Economy To Cool, But Keep Expanding: Nationwide Economist

By John Hilton

The economy is going to run slow over the next few years, but Nationwide's top economist stopped short of forecasting a recession today.

Speaking on a National Association for Fixed Annuities webinar, Ben Ayers unveiled charts calling for 2.4 percent growth this year, followed by 1.9 percent in 2020 and about 1.5 percent in 2021.

That would fall short of the 3 percent annual growth goal set by the Trump administration. But Ayers noted that the current economic expansion is set to become the longest in U.S. history.

"We feel we still have a little bit of a ways to go. But when you go ahead to 2020 or 2021, things get a little murkier," he said. "The odds of that next recession get a little higher each year."

When it comes to interest rates, Ayers forecast "two or three" rate hikes this year by the Federal Reserve. The Federal Funds Rate should hit 3 percent by the end of this year and 3.5 percent in 2020.

It is going to continue to be a worker's market when it comes to jobs, Ayers explained. In fact, there are more jobs than workers to fill them, a rarity even in the best of economic times. The unemployment rate should dip into the low 3 percent range this year, he added.

"The strength of the labor market is really helping to sustain the expansion," Ayers said. "We actually saw an acceleration in job growth last year."

The downside for businesses is the inability to find qualified workers in many fields. The market reaction will surely mean wage growth, Ayers predicted, which will help sustain the expansion for even longer.

CBO Forecasts

Meanwhile, the Congressional Budget Office released its own forecast this week calling for 2.3 percent growth in 2019, 1.7 percent next year, and 1.6 percent in 2021. Growth was an estimated 3.1 percent last year.

The spike in economic growth fueled by Republican tax cuts in 2018 will fade in the coming years, the CBO said. Meanwhile, other troubling factors are likely to conspire to keep a lid of the economy's potential. Among them, tariffs imposed by the Trump administration and the mounting federal deficit, the CBO said.

The budget monitors forecast an $897 billion budget deficit over the 12 months through September, up from $779 billion last year. The CBO said the budget deficit will top $1 trillion in fiscal 2022, two years later than its April projection.

“That reduction in projected deficits results primarily from legislative changes -- most notably a decrease in emergency spending,” the CBO said.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.