We are already a few months into 2019, and it is safe to declare that when it comes to the U.S. economy, the defining theme for this year is: volatility. Indeed, everything from a tense trade war with China, tariff battles with Canada, Mexico and the EU, to the Brexit fiasco — and the list goes on — portends that, as the saying goes: “we will live in interesting times.”
However, while the only certainty on the economic landscape is change, that does not mean we cannot make intelligent forecasts. According to Hyounsik Noh, a graduate student in Enterprise Risk Management at Columbia University, here are three predictions for the U.S. economy in 2019:
1. The Economy Will Slow Down, but Still Remain Strong
After growing at almost 4 percent in the middle of 2018, Gross Domestic Product in the U.S. slowed down to 2.6 percent in the final quarter of last year. While this is still safely above the 2 percent trendline, it does represent a slowdown that will bring some economic pain to certain areas, industries, businesses and workers.
Hyounsik Noh states that for the first time in nearly a decade, sales in both the automobile and housing industries have fallen. For housing, there could be a light at the end of the tunnel if this significantly pushes home prices downward, which in turn would lead to a spike in sales as people who have been waiting on the sidelines enter the market. For the auto industry, the future does not look as promising, at least in the near-term. Demand for U.S. cars is falling in China due to slowing GDP growth and the ongoing trade war. For example, because of sluggish demand for the Jeep Cherokee in China, in February Fiat Chrysler eliminated a third shift at its plant in Illinois and laid off 1500 autoworkers.
2. Wages Will Continue Rising — for Now
Facing a tight labor market, businesses will continue to raise wages in an effort to recruit and retain workers — especially skilled and specialized professionals in areas like healthcare analytics, information security, accounting, and solar power systems.
While a bigger paycheck is obviously good news for workers, it is also triggering valid inflation concerns that might convince the Federal Government to raise rates later in the year to cool things down. Hyounsik Noh explains that, rising labor costs are compelling some businesses to pass on the higher costs to their customers, which will adversely impact demand for their offerings — and in the big picture, their need for more workers, and possibly for existing workers.
3. Investments in Worker Productivity Will Increase
In 2018, businesses continued to dial up their spending on technology-led solutions that increase worker productivity, such as portfolio management software, collaborative work management platforms, hosted VoIP phone systems, and so on. In 2019, this investment should continue as businesses seek to become more agile and capable of responding to shift and shocks.
According to Hyounsik Noh, along with these technology investments, businesses will also allocate more resources and priority to training their workforce. This will be less of a challenge with millennials compared to older workers who may resist adopting new ways of working; at least, without having a clear sense that doing so will be fruitful instead of futile. It will be up to businesses to ensure they make the case for the former, or else the latter will be assumed.
Hyounsik Noh’s Final Thoughts
As previously mentioned, the only guarantee in the economic landscape is that it will change. The above are statistical predictions from Hyounsik Noh and are meant to educate readers on the potential outcomes of the 2019 U.S. economy. Various factors can change any of these predictions at anytime, it is impossible to guarantee the outcome of an economy.