The U.S. economy faces a difficult road ahead over the next five years as homeowners and governments unwind debt built up during the housing boom, Berkshire Hathaway Inc.'s David Sokol said last week.
“All of that just feeds into a slow-growth environment,” said Mr. Sokol, who heads Berkshire's energy and luxury-flight divisions. “If we could average 2% for the next five years, we'd be pretty happy.”
The U.S. economy grew at a slower-than-forecast 2.4% annual rate between April and June after expanding at a 3.7% pace in the previous three months, according to the Commerce Department. Warren E. Buffett, Berkshire's chief executive, said in June that he expected a “terrible problem” for debt backed by state and local governments in coming years.
“It's going to be a painful period,” said Mr. Sokol, whose energy division owns a real estate brokerage firm. “If the U.S. grew a consistent 2% from this year forward, Europe half a percent and Asia 6.5% to 7%, my guess is that we'll all feel pretty good.”
Companies that fired workers at the peak of the financial crisis have been forced to improve productivity, reducing their need for new employees, Mr. Sokol said. The U.S. unemployment rate has remained above 9% for more than a year, compared with 5% at the end of 2007.
The credit crisis in 2008 was “such a dramatic jolt to businesses that it did something very positive,” Mr. Sokol said. “It made companies that were pretty efficient get a lot more efficient; it made every business I'm involved with really take a hard look at the business model.”
Mr. Sokol cut jobs last year at NetJets Inc., the luxury-flights unit, as Berkshire reduced employment by more than 20,000. Berkshire is adding staff at some industrial operations this year, he said.
Sales at U.S. retailers rose less than forecast last month, indicating that a lack of jobs is prompting Americans to hold back on spending. Excluding autos, sales of building materials, furniture, clothing, appliances and general merchandise all declined.
“People have been shocked into the notion that maybe some monthly savings is a good thing,” Mr. Sokol said. “We'll end up with a lot of people that are struggling until their home values come back a little bit.”
Mr. Sokol joined Berkshire in 2000 when he sold MidAmerican Energy Holdings Co. to Mr. Buffett for more than $8 billion. Mr. Sokol remained at the helm of the power producer under Berkshire and ex-panded the business through acquisitions, including the purchase of PacifiCorp in 2006.
Mr. Buffett has turned to Mr. Sokol to restore profits at NetJets, lobby Congress for protection against new derivatives rules and guide an investment in Chinese automaker BYD Co. Ltd. Mr. Sokol is considered by some, including Mr. Buffett's biographer, Andrew Kilpatrick, as the front-runner to take over as Berkshire chief executive when the billionaire's tenure ends.
Mr. Sokol considers his main job at Berkshire to do “whatever Warren wants me to do,” he said in an interview last week on Bloomberg Television.
