Grand Rapids Area Chamber of Commerce members heard an optimistic outlook for the nation’s economy in 2019.
The Grand Rapids Wells Fargo branch sponsored Wells Fargo Vice President and economist Charlie Dougherty to speak at the chamber’s January monthly luncheon on Monday, Jan. 14.
“Our economy is doing very well,” began Dougherty who lives in Charlotte, N.C. “Our GDP (gross domestic product) has upshifted recently and should end the year at nearly a 3 percent pace. Growth should remain solid in 2019.”
According to Dougherty, the nation saw strong consumer spending in 2018 as well as strong government and business spending especially in technology.
“I think that will continue in 2019,” he added.
Areas of concern include trade with China, but Dougherty believes that is a “pretty inconsequential” concern because “I think we’re getting close to a trade deal with China.”
“At the end of the day, consumer spending is what drives the economy,” he explained.
The manufacturing industry has seen “sky-high” growth, he said, while the housing market still has not fully recovered from the 2008 recession. Still, he views gains in the latter as “slow and steady.”
“I think things are really solid and evidence of that is that we’re seeing interest rates going up since 2015,” said Dougherty. “That shows the feds see things going up.”
Dougherty also believes the labor markets are “extremely solid right now with hiring not showing any signs of weakening.”
With the national average unemployment rate continuing to fall and at 3.9 percent as of this month, Dougherty said that makes him “very, very optimistic.” He explained that wage growth has kept up with income gains, which is also a positive sign for continued growth.
“Consumers are continuing to spend,” he said.
What could derail consumer spending would be inflation, Dougherty explained, but he said the Consumer Price Index has been steady.
“I don’t perceive inflation to get up anywhere where it would be alarming anytime soon,” he explained.
Increased defense spending is also keeping the U.S. economy solid as is tax reform which “will be more apparent in 2019,” according to Dougherty. Changes in industry and business tax codes has also been “key,” as Dougherty pointed out that the corporate tax went down to 21 percent from 35 percent. Although this will add to the nation’s deficit, Dougherty thinks it won’t be noticeable immediately.
As for prices, Dougherty reports that prices have risen the fastest in rapidly growing markets like technology. Home price growth is at about 6 percent with investment levels low - mostly in the western part of the U.S.
“The housing market is at a key turning point where momentum will shift more toward single-family construction,” believes Dougherty.
While several years ago construction focused on luxury apartment buildings in metropolitan areas for the Millennial generation (which Dougherty says is nearly as big as the Baby Boomer generation), Millennials are now having kids and seeking single-family homes.
“The U.S. homeownership rate is climbing back up,” he explained.
On a state level, Dougherty said Minnesota has seen strong economic growth as well. Although the state has not seen as much growth as other states in employment, Minnesota is up 1.1 percent. According to Dougherty, Minnesota is ranked 25th for fastest employment growth but one of the lowest in unemployment rates at 2 percent.
“Mostly every single industry in Minnesota has been hiring,” he said.
“One of the most positive things we’ve seen throughout the state is population growth,” he continued. “People are moving here. The No. 1 reason people move is for a job, so population growth from other areas is a good thing.”
Considering Itasca County’s unemployment rate at more than 5 percent, Dougherty believes the area will start to see employment and job growth with more investments.
“We’re starting to see a rising tide effect,” explained Dougherty, who believes “more rural areas will see the job growth this year.”