By Paul Post
The U.S. should have no trouble weathering a mild recession if one occurs, but inflation, a national labor shortage, and skyrocketing debt coupled with high interest rates are major causes for concern.
That’s what a leading financial analyst told more than 200 people gathered for a recent Adirondack Regional Chamber of Commerce event at the Queensbury Hotel.
Ken Entenmann is senior vice president, chief investment officer and chief economist for Norwich, N.Y.-based NBT Wealth Management. He holds a bachelor’s degree in applied economics and business management from Cornell University, an M.B.A. from the University of Rochester’s William E. Simon Graduate School of Business Administration, and oversees more than $9 billion in assets under management and administration in trust, custody, retirement, institutional and individual accounts.
His presentation, supported by detailed graphics, was entitled, “Should I Stay or Should I Go?: Waiting for the Imminent Recession That Has Yet to Happen.”
“Whether we have a recession or not, I don’t think is the relevant question,” Entenmann said. “Things are slowing, but because consumer and corporate balance sheets are relatively strong, I think we’ll weather a recession. I’m concerned because I think it’s fair to say Washington right now is dysfunctional, and the likelihood that they’re going to tackle some of the bigger problems like Medicaid and Social Security is small. Therefore, I think those problems are going to linger.”
Since 2007, national debt has more than tripled from $9 trillion to $33 trillion.
“Then the chickens came home to roost,” Entenman said.
While debt was growing exponentially interest rates remained low, but have since gone up 550 basis points, meaning this year’s interest payments on debt will total about $800 billion and likely reach nearly $1 trillion in the next few years, or 8 percent of the federal budget.
“Why is that important? Because it sucks the life out of an economy when all that money is going to pay off debt,” he said.
Social Security, Medicare and other mandatory programs comprise more than 60 percent of the federal budget, but neither Republicans nor Democrats want to cut such spending, leaving a small amount of non-defense discretionary spending subject to reductions. In short, revenue can’t keep up with spending, which has created a trillion-dollar budget deficit.
“I don’t have a great deal of confidence that they’re going to get together and fix this any time soon,” Entenmann said. “We have to get our arms around that, or it’s going to become a bigger and bigger problem.”
Entenmann was joined by John H. Watt, president, and chief executive officer of NBT Bancorp, which recently completed the $204 million purchase of Lakeville, Ct.-based Salisbury Bancorp, whose 13 branches are in the Hudson Valley, northwestern Connecticut, and southwestern Massachusetts.
The acquisition gives NBT more than $12 billion in assets and 153 banking offices in seven Northeast states, including one on Quaker Road in Queensbury. Ten years ago, NBT acquired Syracuse-based Alliance Bank.
“Our strategy is to grow continually,” Watt said. “We establish market share in core markets and move from there. Most of the time, NBT does that by planting a flag and driving organic growth. From time to time we meet a partner that is very similar to us culturally and has a very similar set of businesses that will contiguously advance our strategy, which in this case is down the Hudson Valley, while solidifying our brand in Connecticut.”
Expansion plans also include new branch offices in Burlington, Binghamton, and DeRuyter in rural Central New York. “We identify markets where there are opportunities; sometimes it’s where the big guys exit those markets, and we grow,” Watt said.
NBT has recorded 11 consecutive years of annual dividend increases.
Watt said the company’s growth and success is closely tied to upstate New York state’s semiconductor industry, from GlobalFoundries in Malta to Micron’s recently announced plans to invest $100 billion in new chip manufacturing facilities near Syracuse.
“Our footprint sits right on top of that corridor,” he said. “I have been driving up and down the New York State Thruway for almost 40 years and I have not seen the potential for economic transformation that is possible, as a function of the connection of that corridor and the anchor of Micron in Central New York. That’s only good for all of our economies on the eastern side of the state, including right here.”
“There is a huge ecosystem that supports those large chip manufacturers,” Watt said. “It’s about housing, warehouses for first- and second-tier suppliers, it’s about logistics, it’s about every company that runs utility lines and does construction and on and on. We’re supporting all of those communities and all of that economic development.”
Many of the highly talented executives and skilled workers needed to staff huge semiconductor plants come from other countries.
“One of the things, in my opinion, over the long history of the United States that makes this country great is we have had open immigration,” Entenmann said. “Legal immigration is really important to the growth of our economy because across Western civilization, birth rates are plummeting.”
Entenmann said current low unemployment rates are somewhat misleading because many people retired during the COVID-19 pandemic and no longer count when calculating such figures.
More young people are reentering the workforce after living off government subsidies and savings during COVID, and inflation is slowing, but a dichotomy of signals makes forecasting an economic outlook quite difficult, he said.
Many economists base their analysis on political developments. But Entenmann said the outcome of next year’s presidential election probably won’t have a major impact no matter who wins.
“History tells us that we spend an enormous amount of money and energy on elections,” he said. “But unless you get real extreme policies, it’s hard to move that proverbial battleship, which the economy is. It’s just this big behemoth that runs its own course. Certainly on a regulatory standpoint things can change for better or worse, but on the margin elections don’t have a material impact.”
Entenmann’s business proficiency is a byproduct, in part, from his years playing for Cornell University’s championship lacrosse team, which reached the NCAA Final Four in 1982. That experience taught him many valuable lessons.
“Collaboration is most important,” he said. “If you’re the star scorer, you still need defense and a goalie. And you’re going to lose whether it’s in sports or business. I think there’s more value in learning from mistakes and losses than there is from winning. You’ve got to get up and dust yourself off. If you aren’t making mistakes in business, you probably aren’t pushing the envelope.”