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Economic Trends: Experts Offer Outlook for ’23

ECONOMY: Seven Share Perspectives on the Challenges and Prospects Ahead

The economy of San Diego County – something as big, powerful and deep as any hero described at a sold-out Comic-Con panel discussion – was the center of attention at the San Diego Business Journal’s 2023 Economic Trends event.

Click Here to watch the Full Event Video

Mark Cafferty
President and CEO
San Diego Regional Economic Development Corporation

In this particular case, a panel of experts tried to describe the shape-shifting protagonist that is San Diego’s $244.6 billion gross regional product.

While they were at it, they tried to get a peek behind the mask.

On Jan. 31, Deloitte welcomed a contingent of business leaders to its offices at Carmel Valley’s One Paseo development. There guests heard from seven experts who summed up what they saw in San Diego’s economy and gave opinions on where it is headed next.

Each panelist offered a view through a different lens, said event moderator Mark Cafferty of the San Diego Regional Economic Development Corporation. Taken as a whole, the opinions of the Economic Trends panelists were remarkably positive.

The Landscape Shifts

The economic landscape in early 2023 is markedly different from the same landscape one, two or three years ago. As the third anniversary of stay-at-home orders approached, unemployment stood at 3½%, its lowest point in 50 years. Businesses and consumers reckoned with inflation in all sorts of areas, though the pace of inflation was seen as decreasing. The Economic Trends panelists said they expected another increase in the Federal Funds Rate; it came the day after the presentation, changing the cost of lending again. As of early February, the Federal Funds Rate was 4.75%, up from 0.25% one year ago.

James E. Glassman
Managing Director
JPMorgan Chase & Co.

Panelist James E. Glassman argued that a recession might not be inevitable.

The way that pundits predict recession is half art and half science. That’s what they say, at least.

It is neither, said Glassman, managing director of JP Morgan Chase & Co. and head economist with JPMorgan Chase Commercial Banking.

“It is all about emotion,” he said. “It’s not art and it’s not science.”

There is always something to worry about, Glassman said, but he made a strong case for optimism.

“I really think something remarkable is going on. We are the luckiest generation. There’s no generation earlier than our generation that has enjoyed the kind of economic prosperity that we have.”

Detailed summaries of Glassman’s presentation and those of the other panelists are inside this issue.

Playing the Long Game

San Diego’s biotech sector is strong, asserted panelists Miguel Motta, San Diego head of Biocom, and Juli Moran, San Diego office managing partner at Deloitte.

Juli Moran
Managing Partner, San Diego Office
Deloitte

Both spoke of strong federal funding as well as a robust talent pipeline. “We graduate over 7,000 STEM professionals a year from all the universities and research institutes here in San Diego, and that’s phenomenal,” Moran said.

Motta noted a remarkable amount of collaboration in the local market, compared to competing markets. “It’s amazing,” Motta said. “We are the envy of the world.”

Motta also noted the resilience of San Diego’s biotech industry.

“Many investors in other verticals or in other industries expect returns pretty quickly,” Motta said. “If you think about technology, you’re supposed to develop a product in six to 12 months, test the market in the next 12 months, bring revenue in the second or third year. When you think about life sciences, the investors that are sophisticated and familiar with the industry, they know that developing—not only doing the research, development, going through regulatory, commercializing—takes many years.”

In times like these, he said, “it provides some perspective that the investment is a long-term investment with a long-term horizon.”

Miguel Motta
San Diego Head
Biocom California

Lines Blur Between Office, Home

Moran discussed the experiences of companies trying to find the proper balance of working at the office and working offsite. Pandemic conditions forced companies to rethink their policies and find a happy medium. That happy medium was “being together when it matters.”

“I actually personally had two projects that we were doing for two pretty large life sciences clients here at the end of 2019 because they were out of real estate space,” Moran recalled. “And what they wanted to do was take 40% as a target of all of their roles or jobs and say, this is theoretically remote or hoteling, and you don’t need to come into an office and sit in a desk every day. And in one case it was a battle, and they ended up with maybe like 18 or 20% of the roles. They compromised.

