FNB Exec Forecasts Low Recession Risk for 2020
By George Nelson
BOARDMAN, Ohio – A First National Bank vice president urged business and community leaders Wednesday morning to focus less on what they see on the news during the upcoming election year and more on economic fundamentals.
Chris Cwiklinski, senior vice president and director of portfolio management for First National Bank Wealth Management, Cleveland Region, presented the outlook for 2020 at the Youngstown/Warren Regional Chamber’s annual Economic Forecast Breakfast. The event at Mr. Anthony’s Banquet Center also featured a forum on the upcoming presidential election and the presentation of the Excellence in Manufacturing Award to Quality Switch Inc.
“Our advice to everybody in the room would be to ignore the news and focus on the fundamentals,” Cwiklinski said.
Every day, news media report on an array of issues including trade wars, Brexit, impeachment, national debt and the election, Cwiklinski said. “It seems like we’re on the precipice of Armageddon.”
He elected to take the opposite approach as he pointed to various economic factors and trends, noting both the stock market and Gross Domestic Product look strong going into next year.
GDP is growing at 1.9%, a rate he acknowledges many observers would like to see higher. “It would be nice to have faster growth, but 1.9% is not bad and it’s not negative,” he said. “Our base case for 2020 is we’re not going to see a recession.”
Much of Cwiklinski’s optimism is driven by the strength of the consumer segment of the economy, which makes up nearly 70% of GDP. Real median household income, which usually declines before a recession, is not showing signs of decline now. The stock market, which ended last year down 5% because of a “pretty nasty December,” is up 23% this year.
Further, inflation remains in check and average hourly earnings are growing around 3%, he reported. “That’s pretty robust. That’s got to feel good for consumers,” he said. Unemployment is low and companies also are reporting that skilled labor is hard to find, which supports earnings growth.
Another factor he cited is the “misery index” – the inflation rate added to the unemployment rate, which is at 10% of what it’s been historically, near the postwar all-time lows for the measure.
More good news is interest rates. In 2018, the rate for a 10-year bond was 3.21% and 3.43% for the 30-year bond, compared to 1.92% and 2.39%, respectively.
Cwiklinski conceded that manufacturing is a vulnerable spot for the economy, with September being particularly weak. “It’s the biggest question mark that we have,” he said. He wondered how much the General Motors strike was a factor in the September numbers and noted there was an uptick in October.
He also rattled off a series of local signs of progress, including the announcement that Lordstown Motors Corp. had taken over GM’s former Lordstown Complex, a development that may position the area for a bigger role in the electric vehicle industry. Other projects he mentioned include the construction of TJX Companies Inc.’s 1.2-million-square-foot regional distribution center and a new power plant in Lordstown, as well as continued development at and around Youngstown State University.
“I was surprised when I picked up the newspaper and saw all the great things going on,” he said. “There seems to be a lot of momentum in the Youngstown area to keep the economy going.”
Several of the local projects Cwiklinski mentioned were referenced during a presentation, including a video, on the chamber’s economic development efforts.
Committed economic investment during 2019 totaled more than $212 million and more than 20 industrial projects were announced, reported Sarah Boyarko, chief operating officer.
The chamber and the Manufacturing Advocacy & Growth Network, or MAGNET, presented the Excellence in Manufacturing Award to Quality Switch, which in May received the President’s “E” Star Award in recognition of its success in exporting.
The Newton Falls company designs and manufactures switches for use in electrical transformers on utility power grids and in industrial power supplies. It previously received the “E” Award in 2015.
“Achievement is one thing. Sustaining achievement is quite another,” said Darlyn McDermott, market leader and growth adviser for MAGNET.
Quality Switch sells in 19 countries and exports represent approximately 40% of its business, said company president, Larry Dix. In many cases, the cost of freight exceeds the cost of the product.
“I can assure you that our success in these countries is not because we are the low-cost supplier,” he said. “Our focus and success has been based on being different, on being better, on being unique. We focus on the actual need and we work with our customers. We work with their customers.”
The keynote of the morning program, “2020 Presidential Election Perspectives,” was delivered by Bob Paduchik, Ohio chairman for Donald J. Trump for President, and progressive talk show host Rick Ungar of “The Rick Ungar Show.”
Both have Mahoning Valley connections. Paduchik’s parents are Valley natives, and while he was raised in Akron spent much of his childhood with relatives here. Ungar is a graduate of Liberty High School.
“I always thought the Republican Party didn’t look out enough for working men and women,” Paduchik said.
Trump has became a “blue-collar conservative” and transformed the Republican Party into a “blue-collar conservative party,” he said.
“We saw that in the first few months after he reached the nomination in 2016 when we were getting a tremendous response from people in Ashtabula, Trumbull and Mahoning County, all throughout Valley,” he said. “We were pulling in support from disaffected Democrats and independents.”
The Valley “very much explains what happened to the Democratic Party,” which traditionally looked out for “working class Americans,” Ungar said. During the past two generations, the party got involved in looking for “special interests” and taking on issues such as championing gay rights.
“I’m glad we took them on. The problem is we did it and it turned out we couldn’t walk and chew gum at the same time. We forgot about the people who were the Democratic base,” he said. “When you start to forget about people, those people are going to notice. And they are going to change their loyalties. They did.”
Both were asked to comment on what impact GM Lordstown’s closing would have on the 2020 election and Trump’s support here.
“The Democrats and the press are trying to make it as big of an issue as they can. I wish they had put more effort in it when they bailed out GM and would have cut a deal that would have done something for Lordstown,” Paduchik said.
GM Lordstown is “a big story” that has been covered extensively, but getting too focused on a story like that presents the risk of neglecting other opportunities, Ungar cautioned.
“This area of the country is ripe for manufacturing,” he said. “You people who are here and are developing this area are in a unique position. There are a lot of manufacturing companies still out there that need to have a good place to go and this is a great place for them to go. … Don’t get so wrapped up in [Lordstown] that you lose the opportunity to take advantage of the workers that are here.”
Pictured: Chris Cwiklinski, First National Bank senior vice president and director of portfolio management, expects no recession for 2020.
Copyright 2023 The Business Journal, Youngstown, Ohio.