In the first of a two-part series, David Wiener reports on the ELFA Convention. With inflation in check and unemployment at historic lows, keynote speaker Chief Economist/Co-Founder of Moody’s Analytics, Dr. Mark Zandi said the U.S. economy is poised for economic gain; however, several potential issues threaten to derail the this progress.
Economics has two primary faces: The first is micro economics — the study of supply and demand with respect to the products and services we offer, it tends to be front and center in our day to day world. In our “day jobs” we don’t generally have time to seriously examine the second, but it can be important if we want to be poised to anticipate and prepare for any pending climate change in the overall economy. The Chief Economist/Co-Founder of Moody’s Analytics, Dr. Mark Zandi, offered a thoughtful look at our U.S. economic climate at the ELFA Convention.
As of August 2018, the U.S. economy hit a milestone when the total number of job openings (7 million) exceeded the total number of those unemployed (6 million). For most of the economic recovery this past decade, real wages have contracted 0.5% given that wage growth has generally been around 1.5% while inflation has hovered around 2%. This year appears to be different. While inflation has been held in check at 2% in 2018, it is projected that wages will increase by 3%, resulting in a net 1% real economic gain. It is predicted that by mid-2019, the unemployment rate will fall to 3% for the first time in close to 70 years. This event is unique. Since U.S. labor statistics have been tracked there have been only two periods when American unemployment has been this low — both when over 10% of the work force was serving in one of the branches of our armed services: World War II and the Korean War. So, 2019 will be the first time ever in U.S. history when 97% of the American workforce is employed without a military draft siphoning from the labor market.
As with most economists, it is important to wait for the semi-colon followed by the word “however”. The already understood good news presented by Dr. Zandi was welcomed and affirmed; however, he proceeded to unpack, “What Could Go Wrong?” which shined a spotlight on several potential economic derailing themes. The following is a summary of three which he discussed.
While 2019 looks to be okay, Dr. Zandi warned to watch out in 2020.
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