Excerpts from Virginia FREE Luncheon Speech
December 16, 2016
Jefferson Hotel, Richmond, Virginia
I am grateful for the opportunity to be with you today to speak with this group of leaders from across the Commonwealth who don’t always agree, but share something very important in common – a deep love for Virginia and the aspiration that she fulfill her full potential
Richmond is my hometown, and while I went to High School in Norfolk and now live in Northern Virginia, my love for the Commonwealth started right here in Richmond.
Macro Economic Outlook has Changed
President-Elect Trump’s election has materially changed the outlook for business, leading to Virginia’s economic prospects being much better today. To be more specific, the prospects for business growth and for associated job growth are better. And the multiplier effect that results from business and job growth – consumer-purchasing, real estate development, growth in the tax base, civic-engagement, community support – these factors will enable Virginia’s economic future to really begin to compound.
The challenging question is “are we ready” and if not, what can we all do to make sure that Virginia fully participates in this new ballgame. I am afraid that we not.
In October, our economic outlook could be summarized by:
Low Growth in the US with the real possibility of a recession;
Low, long-term interest rates for the foreseeable future;
High asset prices, driven by the cheap debt and not by companies growing; and
An outlook for investment returns that was expected to be modest at best.
This was not a unique view. Indeed, this was the future in most people’s minds.
Following President-Elect Trump’s election, this outlook changed.
The National Federation of Independent Business (the NFIB) Index of Small Business Optimism November index jumped 3.7% on either side of the election to a level just above the 42-year average – interestingly, this is only the third time since 2007 (in nearly 10 years) that it has broken into above average territory.
Why the spike? Clearly, small businesses (and candidly, medium and large businesses as well) expect better business conditions. The biggest move in any component of this index, expectations for business conditions, rose from a negative 6 rating to a plus 38 rating, a 44-point move.
The stock market’s reaction is absolutely reflecting this same sentiment. The S&P500 is up 8.5% since November 8th, with the regional bank stock index up 26%, industrials up over 10%, and metals and mining stocks up 22%.
Unfortunately, earnings are not “suddenly much improved”. Economic data just this week was disappointing on both the industrial and retail fronts.
These moves represent the full swing of confidence that the business environment will be more favorable and that, as a result, business leaders will have the confidence to lean in, take expansion risks, launch new products. It is the anticipation of the full drive of free enterprise.
So what does it mean for our country and for Virginia? I think it means that economic growth prospects are better. As opposed to being in the 7th inning of a 9-inning economic expansion, with the specter of a recession darkening the outlook, we instead are heading into extra innings. And just maybe, we may have an entirely new ball game in front of us.
What Does this Optimism Mean for Virginia?
Is Virginia ready for this “whole new ball game”? I think the answer in my view is unfortunately no.
In the most recent Forbes “Best States for Business” ranking, we were ranked an impressive #6, up from last year, but down from being #1 in 2013.
While ranking strongly in Labor Supply, Regulatory Environment and Quality of Life, we are 29th in Business Costs and 33rd in Economic Climate. Let me repeat that, our cost of doing business ranks 29th and our economic outlook ranks 33rd. That means Virginia’s businesses find it harder to compete and harder to grow, and new businesses certainly will consider choosing to not come to Virginia.
This new ball game will be competitive — which businesses will grow faster, which ones will choose Virginia, where will the best, high paying jobs go. We need to compete.
Are we going to compete with the intensity and sense of urgency that the opportunity in front of us deserves and demands? We need to play this new ball game with a true sense of urgency and purpose.
Encouragement for Bold Thinking
I would encourage this group, both business and government leaders, to bring a bold, value-creating approach to Virginia’s economic future.
Think ambitiously. Do not let ourselves watch others compete harder and win in this “new ball game”. We should be able to grow faster than the national average, attract more high-paying jobs, start more new businesses. We should be #1 again in the Forbes ranking, you get the idea.
We need to ask everyday, “what can I do to remove the impediments that block the path to achieving ambitious goals?” Let’s get at the high cost of doing business here, help facilitate the formation and available of capital, encourage regions to work together, be ever vigilant on unnecessary regulations.
And, let’s set real goals with milestones, and get everyone lined-up behind achieving them. We are heading into a state-wide election year, and yet we can’t afford to take the year off or be slow out of the gate in 2018. Virginia’s Future is too important.
Thank you all for loving Virginia and thank you for inviting me to speak with you today. Merry Christmas and Happy Holidays.