ORLANDO, Fla. – Despite the onslaught of controversial media coverage and tweetstorms surrounding the Trump administration, University of Central Florida economist Sean Snaith says President Trump’s economic policy continues to lay the groundwork for stronger economic growth, increased consumer confidence and ultra-low unemployment rates.
In the quarterly U.S. Forecast from the UCF Institute for Economic Competitiveness, Snaith posits foreign trade disagreements and tax reform have both promoted economic policy uncertainty. Nonetheless, Snaith says he anticipates steady economic recovery following the Great Recession of the late 2000s.
“Economic policy uncertainty is still elevated from historical levels, but it is already much lower than during the Obama administration, and that reduction should lead to higher levels of investment, employment and Gross Domestic Product (GDP) growth going forward,” Snaith said.
Real Gross Domestic Product (GDP) growth reached 2.3 percent in 2017, but Snaith said he expects it to hit 3 percent in 2018 and then rise to 3.6 percent in 2019 before easing back to 2.8 percent in 2020 and 2.5 percent in 2021.
This projected growth likely will prompt the Federal Reserve to initiate another 25-basis point hike in June, according to the forecast. The Fed previously bumped interest rates in March 2017. The forecast cites stronger economic growth and higher inflation from Trump-era policies will lead to a faster pace of rate hikes during the next three years, with the federal funds rate hitting 4.25 percent by the end of the final quarter of 2021.
“The change in leadership at the Federal Reserve is taking a less hawkish stance on regulation and coupled with recent congressional action to roll back some of the massive Dodd-Frank law,” Snaith said, “this will free up the financial sector, to an extent, allowing it to grow faster after seven-plus years of heavy regulation.”
Calling it a near perfect environment for economic growth, Snaith predicts a noticeable increase in consumer spending habits as a result of higher take-home pay by American workers. Additional factors accelerating consumer spending are rising employment, strong growth in home equity, rising disposable incomes and increased consumer confidence, according to the forecast.
Average monthly payroll job growth slowed to 1.6 percent in 2017 and is forecasted to remain at that level in 2018 and 2019 before easing to 1.1 percent in 2021. As the current phase of economic recovery has lasted more than nine years, a rapid acceleration in overall job growth is unlikely, Snaith says, but the recent uptick in growth could be a result of tax reform.
“For an economic recovery this old, we cannot expect much stronger growth than this,” he said. “Job growth will be sufficient to keep up with labor force growth through the end of the forecast horizon. The economy is rapidly closing in on full employment and the faster wage growth that comes with it.”
The housing market, which continues to recover, is projected to slowly improve through 2021 in the face of rising mortgage rates. Snaith said he expects housing starts to rise from 1.38 million in 2018 to 1.66 million in 2021.
For the complete U.S. Report from the Institute for Economic Competitiveness, visit https://business.ucf.edu/centers-institutes/institute-economic-competitiveness/
The Institute for Economic Competitiveness strives to provide complete, accurate and timely national, state and regional forecasts and economic analyses.
Snaith is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.
About UCF College of Business
Established in 1968, the UCF College of Business offers degrees at the bachelor’s, master’s, doctoral and executive levels. All programs, as well as the Kenneth G. Dixon School of Accounting are accredited by AACSB International – the Association to Advance Collegiate Schools of Business. The college provides high-quality academic programs designed to give students a competitive advantage in the world of business now and in the future. The college promotes a unique culture of engagement, risk-taking, cross-disciplinary collaboration and data driven decision making in an effort to ensure students are well prepared to enter a dynamic marketplace. Learn more at business.ucf.edu.