“Ironically, we had a perfect pilot that started in March of 2020 that we actually didn’t need to bring everybody to the office every day. And we didn’t lose productivity. And in many cases we probably increased productivity.

“So I think this [concept of] being together when it matters—being together when there’s an impact that we absolutely get value out of—is what people are thinking. If it’s bring the team in every Tuesday-Thursday, if it’s during a certain phase of a transformation project that the company has going on, if there are design sessions, if there’s testing, if there are strategy sessions. There are certain things that make sense for you to be in person. But there are certain times where we don’t need everybody to physically be there.”

Part of the morning’s discussion centered around talent, including getting and keeping the best employees.

Tracey Best
Partner, Benefits Practice Group Leader
C2 Risk & Insurance Services

“Talent is the number one conversation we are having” with employers, said Tracey Best, benefits practice group leader and partner with C3 Risk & Insurance Services. “… What we’re seeing is remote work is here to stay to some degree for every industry and every company,” she said, noting that the original approach to remote work was “trial by fire.”

One of Best’s central points was that a company needs to tell its story to employees and prospective employees, notably on the internet. How a workforce feels about its company is very important.

“Just know that flexibility is going to be critical to every company moving forward …,” Best said. “You’re going to need to bring your A game now more than ever, because it is about how those employees feel about your company, not what you think about your company, but connecting how what you want to portray is actually happening within your company so that you can have the best chance to retain those employees.”

Employees “do have options out there,” she said. “And they will continue, especially in San Diego, to have options.”

Caring for the Vulnerable

The medical community is still facing difficulties, said Kerry Forde, chief operating officer and interim chief nurse executive with Kaiser Permanente, who noted that emergency rooms remain busy.

Kerry Forde
Chief Operating Officer & Interim Chief Nurse Executive
Kaiser Permanente, San Diego

She spoke of people not getting timely care during the COVID-19 pandemic. Some patients saw conditions go from the “somewhat annoying” to “really quite detrimental to their health and their morbidity and mortality.”

Healthcare services and the people who offer them have been “stretched for three years, and I do mean stretched,” Forde said at another point. “It was a very unforgiving landscape in healthcare. It really pushed people to the limits. …

“We are seeing people say one of two things: ‘I’m almost ready to retire. I’m going early.’ Or ‘I’m not ready to retire, but I’m going.’”

People are just tired and they are choosing to leave, she said.

Julie Lowen, founder and CEO of Children’s Paradise Preschool and Infant Centers, spoke of the importance of childcare, which in some cases involves broader social services.

Julie Lowen
Founder & CEO
Children’s Paradise Preschool and Infant Centers

“Childcare empowers families to work,” Lowen said. “Productivity is also increased when parents are not worrying about their children.

“How many of your companies are looking for employees?” she asked. “A 2022 report by the U.S. Bureau of Labor Statistics confirms the percentage of women working today is 56.2%. The Mom Project recently did a study and determined that 43% of highly skilled women leave the workforce once they become a mother. Today’s workforce is focused on raising healthy children and thus childcare benefits are ranking amongst the top tools women use to reignite stale careers.”

Some of the speakers said the United States must address controversial issues in the years ahead.

Immigration reform may be necessary to supply the United States with working-age adults. The population aged 16-70 is shrinking and the replacement rate can’t keep up. Demographics are “the elephant in the room,” the speaker said.

A Supervisor’s Role

As the economic landscape changes, supervisors have a lot to think about.

Cafferty concluded the session by reminding supervisors that they have the power to make their employees’ days better or worse. He also encouraged his listeners to consider unseen and unmentioned forces affecting their colleagues.

“I always function with the assumption that everybody is going through more than we realize,” Cafferty said. “And now more than ever, that is true. So it’s a lot of power in your hands when you lead organizations, you lead teams and you lead operations.

“I know there are a lot of wonderful people in this room [who] continue to do what you can to make those days better for people when they walk through the door” first thing in the morning, he said.

Mark Cafferty, president and CEO of the San Diego Regional Economic Development Corporation, wove together the thoughts of six experts who offered diverse views of the San Diego economy during the annual Economic Trends event on Jan. 31 at Deloitte. Photo by Bob Hoffman Photography & Video
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