boy pizza boy do you want to be vaccinated come over here so they vaccinated the pizza boy you know if we need to be willing to vaccinate the pizza boy if that's the only person around i am optimistic but there are some risks here and i want to emphasize that this forecast is not uh is not guaranteed first of all well the virus has mutated viruses are famous for mutating and we have a more contagious version we may have one uh coming out that is a little bit more deadly and who knows what other mutations will develop uh the vaccination process as well as the long-term effectiveness and safety of the vaccines you know we we know what the short-term safety is we don't know what six and 12-month out safety is so there is some uncertainty plus at this time of great uh confusion there are plenty of other things that could happen war oil crisis so um i think that businesses should be flexible and ready to go in different directions so this forecast is like i'm i'm rolling the dice you know and um uh when uh you're uncertain and you're rolling the dice you know you're working with the odds but you have to recognize this is not guaranteed uh the last time i was in vegas uh at a casino at the craps table the guy next to me was having a lot of fun he was really enjoying it and uh after winning uh another uh round uh he turns to me and says isn't this fun and i had to explain to him that it is less fun the more you've studied probability and statistics but that's just the the challenge of being an economist let's go back and um look at some slides here uh we're close to the trend line by the end of 2021 in oregon i think that uh it'll look a little different in oregon we don't have good dollar numbers on a contemporaneous basis so we look at employment and remember it's more volatile than the dollars i think that we're going to get close to our trend line again the first half of 2021 i think will be slow p ogress the second half much faster progress the second half of 2021 and on into 22. so that is my view of what's going on uh for growth in 2021 and 2022 now i want to talk about uh political change you may have heard that there's a new president of the united states and there is a lot of talk about uh change maybe even a little talk about unity but you know talk is cheap i'm going to focus not on everything the candidate joe biden said that he wanted to do but about four areas that i think will have the biggest business impacts and go through them the first is i think we're going to get a stimulus relief bill i prefer to call it a relief bill because stimulus uh would apply if you believe the old-fashioned keynesian models you're in a recession and if you can throw some money into the economy people will spend more they'll be ripple effects and everything will be hunky dory but that is not the constraint lack of money is not the constraint people have stimulus people in the aggregate have stimulus and they have not been spending their money uh the stimulus checks the twelve hundred dollar checks that came um last year mostly went to pay off credit card bills and to sit in checking accounts we had a round of stimulus stimulus last month and i think that a new package will be relief and the the more it's targeted to the people who have lost their jobs uh the more beneficial it will be but generally um throwing money at people is not going to be solving our problems so i do not expect a big economic impact from that now the second item i want to talk about is labor policy if your business is in the situation where there's talk about uh uh unionization uh this is important to you but it's not so important if your company is definitely not gonna be unionized or already is unionized but in the obama administration some of the the rules were changed to make it easier for unions and then um the trump administration reversed those rules and now we're going back to the obama era rules for most businesses it will not make a difference i'm asked a lot about the 15 dollar minimum wage and i think that that will not pass at least for a wage increase uh right this year there may be a compromise with a longer term phase in to 15 the challenge politically is that there are many states whose economies depend on being lower-cost locations here in oregon you might think of a grants pass has trouble competing with bigger cities but the advantage it has is labor is a little bit cheaper down there and even in liberal states there are some communities that are low wages new york state is generally a high-wage area elmira new york in the western part just north of pennsylvania is a relatively low wage area so i think that even among the democrats there's going to be a little push back to a sudden jump to 15 an hour for oregon businesses not a lot of difference i doubt that the federal minimum wage is going to jump above the oregon minimum wage so i think that uh the wage that employees will be paying will be about the same i do not expect significant stimulus to the economy from a fifteen dollar minimum wage yes uh some people will be making more but there will be fewer of them earning um low wages because there will be a substitution of equipment computers for people some outsourcing so it will not be a stimulus to the overall economy next on the agenda is international trade yeah international trade this is an area where i think that the biden administration will go in the same general direction as the trump administration the democrats historically have not been as favorable towards globalization as the republicans have been but they're going to do it much more politely i think more gradually they will do it in with greater collaboration of our our major friends like the uk canada japan uh we economists believe that uh international trade benefits both sides so we tend to favor more of a free