2019 Will ‘Be A Good Year,’ Economist Says

Jan. 10--A government shutdown. A volatile stock market. A trade war with China. Rising interest rates and slowing economic growth.

You might think this will all chill the economy in 2019.

Think again, economist Christopher Thornberg told an audience of business leaders at an Irvine chamber of commerce breakfast Thursday, Jan. 10.

"It's going to be a good year," the former UCLA professor of economics said. "Things are wonderful. You're going to have a great 2019."

Once an apostle of doom who predicted the 2007 housing meltdown, Thornberg continues to be optimistic about the current economic outlook.

Speaking at the Greater Irvine Chamber's Business Outlook, the founding partner of Beacon Economics said reasons for continued economic growth include:

* Consumer spending, consumer confidence and savings rates are strong.

* Auto production is ticking along at a nice, steady pace. General Motors' recent decision to cut jobs was a rational response to conditions, not an indicator of the health of the overall economy.

* Inflation is constrained, wages are rising and unemployment is low. "There are more job openings in the U.S. economy today than there are people actively looking for work," he said.

* Trade issues with Europe, Mexico and Canada are being resolved.

Thornberg had plenty of criticism of the Trump administration and congressional Republicans, calling the 2017 tax plan unneeded economic stimulus when there are more jobs than people to fill them. He also criticized President Donald Trump for an inaccurate obsession with trade deficits.

"A trade deficit is not driven by foreign trade barriers," he said. "A trade deficit is basically an imbalance between consumption and production in the economy. The U.S. is basically consuming more than it's producing."

But he nonetheless praised Trump for challenging China's trade practices, saying "I give Trump a lot of credit."

"Taking on China was something that somebody had to do," he said. " ... China doesn't play fair in the global trade sandbox. They do not. They don't allow other nations access to their economy the way they have access to (our) economies. There's obviously all the technological theft going on. There are all sorts of other things going on."

But the trade war will hurt China far more than the U.S., Thornberg said.

Only 7 percent of U.S. exports go to China, while 20 percent of manufactured imports come from China, he said.

"This is a scary time for China. Not so much for us," he said.

In California, the economy is booming. Yet, more people are leaving the state than are moving in from other states. The reason: A shortage of housing is driving up home prices. And the pace of homebuilding is little more than half of what's needed to meet demand.

"It's not an affordability conversation. It's a supply conversation," Thornberg said.

On the other hand, he noted, political uncertainty in Washington is undercutting the economic outlook and diverting the nation's attention away from such critical policy issues as upgrading the nation's infrastructure.

"We first have to get a proper sense of reality," Thornberg said.

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