A growing number of American economists are bullish about growth in the coming year.
The National Association for Business Economics said in a survey released Monday that 67% of respondents expect America’s gross domestic product – the most complete measure of the nation’s economy – to grow by 1.1% to 2% this year. A growing number of respondents (30%, compared to 20% in October) expect even higher growth of up to 3%.
The survey of 97 NABE members about US business conditions was conducted in late December and early January, when several economic bright signs became apparent, said Ken Simonson, chief economist for the Associated General Contractors of America and a NABE spokesperson. The United States, Mexico and Canada neared completion on a trade agreement, and the stock market closed out the year on a high note, and the Federal Reserve has kept interest rates low, he said.
The survey took place before the United States and China signed a preliminary trade agreement, but the deal had been telegraphed for quite some time.
Fears of a recession have abated and businesses are confident about the health of the US economy.
“The fact that they think their companies will do better, that will certainly contribute to a higher GDP,” Simonson said. “If they think the overall economy is on its way up, and presumably, they’re going to see more sales in their companies and they’ll want to hire more people.”
Jobs, jobs, jobs
The survey comes amid record low unemployment and strong consumer confidence. Wages and salaries grew in the fourth quarter of last year, after a dip in previous months.
But, for the first time in a decade, hiring was flat in the fourth quarter. While companies continued to hire more in the finance, insurance and real estate, hiring decreased in the transportation and communications industries.
That’s not necessarily a reason to panic, though: Hiring has become more difficult as the number of available jobs is larger than the number of people seeking employment.
“This may have been due to difficulty finding workers rather than a pullback in demand,” said Megan Greene, NABE business conditions survey chair and senior fellow at the Harvard Kennedy School.
Expectations for job growth were much higher in the most recent survey compared to the last one. Twenty-seven percent of economists expect hiring to increase in 2020, compared to just 19% in the last survey.
Last October, the US unemployment rate dropped to its lowest point since 1969. And the job market is strong: There are more job openings than there are unemployed people searching for a job. Payroll employment growth is up, according to the Bureau of Labor Statistics.
Tariffs on imported goods and retaliation by US trading partners like China created problems for American manufacturers. While 61% of businesses said they were unaffected by tariffs in 2019, some industries were hit harder than others by tariffs, the NABE survey found. A majority of companies in manufacturing, mining and farming reported that tariffs had driven up costs and 41% said it had led to negative sales, the survey said.
Manufacturing, mining, agriculture and fishing companies also reported falling profit margins. The finance, insurance and real estate industries said that profit margins were on the rise overall.
Meanwhile, as companies incorporate more advanced technology, including AI, online shopping and cloud services, they are divided on how these tools will impact their bottom line. While 38% of businesses surveyed said they expected no significant impact, 26% think sales will increase and 23% think costs will drop.