trade approach so i'm not in favor of continued move uh towards restricting international trade but if we're going to move in that direction doing it gently more predictably more politely i think is a positive development and the last thing i want to talk about is an infrastructure bill i think we're going to get an infrastructure bill uh not right away it'll take a long time maybe the second half of this year or the first half of next year there will be a major infrastructure bill republicans like the idea democrats like the idea uh there are no fiscal conservatives left in washington d.c it's a fully extinct species apparently so we'll get it the argument will be how you divvy up the spending the democrats will want of course the green new deal republicans will favor more traditional highways and bridges but i think eventually they'll come to a compromise and they'll be a lot more money spent on infrastructure the discussion reminds me of a lesson i learned my first year in a bachelor pad after i got out of the college dorms and that is when the pork turns greens turns green things are not real happy so that is what i see from politics now i'd like to turn to the lasting impacts of the virus and the pandemic and how that's going to affect oregon land use so we've learned that we can work from home this was my first home office when i left my rented space on cruise way i've been kicked out of that office you know family challenges but it was beautiful home office but what we have generally learned is that working from home works for many people now it doesn't work for the people mowing my lawn it doesn't work for the person driving a bulldozer on a construction site but many many people have been successful at working from home some like it but some don't the people who like it uh maybe never liked their work colleagues very much uh some folks report that they are more productive they have more flexibility about when they walk the dog you know there's a sun break at two in the afternoon and nothing's scheduled let's do it but some people don't like working from home they like the camaraderie they've got animals or in-laws which i guess are another form of animals and they don't want to be on a zoom call and have a spouse in skivvies come walking behind them and if you're worried let me assure you i have taken precautions to make sure that no spouse in skivvies walks behind me during this i that's good news for some of you maybe not for all of you but because we've learned that working remotely works and that some people like it though some people don't i think what we're going to find is a hybrid work model coming some people will come into the office daily because that's what they want to do i most cases i think managers are going to want the whole team to come together maybe everybody in finance shows up in the office on mondays everybody in marketing shows up on tuesdays everybody in customer service shows up on wednesdays it will vary from company to company but i believe that is going to be common for a lot of people to have the choice whether they work remotely or not oh and that remote work can be working from home or it could be working from a co-working space sort of a we work in the suburbs and um that could be my office depot has taken some of its floor space and made it into a co-working site or it could be that some executive uh normally has been going downtown but his company has a branch location near home and he may say hey all i want is a a desk at the branch for four days a week and the one day a week i'll go into work so this remote uh this hybrid work model i think is going to lead to a lot of variety some people will stay right where they are other people will change and what we'll have is a preference for larger homes farther out so if you're going to be working even a couple of days a week from home you might think oh i'd like to have an extra bedroom or if you can not cannot afford an extra bedroom maybe an apartment with an extra 30 or 40 square feet for a work location within the place well more space costs more month money whether it's the price of the house or the rent on a rental unit uh it costs more money but it tends to be cheaper farther out from the central city so i think there's going to be a preference for people moving out the limitation on people moving out historically has been commuting time and people don't want to spend too much time uh either driving in their car or riding a bus and i think that bus and rail transit is less attractive in an era of uh pandemics so but uh commuting is not a big deal if you're only going into the office once a week and i think that people will say hey i can get the the greater space that i want out in the suburbs the commute is not the challenge it used to be so there's going to be a move out and that's not everybody probably most people and the way we economists tend to think of this is that in any change in the environment most people do what they've been doing but there are some people in the middle they could go this way could go that way and with this change in the environment i think many of them are going to want to shift to a farther out location but oregon's land use policy has been focused on getting people close in not expanding not urban sprawl and that conflicts with i think a growing preference that we'll see for people in the outer areas we also adopted our land use policy at a time when we had a lot of land inside urban growth boundaries and the people most responsible for our land use decisions were people of a mature generation homeowners maybe they had a second home at the beach or in central oregon and they thought uh when i drive to my second home i don't want to go past a subdivision i'd rather go past a farm and i don't believe that we thought very much about what