Will the economy bust out in 2018?
Experts see positive signs for growth ahead
The U. S. economy in 2018 may finally unload some of the baggage that has slowed it down since the Great Recession ended in 2009.
Already, economists say, the recovery is beginning to expand to more industries and sweep up more of the Americans left on the sidelines over the past 81⁄ years. Those 2 trends will likely gather force this year, analysts say, while tepid wage gains accelerate.
The Republican tax cut plan, recently signed into law by President Trump, could provide a further modest boost, economists say.
“I think growth is shifting into a higher gear,” said Mark Vitner, senior economist at Wells Fargo. “It looks like we’re finally putting the financial crisis behind us.”
The economy isn’t expected to register the breakout 3% growth Trump has promised, at least in the near term. But it is forecast to grow 2.6% in 2018 as consumer spending keeps chugging and business investment ratchets higher, according to the average estimate of 52 economists surveyed by Wolters Kluwer Blue Chip Economic Indicators in early December. Thatwould soundly beat 2017’ s projected 2.3% pace and the modest 2.1% average during the recovery to notch the second- best annual showing in that period behind 2015’ s 2.9% gain.
What’s more, the headline growth figure doesn’t tell the whole story. The nation’s manufacturing recovery largely has been driven by the oil production rebound, technology advances and pent- up consumer demand for vehicles, Vitner said.
Recently, he said, the pickup began spreading to other sectors as both the U. S. and global economies gained strength, including construction equipment, factory machinery and agricultural accessories.
That, Vitner said, will help provide jobs or more hours to underemployed factory workers in the Midwest and Deep South. “My general sense is we’re going to see economic growth broadening,” he said.
Industrial production is expected to increase 2.5% in 2018, up from a 1.8% rise in 2017, according to the Wolters Kluwer survey. A bump in housing starts and sales will add still more kindling to the mix, Vitner said.
And a 4.1% unemployment rate that’s projected to edge down further willmake it even tougher for employers to find workers, forcing them to consider more seriously Americans marginalized by a lack of skills or opioid addiction, said Diane Swonk, head of DS Economics. That group includes prime- age men hit hard when manufacturing and construction each lost about 2 million jobs in the recession.
Swonk said some companies are waiving drug tests for job applicants and providing treatment programs to addicted workers to reduce employee turnover. Others are bringing on workers who lack all the skills they’re seeking and training them to fill in the gaps.
Overall, employers’ struggles to find workers will continue to crimp hiring, experts say. Both Vitner and Swonk expect average monthly job growth to fall to about 160,000 in 2018 from 174,000 in 2017. Yet that’s well more than the 100,000 or so needed to continue lowering the unemployment rate.
And the tightening labor market will likely force businesses to increase pay more substantially to attract and keep workers.
Average annual wage growth of about 2.5% should climb past 3% by the end of the year, the two economists say.