The outcome of the recent presidential election has significantly changed the economic outlook for the United States as it prepares for Trumponomics, says University of Central Florida economist Sean Snaith.
“What will a Trump administration mean for the U.S. economy?” asks the director for the Institute for Economic Competitiveness at the UCF College of Business in his latest U.S. forecast. “Well, the new administration is still taking shape, but President-elect Donald Trump’s plans for tax reform, regulatory rollbacks and infrastructure spending should boost economic growth while lowering the risk of recession.”
Fear of recession is at its lowest level in a year, according to the fourth-quarter Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia. Snaith warns Trump’s threats of punitive tariffs on countries engaging in unfair trade practices or currency manipulation could spark a trade war that would raise the risk of recession for the United States, the potential Achilles’ heel of his economic platform.
“Trump’s trade-policy stance creates significant uncertainty in the foreign sector. A stronger U.S. dollar in a world of weak growth and negative interest rates in many countries will boost imports and depress exports as a result,” he said.
The forecast notes the Federal Reserve Board is expected to raise interest rates 25 basis points, or 0.25 percent, in December, the first increase since December of last year, and the new administration is expected to increase the pace of increases during the next three years.
Real GDP growth is expected to slow to 1.6 percent in 2016, hit 2.8 percent in 2017 and 2018, and then rise to 3 percent in 2019 as the Federal Reserve tightens interest rates. A recession, though less likely under the new administration, could interrupt the Fed’s plans, Snaith said.
The housing market continues its recovery and is forecast to slowly improve through 2019 despite rising interest rates. Housing starts also are expected to rise from 1.15 million in 2016 to 1.58 million in 2019.
Payroll job growth has decelerated and is projected to slow to 1.8 percent in 2016, 1.5 percent in 2017 and 1.3 percent in 2018 before ticking up to 1.5 percent in 2019. The possibility for even faster job growth than currently forecast has increased post-election.
Unemployment rates are expected to decline to 3.9 percent in early 2019, and job growth should be enough to keep up with labor force growth until 2019 when unemployment stabilizes. Underemployment, which includes those working part-time despite wanting a full-time position, has been a persistent problem in this recovery. As of October, underemployment stood at 9.5 percent but is expected to continue to decline through 2019.
For the full forecast, visit: https://issuu.com/ucfbusiness/docs/ucf-us-forecast-november_2016-final.