that land use restriction meant for the young person trying to afford a first apartment or the young couple trying to afford a first house but housing prices have gone up far more than they need to because of our land use policy and i think we're going to have a conflict how is it going to end i think that we will probably eventually ease some of our land development restrictions but i'm not talking 21 or 21 or 22 i'm talking several years out five years out but i think people in the real estate development area ought to think about where that controversy is going to land in coming years so those are the primary uh points i wanted to make i'm going to give you some takeaways you might start thinking about questions for the q and a section and typing those in to the q a bar at the bottom of your window the first is of course that we're going to have growth in 2021 and 2022 i would say that businesses should think about limitations restrictions challenges they will face with a growing economy now when i talk to managers it's like yeah yeah give me growth i'm all for growth but uh growth is not always easy it brings challenges growth brings a better set of challenges than recession no doubt about it but for your organization to grow in sales we need to add people where will you find those people if you've laid off people do you know if your people will be willing to come back have they found another job have they moved to toledo check in about the labor needs you may have in a growth era many companies start running short on working capital what happens is there's a flurry of activity and many companies have to spend money whether it's on wages or on materials they have to spend money faster than the money comes in and their accountant says gee on an accrual basis you're doing really well but you have run out of cash a good approach to that is a cash flow forecast and a discussion with a banker who is willing to sit down and talk with you one-on-one about your own particular needs and if you're banking with summit bank you hit the jackpot because they've got a team of great bankers um but there could be other challenges as well um machinery equipment real estate and this is not a hard exercise you can do it over a cup of coffee or other beverage of your choice with a single sheet of paper think through now what will be your challenges in a growing economy on the political issue i mentioned the labor issues that will be more important in the coming days and i believe that we're going to have a tight labor market in the next decade the best employee benefit is not on-site day care it is not yoga not even goat yoga the best benefit an employee can have is a good boss when people quit they seldom quit the job they mostly quit the boss and training to make your first level managers better at their job better at keeping people engaged will really hugely help employ retention and the bottom line and the third thing is for the oregon land use issues i think that we need to be ready for a dispute a protracted political dispute over how we deal with land and as we get ready to talk about um take the questions in the q a section let me mention that i put out a newsletter once a month i know many of you get it from your friends at summit bank you can subscribe directly you can email me or text the word econ to 42828 be happy to add you to the list with that let's uh let's go back and um take some questions jenny have you been uh accumulating questions i i have but so far we we don't have any questions we we did i think a couple showed up in chat maybe um no that was someone who was having having zoomed in okay we had i'm looking at i'm looking at quite a few in the q and a i've got zero go go for them oh really i'll i'll pitch it i'll pitch a couple that i thought were interesting um uh there's a comment about the the oregon cat tax that was passed last year um do you think that that that that's going to have a particularly uh significant impact combined with the pandemic and do you think there's any chance that there's a there's going to be a change there in the future on the part of oregon yeah i i believe the tax is not what i would have chosen but i don't think it's going to be um a huge factor on the economy especially compared to recovery from the pandemic and as for uh some repeal of the tax or uh dialing down of the tax uh the governor feels that uh she needs a lot of a lot more resources to deal with the greater needs the people in the majority party in the state house agree with that i think it's um highly unlikely that that is going to change so it's not positive but it is not going to be a huge negative call it a minor negative and and then i don't know about the about the excel pipeline closure do you think the that in specific and the energy policy of the biden administration is going to have a material impact yeah i believe that um these changes the pipelines the uh oil and gas drilling are not going to have a huge impact right away but they will gradually accumulate over time and we'll see higher energy costs because of that enough that we can detect it if we look carefully but it's not going to trigger a recession and another question generally about the uh the biden tax plan uh increasing the top marginal long-term capital gains tax and additional uh aca tax if if if indeed that's successful what what do you think about that the the way i look at these tax changes and i looked at the uh the the trump tax cut and now the proposal for higher taxes is uh the press is talking a lot about how many dollars go from this pocket to that pocket what i look at is the incentive and in a lot on a long-term basis the the tax policy that has the biggest effect on economic growth are taxes on investment and they have a negative long-term impact the second biggest impact of taxes