The U.S. economy is “in a good place” and expected to stay there through 2019.
That was the assessment of Bill Witte, senior economist with FTR, who gave an economic update to subscribers during a State of Freight webinar Oct. 11. He cited Q2 GDP growth of 4.2%, which has been accelerating since mid-2016.
“Until about a year ago, that growth was really just bringing the economy back to its post-recession new normal growth of around 2%. Since then, it continued to accelerate and is now significantly above that. We have broken out, at least for a while, from the new normal,” Witte explained.
Other encouraging signs are stronger investment growth, government spending, and a rise in exports. The only sector that’s not thriving is housing, Witte said. But he also warned the strong export numbers may have been distorted by talk of tariffs and a rush to ship goods in the second quarter before anticipated tariffs took effect in the third quarter.
The labor market is also strong, with unemployment at 3.7%, the lowest rate since the 1960s. And more good news: the economy is well balanced. “I think we’re going to continue to be in a pretty good place for most of next year, at least,” Witte said. “And not a terribly bad place after that.”
But that assumes nothing major goes wrong. Witte acknowledged there are downside risks, including: bad fiscal policy; international problems in China or Europe; political deadlock in the U.S.; and a significant correction to the financial markets. If a couple of those risks come to fruition, Witte said “We might see a recession.” Witte doesn’t think a recession will occur until 2020 or 2021, and when it does happen, he said it will likely be a “garden variety recession” like that seen in 2000-2001.
“I don’t see the likelihood of something like the 2007-2008 recession,” he said. “We went into that one with an economy that was significantly out of balance, and the housing sector was inflated. There’s nothing like that this time. The economy is pretty well balanced.” All in all, Witte remains upbeat about the economy. “My top line story is I think the economy is going to be pretty good at least through 2019, and potentially, if things don’t go wrong, beyond that,” he concluded.