Ford Makes Financial Forecast

WILDWOOD – Jay M. Ford’s annual financial forecast presented sobering statistics that chronicled challenges to businesses at the Jan. 28 Greater Wildwood Chamber of Commerce meeting.
Ford is president and chief executive officer of Crest Savings Bank.
While a glimmer of hope started to shine as the nation emerges from recession, and the Federal Reserve is reducing monthly U.S. Treasury purchases to $65 billion, Ford, reflecting back over the stagnant economy from 2008-09, and the impact it had on employment, said, “It has taken us the better part of the next four years to just about get even.”
“The reality is, the job market, in my opinion, will never look like it did in the past,” Ford said. In part, that is due to a sluggish “participation rate.” While some job seekers are eager to work, some hold two part-time jobs instead of one full-time position; others are less inclined to seek work.
Given the 2013 population of 247 million, there were 155 million in the workforce, a participation rate of 62.8 percent, with number of unemployed at 10.4 million, or about 6.7 percent. That compares with 2006 when the population was 229 million, with 151 million in the labor force, a 66.2 percent rate, and unemployment rate of 4.6 percent.
Ford predicted the unemployment rate would hit 6.5 percent by year end. That, he noted would be a “byproduct of the participation rate, people removing themselves from the job market then seeking employment.”
The nation’s debt, which will affect future generations, rose to $17.3 trillion in 2013, compared with $3 trillion in 1990 and $6 trillion in 2000, according to slides Ford showed through his discussion.
Of interest rates, Ford said “We will constantly see some gyration of 30-year mortgage rates.” Currently that rate is 4.4 percent. In 2009 the rate was 4.9 percent, in 2006, 6.25 percent.
“I do not see 5 percent in 2014,” Ford said. “I don’t see when we talk about what is going on in the housing market where the Fed would permit the rate to 5 percent.”
A member questioned Ford whether, since the real estate crash, if banks were more interested in commercial loans than residential mortgages?
Ford noted Cape Bank’s decision to exit the residential mortgage market. “Cape Bank has been with us since the early 1900s as providers of residential financing for many years. They decided, because of regulation and financial pressure, they did not feel they could properly provide appropriate priced financing.”
He said regulations to qualify a mortgage “placed the onus on the bank, when it originated (a mortgage), to prove at some time in the future that the borrower could afford that mortgage at time of origination.”
“Sturdy (Savings Bank), Crest (Savings Bank), 1st Bank of Sea Isle City and Ocean City Home Bank all recommitted themselves to the community residential market,” Ford said.
Regarding the stock market, Ford said, “Another 26 percent increase in the Dow is unrealistic.” Still, he expects the Dow “will break 17,000 in 2014.”
Tourism, a key component of Cape May County’s economy, was a bit disappointing, said Ford. He cited 10 months’ tourism tax receipts, as calculated by the Greater Wildwoods Tourism Improvement and Development Authority at $3.79 million, compared with just over $4 million in 2012.
Casino revenue, which has an effect on the county’s economy, was down significantly at $2.8 billion in 2013, employing 32,400, compared with 2012 when revenues were $3 million and 34,700 were employed. Both figures were relative shadows of the 2006 figures when $5.2 billion poured into coffers and 45,000 people were employed in Atlantic City’s gaming halls.
Ford cited the impact on-line gaming could have on those figures, as well as the advent of new casinos in Philadelphia, New York and Delaware.
Use of technology received attention by Ford. One slide showed listed use of mobile phones by those over age 16. Of those, 80 percent use their devices in front of the television.
Another statistic he cited was “mobile adoption.” It depicted graphs comparing length of time devices were accepted by the public to attain 50 million users. Radio took 38 years, television, 13 years, Internet, four years, Facebook 3.5 years and Draw Something app 50 days.
Ford then cited the impact that technology had on bricks-and-mortar business. Showing a slide of Jeffrey Bezos, Amazon founder, he said, “The American dream is still alive.” He noted Amazon’s founding in 1994 chiefly to sell books.
“Who here did not get a box from Amazon over the holidays?” he asked, scanning the room. Very few hands rose. Today, Amazon employs 33,700 worldwide. Its 1997 initial stock offering, at $1.50 per share is now worth about $400. Those who invested $3,750 in Amazon in 1997 would have an investment today work $1 million, Ford said. The company listed $34 billion in sales in 2013, $1,000 in sales per second. On “Cyber Monday” alone, Amazon handled 13 million units ordered, Ford said.
He also showed a slide depicting the impact baby boomers will have in the next several decades. Since January 2012, 10,000 a day turn 66, to date 7.5 million attained that age. By January 2031, 69.5 million will have attained 66.
Since 2011, Social Security has been paying out more than it has collected. By 2026, Medicare trust fund will be exhausted. By 2033, Social Security Trust Fund will also be exhausted.