WASHINGTON — The fiscal cliff/debt ceiling debacle, sequestration, and government shutdown were three of the biggest economic stories of 2013, but a pair of observers says they didn't have much impact on credit unions as a whole.
Bill Hampel, chief economist at CUNA, noted that those three factors - along with increased tax revenues for higher earners and a 2% payroll tax - contributed to a 1% to 1.5% slowdown in economic growth.
"Since the economy has only been growing at a little over 2%, that means we otherwise might have grown at 3% had it not been for those actions.... Absent these headwinds [the economy] would've looked pretty good this year - and instead it just looked kind of okay."
NAFCU CEO Dan Berger echoed that sentiment.
"I believe in momentum, and anytime you have anything that creates a real or perceived stall is never really helpful," he said. "To what degree that was harmful, I don't know, but anytime you interrupt an economic recovery, any kind of pause - which all those issues caused - creates a slowing down."
Military Markets Take A Hit
Credit unions across the nation rolled out relief programs to help members impacted by these events, but many CUs that spoke with Credit Union Journal this year reported limited response to those offers from the membership.
Hampel observed that while those events had some effects in select markets - particularly markets with high concentrations of military and federal workers - they did not, taken together, have a significant impact on the credit union system.
Berger noted that "from a macro level, in different pockets you saw some credit unions where their member assistance programs were utilized - Service Credit Union in New Hampshire, they were really busy." Similarly, a trio of CUs in Washington State combined their efforts to host programs on how members could prepare for sequestration cuts.
Looking Back, Looking Ahead
Recently released NCUA data for the third quarter of 2013 showed that CUs continue to see a pick-up in consumer loan demand, but Hampel noted that things might have been even better had it not been for government spending fiascos.
"Consumer confidence has been pretty weak so far this year given the point in the business cycle that we're at," he said. "It should be getting stronger. The good news we've seen on credit unions would've been even better if we hadn't had the sequester and these debates on what's happening to government policy and the uncertainty that's creating."
Even as lawmakers approved a budget deal in early December, NAFCU's Berger noted that there are still plenty of issues to be dealt with that could impact the economy in the year ahead.
"I don't think we'll ever be out of the woods," he said, adding that he believes CUs will be "relatively flat going into early parts of 2014, but later on it starts to get a little stronger." But that's only if other crises don't appear, including interest rates, unemployment and more.
For his part, CUNA's Hampel noted that 2014 may see things improve even faster than CUs have expected, meaning consumer loan demand could pick up even more. The risk, however, is if long-term interest rates rise dramatically. While that might help some CUs, "those with a lot of long-term assets might not find that very comfortable," he said.
"For so long, we've known that rates were really, really low, and the only place they can go is up," he said. "The question is when? Some credit unions may not be as prepared as NCUA thinks they should be, but I think the vast, vast majority are prepared so that even a dramatic increase in interest rates - although it won't be very pleasant - in most cases won't hurt them too much."
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