Despite a disastrous December stock market, that some said augured a recession, the economy isn’t going into a tailspin this year although growth will slow.
That’s what two University of Chicago Booth School of Business professors predicted on Thursday night at a forum in Manhattan entitled “Trade Wars, Deficits and Inflation: Rhetoric or Reality?”
The meeting reviewed the prospects for the economy this year as well as long term labor trends.
“It’s hard to believe that the economy is going to go off of a cliff,” said Professor Randall S. Kroszner, who is also a former Federal Reserve Board governor.
“The fundamentals are good. Consumption is strong, investment is up; it is perfectly reasonable to believe the economy will remain strong, according to Kroszner.
Kroszner’s colleague, professor Erik Hurst, agreed, but added that the economy wouldn’t be able to achieve a three percent annual growth rate this year. Still, he noted that “we are about five months away from the longest expansion in U.S. history.”
But both professors agreed that uncertainties could potentially cause problems for the economy and the market. They also said that some have missed this historic expansion.
Uncertainties that could end the expansion include the U.S. government shutdown, trillion-dollar deficits and the potential trade war with China. And some workers, they added, are still having problems even though there is low unemployment and some wage improvement.
Hurst noted that the low unemployment rate is a small part of the total labor market. Although wage rates have slightly improved, Hurst said, “there is a long-term challenge in the market.” He said the answer to the problem wouldn’t come from erecting tariff walls.
Hurst said that China over the past decade has taken away some manufacturing jobs, most in middle America – but the changing nature of work is a bigger issue in the loss of these jobs.