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Take-Aways From the UK Gatton 32nd Economic Outlook Conference February 3, 2021

By: Laura Day DelCotto

Sitting in the Zoom audience at the UK Gatton Conference, I listen to Kevin Kliesen with the Federal Reserve Bank of St. Louis first acknowledge the difficulties in attempting to forecast our economic future. While “uncertainty remains high,” the Fed notes that most forecasters expect strong economic conditions in 2021-22.  

At the same time, I’m reading the WSJ article by Phil Gramm “The Risks of Too Much ‘Stimulus.’” While also noting that most economists believe we are set for a “robust recovery…policy makers are acting as if running up the national debt and printing money doesn’t matter.” 

Both gentlemen note that the rise in 2020 personal income is largely due to “transfer payments,” ie, UI benefits, PPP loans, one-time family payments, etc.  The national deficit increase due to the pandemic is approximately $4.1 trillion (per covidmoneytracker.org). A “significant erosion in federal finances” as Mr. Kliesen called it.

Moving Federal Policy Forward

With vaccines and federal policy paths forward, Mr. Kliesen sees “rational exuberance” in the face of the tug of war between the forces leading to strength and forces leading to weakness. With the increased savings of consumers, the Fed believes that those increased savings will be spent in going out to eat and travel once the economy opens up.   

Mr. Kliesen sees signs of increasing inflation as being a “relatively high probability.”  He notes  there are always risks to the current positive outlook, such as problems with the vaccine or new strains, geopolitical events, and other unknowns.   

Optimistic Kentucky Economic Outlook

The second speaker Dr. Michael Clark, an associate professor of economics at UK Gatton College, focused on Kentucky’s 2021 economic outlook.  He is “cautiously optimistic” about Kentucky’s outlook, even though the “degree of uncertainty” is higher than normal. 14% of Kentucky’s GDP is export goods, higher than the national average. Dr. Clark provided much information on unemployment rates by sector, housing market, and changes in consumer spending. Retail spending is up 23%, restaurant/hotel spending is down almost 13%, and total spending is up 5.2% over the last year. Different sectors are diverging more than in the past.    

Challenges in Kentucky include disruptions in supply chains, difficulties in attracting workers, how quickly consumer confidence will return, when schools and daycares will reopen, and when herd immunity may take hold. Forecasts today have “short shelf lives” before revisions are needed to reflect new data.

Lastly,  Dr. Jenny Minier, professor of economics at UK Gatton College, spoke to the economics of racial and ethnic inequality.   Dr. Minier reported US Census data on poverty rates, median net worth,  and median household incomes by race/ethnicity.  It is no surprise that there are “striking differences” between Black and Hispanic families vs. White and Asian.   These differences in overall wealth affect so many other aspects of our lives. We see this every day at DelCotto Law, where financial problems create great stressors that impact decision-making abilities, health, relationships, and overall well-being.  

Thank you to UK and the sponsors for another great conference. 

About DelCotto Law Group

DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy and complex litigation. For more information please call (859) 231-5800, email info@dlgfirm.com or reach us on our contact page.

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