on the economy is taxes on income particularly like labor income uh there are some people who have a choice work or not work and they are tax sensitive not every one of them but in the aggregate they are tax sensitive uh whereas sales taxes real estate taxes have a negative impact on economic growth but it's very very small so the the taxes on investment returns on labor uh do impact long-term economic growth but we're talking about you know does the economy grow at 2.5 or 2.3 it's not going to be recessionary but it will uh lower our long-term trajectory um there's a fair number of questions just talking about inflation in general that's kind of a standard idea whe there's a lot of government stimulus what do you what do you think about uh inflation expectations well scott i was trying to avoid the subject because i'm trying to keep this a happy presentation and we have a bunch of you know people in a good mood come here and then we have to deal with the bad news uh the bad news happens after 2022 i believe i'm not worried about inflation this year i'm not worried about inflation in 2022 at least most of 2022 but we've been throwing a lot of dollars into the economy both from the fiscal stimulus those checks and extra unemployment insurance payments uh payments to the states plus the federal reserve has been throwing a lot of money into the economy and the classic definition of inflation is too many dollars chasing too few goods too many dollars chasing too few goods we've added a lot of dollars but our productive capacity as i mentioned is is not growing so we're going to have inflation but i don't think it's going to happen right away i think it'll happen in 2023 we may start seeing signs of it late in 2022 but definitely 23 and 24 we're going to see an acceleration of inflation now if you're an old-timer you may remember 10 inflation in 1980 now we're not going back there but we're definitely going higher and that presents a challenge because the federal reserve is committed to waiting waiting until they see the inflation the old federal reserve from like a year ago said they were going to do the gretzky move and a ski to wear escape to where the puck is going to be anticipate inflation the new fed under powell has said no we're going to wait because their forecasting models are pretty lousy wait until we see inflation but there's a time lag of 12 months or so between cause and effect when the fed takes an action so i think that we'll get inflation the fed will tap the brakes and not much will change because of that time lag they'll tap the brakes again not much will change and then i fear that they may stomp down hard on the brakes causing a boom bust cycle and i think that businesses should start thinking after we get through the pandemic start thinking about flexibility for a boom bust cycle and the decade of the 2020s may resemble the 1970s where we had a recession and a boom recession boom and this happened several times around that is kind of that is kind of dark bill a question related to you you talked about sort of zoom towns and people moving out of the city centers um is there anyone measuring an impact on oregon in particular with with portland do you think that that there'll be an exodus from the portland metro into into environs in portland we don't quite know uh the data that we have shows that um migration population growth in the state which is mostly the variation mostly caused by migration uh was lower population growth nationally was lower because less foreign immigration but um we we don't know for sure uh we're flying visibility impaired at the same time that i believe there are some folks uh leaving portland um maybe it's a fear of insecurity from criminal activity with 9-1-1 calls not being answered and more neighborhood violence uh or maybe it's just uh tired of the high housing costs there are certainly people moving out but there are also people moving in saying hey portland uh i think portlanders you don't know high housing costs i've been living in san francisco or i've been living in seattle so right now i think we're my guess is that we're in neutral territory where the people who say this portland is better than the alternatives are about equally matched by people saying hey portland is now not the best place for me but it's going to be a couple of years before we really know to what extent people are moving i'm nervous and i hope that the the civic leaders in portland start addressing some of the challenges that the city faces so if if inflation overall is tepid uh in the short term however uh there's a lot of escalation in commodities prices uh lumber and steel um what do you see what do you see the near-term uh future for for commodities particularly construction commodities i would imagine yeah commodity prices are always much more variable than other other things um than than rent or labor costs so and we've been in a construction boom you know i talked about people wanting houses well we had a lot of uh housing units started uh in 2020. in fact we had more housing units started than we had additional people living in the country which is a little bit scary but the the key factor there was the multifamily sector had momentum uh big projects with long lead times uh when the um shift happened uh there they just kept building those multi-family units completing projects that rory started but single-family homes more flexible they can start and stop more rapidly and that shift to more single-family construction pushed up the price tags on construction materials plumbing materials copper and brass prices are up and i think that we're not going to see that this is not a harbinger of massive inflation but in the short run demand changes much more rapidly than supply does you know if copper gets more expensive yeah we can open up