The U.S. economy is well positioned for long-term growth, and our latest forecast indicates expansion at a moderate pace. Jobs continue to be added at a notable rate, and other signals are generally positive.
For example, the housing market has finally worked through the major problems of the Great Recession, a positive signal for expansion. At the same time, trade issues remain unresolved and labor shortages are impediments to optimal performance.
A key issue in U.S. economic performance is effectively dealing with trade issues.
Agreements with Mexico and Canada as well as China and other nations have the potential to markedly improve prospects.
Tariffs in the U.S. and China continue to hurt consumers and companies, although we seem to have a potential respite in the works.
The trade war has had rippling effects literally everywhere, and with the two largest economies involved, the worldwide supply chain has been disrupted. The longer the trade war persists, the more long-term distortions will occur. In addition, Brexit-related uncertainty has caused slowing in the UK, and other key European economies (such as Germany and Spain) are also experiencing sluggish growth, exacerbating the situation.
A lack of worker availability is constraining growth in some sectors and geographic areas, as U.S. unemployment rates trend well below the level widely considered to be “full employment.”
Over time, demographic trends and the retirement of the Baby Boom generation in large numbers will increase labor force challenges. Technological advances which enhance productivity, immigration policy reform, and worker retraining programs will be needed to resolve this issue.
The Perryman Group’s latest long-term forecast anticipates moderate growth, with business cycles in intervening years being likely.
During the 2018 to 2045 period, real gross product is projected to expand from an estimated $18.6 trillion to $35.7 trillion, a 2.45% annual growth rate. Employment is forecast to reach 213.2 million by 2045, up from 149.0 million in 2018.
This 1.34% annual rate of growth in employment would result in the addition of some 64.2 million jobs. This pace is well above the internal increase in working-age population, thus requiring immigration. Inflation is expected to remain fairly low. While interest rates are projected to rise from current levels, they should remain below patterns observed over a span of several decades. Income and industrial production are also forecast to see significant gains.
Despite current uncertainty over global trade and looming workforce challenges, the United States is expected to see long-term growth.
By the end of the forecast horizon, there are likely to be sweeping, technology-enabled changes in the way business is conducted, but indications are that the U.S. is well-positioned to adapt and innovate to remain competitive.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.