U.S. Forecast: Economic Health Hinges on Trump's Proposed Policies

If the Trump Administration’s proposed economic policies gain traction, the U.S. can expect faster economic growth and higher inflation, says University of Central Florida economist Sean Snaith, but that’s a big “if” given the administration’s tumultuous first eight months.

“Tweeting and talking about policy is one thing,” said the director for the Institute for Economic Competitiveness at the UCF College of Business, “being able to continue the regulatory roll back and move tax reform and infrastructure spending into legislative action is the key to accelerating economic growth and extending the life span of economic recovery.”

In his third quarterly national economic forecast of 2017, Snaith said to expect the Federal Reserve to call for another 25- basis-point hike this December and that future hikes will come at a faster pace during the next three years, with the federal funds rate hitting 3.25 percent by the end of the first quarter of 2020.

Real Gross Domestic Product (GDP) growth, which slowed to 1.5 percent in 2016, is forecasted to hit 2.3 percent in 2017 and 3.4 percent in 2018 before slipping to 3.1 percent in 2019 and 3 percent in 2020.

The odds of a recession in the final quarter of the year continue to decrease, according to the most recent release of the Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia.  The 35 forecasters surveyed put a 10.46 percent chance that a decline in real GDP will occur in the fourth quarter of 2017.

Average monthly payroll employment growth has decelerated the past three years, and uncertainty and regulatory burden have been hindering payroll job growth, which slowed to 1.8 percent in 2016. The forecast shows payroll job growth slowing to 1.6 percent in 2017 before stabilizing at 1.5 percent for 2018-2020.

The unemployment rate is expected to decline to 4 percent in early 2020, and job growth will be enough to keep up with labor force growth through the end of the forecast horizon. Underemployment, which has been a persistent problem in this recovery and stands at 8.6 percent as of August, also will continue to decline through 2020.

“Continued gains in employment, more rapidly rising wages and improving household balance sheets should continue to provide a solid foundation for continued consumer spending growth,” Snaith said. “Tax cuts and spending programs proposed by the Trump administration should also boost consumer spending growth.”

The forecast states the foreign sector will continue to be a drag on U.S. growth, as a stronger dollar and rising U.S. interest rates boost imports and depress exports. As a result, Snaith said, net exports will continue to fall through 2020.

The housing market, which continues to recover, is expected to slowly improve through 2020, even with rising interest rates. Housing starts are forecasted to rise from 1.24 million in 2017 to 1.63 million in 2020.

For the full forecast, visit:  https://issuu.com/ucfbusiness/docs/ucf-us-forecast-sept2017

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.

The Institute for Economic Competitiveness strives to provide complete, accurate and timely national, state and regional forecasts and economic analyses. Through these analyses, the institute provides valuable resources to the public and private sectors for informed decision-making.

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. Learn more at business.ucf.edu