On the economy, it's feelings that matter, Youngkin says

RICHMOND — They talked about economists' usual concern with hard data on interest rates, employment and tax that measure the state of the state economy, but Gov. Glenn Youngkin told the experts on his Joint Advisory Board of Economists Tuesday that he likes to look at how people feel.

For Youngkin, sentiment about the economy is one of the big three things, along with the generally clearer signals that come from employment data and how the Federal Reserve System is steering interest rates, that say where an economy is going, he told the board at its regular October meeting.

Youngkin said that while Virginia's economy is strong, there's lots of uncertainty ahead.

The board's job is to review the economic assumptions and models that Virginia budget-writers use to propose state spending, construction and taxing plans. In December, Youngkin will propose changes to the existing two-year budget.

It's never easy. Last year, the data all pointed to something that didn't happen, a recession that was supposed to start in the spring and last through much of this year. That forecast underpinned the tax collection forecasts that led to a budget proposal from Youngkin, rewrites by the General Assembly and a compromise at this summer's special session that took a cautious stance on increasing spending and cutting taxes while beefing up the state's financial reserves.

And, as Youngkin told the board, there's a big question overhanging any forecast this year: results of the November election.

Thinking of the views of Vice President Kamala Harris and former president Donald Trump on the key question of what to do about the sunset on federal tax cuts enacted during Trump's presidency, "it's very difficult to find an average," he said.

"This is a zero-one, one-zero situation," Youngkin said, using a bit of computer engineering jargon to make his point.

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The big question, he said, is how people feel.

"In my 30-year business career I have been convinced the economy is more impacted by sentiment than by anything else," he said.

The way business owners feel about the state of the economy and its direction determines whether they go ahead with plans to build new plants or open new stores or launch new products or hire more people, he said.

The way consumers feel is what leads them to take the plunge and buy a new home — or hold off, he said.

The consumer confidence index of the Conference Board, a national business group, fell to near its lowest point in two years, with the "Present Situation Index," a measure of consumers' views on current business and labor market conditions dropping by 10.3 points to 124.3, and the "Expectations Index," which measures consumers' views on the short-term outlook for income business, and labor market conditions dropping by 4.6 points to 81.7, a point barely above the level that often signals a looming recession.

Headwinds

"We are not in recession territory, but we are getting close," Youngkin said.

The job market, meanwhile, is sending mixed signals, he said.

"The job market is strong across the commonwealth notwithstanding lots of headwinds," Youngkin said.

While hiring and job creation have accelerated in the past two years, the last two monthly employment reports showed small declines, he said. That's something to watch closely, in case it is the start of a trend.

Interest rates have come down, after the Federal Reserve's latest cut but whether they will fall more is still an open question, he said.

At the end of the three-hour, closed-door meeting, the consensus was pretty much as Youngkin outlined, said A. Fletcher Mangum, founder of the Glen Allen-based economic analysts firm Mangum Economics.

"The economy is strong, but there's a lot of uncertainty," he said. "There's a lot of stuff hanging over us."