BizTimes Media’s 24th annual Economic Trends event on Thursday featured insights and predictions from an economist, local business leaders and an academic professional specializing in the growth of AI. Speakers were asked to define the current economy and predict three things that could happen in 2025 under the new presidential administration.
Michael Knetter, strategic advisor at the University of Wisconsin Foundation and former economic advisor for presidents George H.W. Bush and Bill Clinton, Steve Shafer, president and chief operating officer at A.O. Smith, Jeremy Kedziora, PieperPower endowed chair of artificial intelligence at Milwaukee School of Engineering, and Mara Lord, chief strategy and growth officer at the Medical College of Wisconsin shared industry-specific insights about what the economy could look like in 2025.
Here are some key takeaways.
Knetter’s 2025 economic outlook:
Employment looks strong coming into 2025.
The unemployment rate is at 4.1% and as the labor market tightens, he expects it to drop to 3.5% in 2025.
“Nothing indicates the kind of momentum you would expect going into a recession,” Knetter said. “Prime age workers are back and as I have said in the past, it’s the older workers who really haven’t quite come back to the same degree. Even with inflation rates coming down, prices are higher than people would have expected. That may eventually force more people back into the labor market.”
Gross Domestic Product (GDP) growth will remain modest in 2025, likely within the 2.5% range, Knetter predicts.
“I think the federal government is going to have to pause interest rate cuts as all these policy initiatives take shape and assess what the likely impact could be on inflation,” he said. “Maybe there will be another cut or two of a modest amount. I think people’s expectations are going to be dashed.”
Inflation will remain around 3%, he predicts.
Shafer’s insights on manufacturing:
Continued innovation and expansion into new markets will allow manufacturing businesses to keep up with the change in the economy.
“A.O. Smith has a great history and culture,” Shafer said. “We have moved into new markets continually as we see new opportunities. When there wasn’t much more left to do with car frames, we felt like we were well positioned in the long term to drive innovation in water technology. That’s what’s led us to move into water treatment. We don’t know how regulation will play out, but we believe that technology like heat pumps, which drives an enormous amount of efficiency in how you need water, will play a role in the long term.”
Acknowledging the relevance and value of global markets could be key to business growth, he said.
“We have a very large, over $800 million business in China in the water space,” Shafer said. “We’ve recently been making significant investments in India, also.”
Long-term investment in global markets with the right kind of product can be advantageous to growing a company in the long-term, Shafer added. In China, A.O. Smith established a need in the region, built a leadership team and developed a product for the market. The company is trying to do the same in India starting with a recent acquisition.
Kedziora’s insights on AI:
Large Language Models (LLM) will plateau, he predicts.
“LLM models like ChatGPT are not going to get much better than they already are,” Kedziora said. “They’re pretty damn good right now, don’t get me wrong, but they’re not going to get much better than they already are in the next year or so. The only thing that could happen would be a groundbreaking, earth shattering change in paradigm or in how we do machine learning.”
“I think there’s two possibilities here,” he said. “Simplistically, one possibility is that the impact of AI on total factor productivity and on labor efficiency is slow or small. The other possibility is that the change is fast and large, which I think would cause some problems. I think that we’re probably heading into the first scenario for a couple reasons. First of all, AI will only impact about 5% of jobs over the next 10 years (according to a study from MIT). Second of all, after asking ChatGPT how far its capabilities extended, writers of the MIT study reported that there was no job task that was entirely replaceable by AI. My impression is that this means that we’re heading towards a slow and small change.”
AI could take charge of end-to-end workflows, Kedziora said.
“The idea is to take several AI models and expand their capability or endow them with sophisticated reasoning,” he said. “This could mean the ability to make long term plans, the ability to set intermediate-level goals, the ability to make higher level decisions, and maybe even the biggest and most dangerous part, give them access to pull levers that affect the world.”
Lord’s insights on the biohealth industry and its impacts on the state economy:
Biohealth is a catalyst for the state economy as its growth and innovation procures $37.7 billion in economic activity, which is about a $22 billion direct economic impact, according to Lord.
New initiatives that could have a big impact on this year’s economy are the developments of theranostics (radiotherapy and diagnostics), a multi-cancer early detection test, and gene therapy treatment.
“Theranostics combines radiotherapy and diagnostics into one seamless step for patients with cancer and other diseases,” Lord said. “It is currently a $2.3 billion industry and we’re expecting it to be $4.3 billion by 2028. Multi-cancer detection tests are liquid biopsy tests that can detect more than 70 types of cancers in one blood draw. Finally, there’s gene therapy. CRISPR is a gene editing technology that can correct gene errors and inactivate gene expression such as Sickle Cell Anemia. Advancements in CRISPR, while some of them are controversial, are getting safer and faster. CRISPR is a $3.3 million industry today and growing, and by 2033, it is expected to be a $24.6 billion industry.”
