While America’s economy—or Gross Domestic Product (GDP)—grew at a rate of only 2.3% in 2019 versus the 3% standard, 2.1 million new jobs were created in the past 12 months, the nation’s unemployment rate of 3.5% fell historically low and energy prices (oil and natural gas) remained well below their historical norms.
That was among the financial data shared with some 300 businesspeople and 40 exhibitors representing Elmhurst and 16 other west suburban chambers of commerce at the 18th Annual Economic Outlook Luncheon held at Ashyana Banquets in Downers Grove on February 7.
William A. Strauss, Senior Economist and Economic Advisor in the Economic Research Department at the Federal Reserve Bank of Chicago, deliver the event’s Keynote Address for the 13th and final time, in advance of his pending retirement this spring.
Strauss assured attendees that there are no indicators of a downturn in America’s $20 trillion economy, or of any pending “negative economic shock” that typically provides the financial impetus for a recession.
The U.S. Stock Market continues to produce record highs, despite regular volatility.
Quoting 1961 Nobel-winning Keynesian economist Paul Samuelson, Strauss quipped that “the Stock Market has predicted nine of the past five recessions.”
Since the end of the “Great Recession”—which ran from December of 2007 through June of 2009—America’s economy has generated average GDP growth of 2.3% over the past 11 years since (a growth span “unprecedented” since the end of World War II) and remains more stable than any other country. Comparatively, the GDP growth rate hit 4.4% and 4.3% following the recessions of 1981-82 and 1974-75, respectively.
Only China (6.1%) and India (5.4%) reported higher GDPs in 2019 than the United States.
The Fed forecasts GDP growth at 1.8% to 2.0% for 2020, 2021 and 2022.
Two major factors that drive GDP—labor force growth and productivity gain—remained relatively static. The labor force had no growth due to a slow population growth and low immigration, while productivity (as a result of better equipment, improved processes, greater capital investment or a more-skilled workforce) increased only 1%.
U.S. manufacturing and labor took a dip in 2019, with the Midwest economy feeling the pinch despite major Illinois contributors such as John Deere and Caterpillar.
The extended tariff conflict with China and the renegotiation of the foreign trade agreement with Mexico and Canada (USMCA)—Illinois’ two largest trade partners—forced some manufacturers to scale back on their operations.
With the tariffs implemented in 2018, the U.S. ranks eighth in the world behind Korea, Brazil, India, Saudi Arabia, Mexico, Russia and China, and just ahead of Turkey and Indonesia. If all of the proposed 2019 tariffs were put in effect, the U.S. would rank No. 1 worldwide.
While Americans are driving vehicles that average 11 years old, auto manufacturers lowered production to 16 million vehicles, with General Motors (GM) weathering a five-week walkout by the 48,000 United Auto Workers (UAW) union members at 50 plants ending in late October.
The auto industry sold 17 million vehicles in 2019, with light truck sales up 2.4% and now accounting for three-fourths of the market. Sedan sales dropped by 10.7%. Alternative-power vehicles (hybrid, electric, etc.) remained less than 5% of total sales.
The nation’s year-end unemployment rate dropped to lowest level since 1969, while the State of Illinois fell to 3.9%, including DuPage County’s low of 2.5%. Unemployment among African Americans and Hispanic Americans also hit record lows. The Federal Open Market Committee (FOMC) projects unemployment rates to tick up to 3.7% in 2020, 3.9% in 2021 and 4% in 2022.
The Consumer Price Index (CPI) rose to 2.3% in 2019, remaining below its historical norms.
After raising its lending rate by .25% in December of 2018, the Fed lowered the rate three times totaling three-quarters of 1% in 2019.
Housing starts totaled 1.298 million in 2019 and are projected at 1.306 million in 2020 and 1.323 million in 2021, all of which are still below the historical norms of 1.4 to 1.5 million.
Businesses and consumers have benefitted from relatively-low oil and natural gas costs, with the U.S. become a net exporter of energy for the first time in history, rivaling Saudi Arabia in crude oil and Russia in natural gas.