David Boothe, president and founder of B.I.G Investment Services, went over the signs he’s reading for a possible recession at the Central Delaware Economic Forecast Breakfast 2023. | DBT PHOTO BY KATIE TABELING
DOVER — Kent County has game-changing projects on the horizon for the year and beyond, but a Dover-based financial advisor cautioned central Delaware businesses that there’s still a chance a recession is on the way.
According to David Boothe, president and founder of B.I.G Investment Services, every single sign of a recession is “flashing pretty bright red,” though it’s unclear at this rate when it will happen. Signs that Boothe is watching closely include the yield curves for interest rates, the S&P 500 stock index, consumer debt, and of course, inflation and unemployment figures.
Boothe served as the big-picture analyst for the Central Delaware Chamber of Commerce’s annual Economic Forecast Breakfast on Tuesday morning.
“I would expect a recession to be mild, at worst, if it does come about,” Boothe told business and local officials at the Maple Dale Country Club. “But a lot of indicators are pointing to a recession, so keep that in mind.”
Boothe examined the difference between long-term and short-term interest rates, noting that the trend lines have inverted, as well as yet another decrease in the Conference Board Leading Economic Index in December — showing a 4.2 percentage point drop between June and December — as historic signs of a recession. He said that historically, if the leading economic index dropped more than 3%, a recession has followed.
However, consumer spending continues to be rock solid, supporting the gross domestic product growth despite the headwinds, Boothe noted. With the annual inflation rate ending at 6.5% for 2022 and unemployment average in December at 3.5%, he also noted these are historic signs a downturn is coming.
“We’ve never had inflation get over 5% and unemployment under 4% and not have a recession. These things have never happened before, and it could be different this time,” he said. “But here’s the thing: lumber prices collapsed last year, and retail and industrial production is collapsing right now. Employment itself is a lagging factor. If we do have a recession, people will probably look back and say it started here.”
Considering the stock market, Boothe found the market has been “firming up on the surface,” and there is a chance the S&P 500, his preferred index for stocks, could reach over 4100. But if that trend reverses and heads south of 3900, Boothe said to take it as a warning that the stock market could get lower than that.
“You have to be careful, because there’s a lot of agreement that we’ll have to have a recession. But the market is always smarter than you. Maybe there will be a curveball. Maybe the recession will come later like in 2024,” he said. “We just don’t know.”
In the case a recession does arrive, Boothe generally said that lower interest rates will arrive to soften the blow, but around 5% rather than the 2.5% in the months immediately following the start of the COVID-19 pandemic. He also advised to consider small caps stocks, as they are much better priced and historically can hold leads on the market for about a decade.
Saving and having cash on hand would also be an ideal, just in case the economy does head for a slowdown.
Other speakers at the economic forecast included Brenda Wise, the director of policy and communications of the state’s Office of Management and Budget, who provided an overview of the governor’s $5.4 billion budget proposal. Highlights for Kent County officials included education funding, $31.5 million in affordable housing initiatives, as well as millions for economic development funds.
Kent Economic Partnership Executive Director Linda Parkowski stressed the importance of Gov. John Carney continuing to fund the Site Readiness Fund and the Transportation Infrastructure Investment Fund, as it’s been a major boon for several sites in central Delaware over the last year.
Looking ahead, Parkowski said that her office is working on at least 27 prospects, 14 of those in manufacturing. Combined, those prospects have the ability to bring in 956 jobs and bring a $576 million investment to the county. Key sites that she predicted will play a role in the year ahead include Duck Creek Business Campus in Smyrna, Garrison Oak Business and Technology Center in Dover, and the future Harrington Industrial Park, which is still in the master planning process.
“That park could be the only real one we have in central Delaware, and it’s probably two years in the making. But I bet it’s going to be amazing,” she said. “We’re already getting calls on it. It’s not ready and we already have companies that want it.”
But one of the major challenges in Kent County’s economic success is training and retaining a workforce. The county’s population is roughly 186,215 people, per 2022 census data, but the major growth in population is those who are 65 or older.
“Our education system does do a great job, but our training right now is done in silos. If you are a business, you have to look at the unemployment office, various colleges and programs. It’s almost like you need to hire a person just to navigate the system to get the training needed,” Parkowski said. “We’re a small state, and we can fix this easily. We also need short-term certificate programs as well, just so we don’t keep extending the wait on things customers need repaired.”