or expand existing copper mines but that doesn't happen quickly so i think the commodity change is fairly short term but if you're um a developer a builder and you're trying to figure out what will it cost to build something six from months from now it is a tough challenge and especially with the volatility of commodity prices which is a long-winded way of saying i don't know so we have a couple over here one person wants to know how oregon pers expenses will affect our state's growth can you answer that question yeah yeah organ per is expensive of course a substantial portion of the cost of government both state and local government in oregon is the pers contribution and it means that the taxpayers get less bang for the buck and the purse high contribution rates are a result of paying for past years workers that we did not fully fund their pension obligations when those people were working 10 years ago so now we're paying for the past and when taxpayers say oh i'm going to get this service for this amount of tax the pers tax means the value received is less than the cost by a significant portion and that's going to make people i think less willing to pay for local bond issues like the metro bond issue that failed i think there'll be a an increased trend there but it's one of the things that i think if you had a really detailed microscope you could see the impact of this kind of policy on the growth rate but the average person running a business or having a job is not going to notice the difference well here's a tough one bill uh your thoughts on the postcovid hotel restaurant hospitality uh business well the restaurant business is easier to figure out one of the things i do with a consulting clients is i say to them think about what has changed and what has not changed and what has not changed is that humans need to eat not only need to eat but want to eat and i think uh that will continue i think that uh there may be some folks with the the new old habits of um social distancing but there are a lot of us with cabin fever so i think restaurants will bounce back pretty well some restaurants will be permanently closed but there are plenty of locations suitable for restaurants plenty of people with the talent to open a restaurant and even plenty of investors willing to help those people open restaurants so the closure of restaurants is not a scary thing to me restaurants open and close all the time travel and hospitality is a little bit um diceir i think that short trips like trips to the beach trips to bend uh will bounce back fairly quickly uh the cruises cruisers got a bad reputation though they are booking uh and we get brochures in the mail all the time uh so some people go on cruises but i think in the aggregate uh the cruises the resort destinations will not be bouncing back quite as quickly we've got one here's a leader here's a got oh sorry i wanted to we've had one in the chat for a while this is from the springfield chamber and they want to know knowing the government and legislative leadership is looking to raise revenues what kind of worst case and best case or tolerable scenarios should we watch for those that will impact small businesses and economic recovery favorably or unfavorably yeah that's a good question you know i think you know we could get the cap and trade proposal i like the idea of some kind of tax on carbon as a substitute for tax on investment income and labor income if you're going to tax something let's tax the thing that you want less of not the thing you want more of but the problem has been that the leaders in the state house wanted to do both and it wasn't just a change in how we tax it was an addition of a tax if there's going to be a raise in revenue i think that maybe the cap and trade will be the most likely way plus some eating around the edges a little bit here a little bit there uh adjustment on minor fees so uh what one of your listeners uh is remembering what you said about boise a few years ago um you said you predicted boise would be the destination for young families due to economic opportunities low cost of living high quality of life um are are housing costs in boise currently higher than you anticipated and are there lessons learned you know that forecast and i don't know if the caller was is remembering but i remember it was maybe 15 years ago at the eugene chamber i said that residents of eugene should visit boise because that is where your children are going to end up living uh because at that time housing was cheaper in boise than in eugene and jobs were more abundant and i use that as a little bit of a slap on eugene policy about growth and development uh well you know that forecast really came out well uh boise is one of the has been for the last 10 years one of the fastest growing places in the country housing costs have gone up they just simply cannot build housing fast enough for all the people who want to move to boise so i think that i haven't done the comparison of boise versus eugene boise may now be more expensive than eugene but people are just piling in there uh i have had been stunned at how low their unemployment rate could go um and it got down to like two and a half percent i think at its lowest so uh boise has been booing what was there scott was there more to the question than just uh how boise is doing uh no it was just uh saying that it looks like boise is not quite so affordable uh anymore and uh right and are they higher than you anticipated the getting the the housing cost yeah i was optimistic uh about uh boise's growth but it surpassed my uh optimism what's what's your oregon ag forecast for 21 and 22 how do you see the impact uh of there well the easiest thing to say talk about is uh nursery crops uh which is of course a huge industry um especially in the valley i think that will be