Continued growth in the national economy, combined with consumer trends like e-commerce and healthy eating, favor a prosperous 2019 for all four of Kern’s major private industries, a regional banking executive said in remarks previewing Wednesday’s county economic summit.
Oil companies should do well amid relatively stable prices and a federal emphasis on petroleum exports, and agricultural operations may still find growth exporting to Asia’s growing middle class, Bank of America Private Bank Managing Director Charles Simonds said.
He predicted local distribution activity will benefit from online shopping habits, and aging babyboomers will drive health-care hiring and housing investment.
He put in a few caveats, like farm labor pressures and fluctuating employment levels, but the observations Simonds offered by phone Tuesday ahead of his planned presentation at the Kern County Economic Summit displayed heartier optimism than might have seemed justified even a few months ago.
The conventional wisdom late last year was that the U.S.-China trade conflict and rising interest rates would slow or halt the longest economic expansion in generations. The outlook was somewhat dimmed locally by a tepid recovery in oil prices and trade woes for fruit and nut growers.
“We think those (worries the economy would slow) were overblown and we’re going to continue to grow both here and globally,” said Simonds, who is also a market investment executive with the bank, whose parent company, Bank of America, is sponsoring his presentation at the economic summit.
Many economists expected markets to slow after Donald Trump won the 2016 presidential election. “The exact opposite happened,” he said, adding taxes and deregulation have helped inspire the business community to continue expanding employment and business activity. “In my view, those remain strong,” he said.
China looks ready to make a deal with the United States that would de-escalate trade tensions that darkened the forecast for California ag, he said.
Simonds also noted the Federal Reserve Bank, seeing little threat of inflation, recently eased off plans to raise interest rates. That, together with growing expectations the Fed will limit its sale of bonds it purchased during the recession, suggests the national economy is probably in for growth through 2019.
“We think we’re still in a relatively strong economic environment in the United States,” he said. “Our estimate for 2019 is 2 to 2 ½ percent GDP (gross domestic product) growth. We think that, globally, we’re going to see growth of 3 to 3 ½ percent.”
The housing market in places like Bakersfield had been restrained by millennials’ reputed preference for dense, cosmopolitan neighborhoods. But Simonds said there are signs that’s no longer the case, and that now it appears Bakersfield could make an attractive option for young people fleeing expensive urban markets.
Offering a sustainable but not particularly bullish outlook for oil, he said barrel prices will likely range between $50 and $60 through the end of this year. Better news is that he sees oil producers benefiting from the national drive for more crude oil and liquified natural gas exports.
Expect to see additional growth in Kern’s logistics industry, whose successes last year included a commitment by Amazon to build a distribution warehouse next to Meadows Field Airport, Simonds said.
Fueled by e-commerce, California logistics activity will increasingly come to Kern because of the county’s central location and its relatively high unemployment rate, “which acts as an incentive” for investment because it makes the local labor force more cost-competitive, he said.
Local fruit, nut and vegetable growers stand to benefit as well from national and global trends, he said. Aside from increased demand in China and India for high-nutrient foods like almonds, local growers should see a boost from the domestic trends of farm-to-table menus and heart-healthy eating.
He said health care, the fourth of Kern’s major economic sectors, should benefit from retirees’ need for maintenance-oriented health care, which may also help the housing market as babyboomers downsize to more affordable living spaces.
In short, all major local industries are in good shape overall, he said.
“The areas of focus that Kern County has developed over the last decade-plus … line up very well with our view of what’s growing and doing well in the U.S. economy overall,” he said.
The annual economic summit begins at 7 a.m. and continues until noon at the Bakersfield Marriott at the Convention Center.