Trends and Outlook in U.S. Economy: What’s Good, What’s Not

Andy Paparozzi

Andy Paparozzi, newly named chief economist for SGIA, proclaimed that, for the immediate future, the positive market forces driving the U.S. economy will prevail. During an “SGIA Industry Reports: Critical Trends and Economic Outlook” session led by Paparozzi and SGIA research coordinator Olga Dorokhina, Paparozzi forecast that the U.S. economy will grow at a rate closer to 3 percent in the coming year, rather than the 2 percent rates it had been experiencing.
The reasons: The virtuous cycle of expanding capital investment, productivity and profitability dampens inflation, and thus, pressure on interest rates. He also believes that the Fed will be cautious in raising interest rates too quickly.
In addition, Paparozzi pointed to the fact that corporate profits have increased 6.6, percent on average, during the first half of 2018. And average hourly earnings of production and nonsupervisory employees were up 2.7 percent during the first nine months of this year, the strongest rate for the first nine months of any year since 2009.
But Paparozzi said he remains concerned about the impact of the import tariffs that are currently being implemented. “Tariffs don’t have to instigate a [full-blown] trade war to damage the economy,” he pointed out. The uncertainty they introduce causes companies to reevaluate their investment and hiring decisions.
Another concern is the ballooning federal deficit and the fact that the U.S. government is spending almost one-quarter of its incoming revenue supply to finance the debt payments.
And, while the overall unemployment rate in the U.S. is the lowest it’s been in the past 49 years, Dorokhina pointed to a recent SGIA research report that addressed employment trends in terms of wages and benefits across various industry segments, the shortage of skilled production workers is impacting all segments to some degree. Consequently, industry recruitment and retention will remain a paramount concern.