strong um there are a lot i was talking to a midwestern nurseryman just yesterday and he says there's a lot of new a lot of new gardeners out there especially millennials the industry had been enjoying people retiring and taking up and spending more time gardening but now millennials are uh gardening uh they're hoping for a boost there limited by uh labor costs uh the lack of new uh commercial development is a limiting factor there because there's a lot of landscaping on that but i think that will come back uh for other crops i think that um we'll see prices that and i don't follow things like wheat uh that closely uh there's a challenge with the export market but i think that uh we'll see roughly stability i don't see a big swing going on in ag so somebody's piggybacking on your boise comment uh what's the new boise if you look out 10 years oh i think that boise will continue to grow uh but they will you know they're limited like bend is by how many construction workers there right now anybody with a um a pickup truck and a claw hammer is a contractor in boise uh and that is limiting their ability to build new houses but boise has a different attitude uh boise's attitude has been uh you know if you want to build it we'll help you and some years back one of the suburbs offered a guarantee to builders saying hey when your permit is completed we'll give you an answer in two weeks or something like that it was a service guarantee to builders and then another suburb said we can't let them be the only one with a service guarantee so the suburbs were competing to get development whereas in oregon the suburbs would be competing to stop development so that's their attitude i think uh it may change that happens as people get a little bit older but um it as they get more crowded but i think that uh boise will continue to expand faster than the national average and do you have an out on the limb kind of forecast for what might be the next metro that that has uh attractive cost of living um similar to what you're saying about boise 15 years ago yeah you know coeur d'alene's been doing well i think spokane is doing fine i know a company that acquired um did an acquisition and ended up with a back office uh accounting folks in both spokane and boise and their attitude usually in an acquisition is okay we get rid of the um the back office people um but what they said is oh we've got a core of back office people in lower cost locations and they went to their seattle back office people and said does anybody want to move to spokane or boise and hands went up left and right so there is a migration to lower cost areas i think that college towns will look good and i think that um some of the smaller cities people cities of you know the quarter million is a little bit small but uh half million to one million cities will probably be the sweet spot across the country what about traditional american border traditional brick and mortar in eugene uh how do you see that coming back i think there will be some brick and mortar but not too much of it you know people have learned to do online shopping and i think that's going to continue for a while so for stores that is going to be tough and eugene is not so big that it's got a big disparity between downtown and suburbs so i don't think the movement to the in portland i think that the shift of people wanting to live in the suburbs will stimulate commercial development in the suburbs in eugene maybe and not so much um hey we're getting close to the end of time uh is there one last question and then i'll make some closing remarks not in the chat okay scott you got one last uh just a a general uh give you a chance to you know be a genius or a goat of industry types that that you see particularly thriving uh in the next couple of years ah industry types yeah you know i we have been spending a lot of time taking care of our homes since we're spending more time in our homes uh the folks who do carpet and drapes um home depot has been doing well with do-it-yourself projects i think a lot of that though was borrowing from the future and people did a lot of activity in 2020 that they would have otherwise done i think probably once we get over the fear of covid then travel would would be the big recovery area let me make some some closing remarks and i'd like to talk about um oh this hold on let me make a little change here those who had a question uh that we didn't answer feel free to email me and you can uh send a text to get on the the newsletter list happy to take your questions just mention you're on the summit bank presentation so that i can separate your email from the groupies and and stalkers who so be devil handsome young economists but i want to talk about some challenges that america has had in the past we've faced a number of challenges we've had high aspirations we haven't always lived up to our aspirations but challenge after challenge we have overcome and we have provided freedom and prosperity to a wider swath of our population than any other country in the world in history we're going to overcome this challenge and we're going to make further progress towards our goal of freedom and prosperity for everybody thank you very much thank you so much dr connerly that was a won erful presentation and the first time that we've heard you for all of our markets on zoom um for those of you out there if you are interested in getting a copy of this presentation contact your banker and they will send it to you and can also send you the slide deck and if you have any ideas for future zoom presentations either topics or speakers let your banker know we really appreciate all of your time today and we hope that you all have a wonderful day and a wonderful weekend and as we like to stay here at summit summit on three so thanks all thanks dr connerly thanks