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Economist offers positive financial forecast

Outlook: Recession risks should be contained through 2019

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While storm clouds have been a frequent site in the Queen City over the past couple weeks, a largely sunny national economic forecast was shared Aug. 22 before attendees at a Springfield Area Chamber of Commerce event.

Approximately 325 were in attendance at the chamber’s annual Economic Outlook event, held at University Plaza Hotel & Convention Center. Keynote speaker Kathleen Navin, an economist with St. Louis-based firm Macroeconomic Advisers LLC by IHS Markit, said the national economy is looking solid with projected gross domestic product growth of 3.2 percent for 2018 and an unemployment level currently at 3.9 percent.

Navin said her firm forecasts the GDP rate to decline in 2019 to 2.3 percent – still above the U.S. trend of 2 percent. But with factors such as the financial impact of President Donald Trump’s economic stimulus expected to end in 2020, and low interest rates continuing to rise, Navin said GDP may dip to 1.7 percent for that year.

Consumer spending has been a strong boost to the healthy GDP in recent years, Navin said, although the total has been less than in 2015 and 2016.

“It is moderating, but it does remain a very large contribution to GDP growth,” she said.

However, retail spending remains strong for 2018, as according to estimated retail sales data recently released by the U.S. Census Bureau, consumer spending increased by 6.4 percent year over year to $507.5 billion in July.

“With the above trend growth, what we expect to see is a further tightening of labor markets,” Navin said, which should result in a slight decline in the unemployment rate. By mid-2019, the firm predicts the unemployment rate will dip to 3.4 percent.

The Federal Reserve has raised interest rates twice this year, currently settled at 2 percent, Navin said. She expects two more hikes before year’s end – once in September and again in December, followed by three more forecasted increases in 2019.

The economic forecast conveyed at the event didn’t hold a lot of surprises for Tom Rankin, founder and owner of Rankin Development Co. However, the developer said getting to hear from economic experts is a great way to keep his ear to the ground to inform future business decisions.

“I need to know what the market is doing, and the more information I can gather, the better,” he said.

Navin’s presentation reinforced his belief that Springfield needs to bolster its workforce.

“It sounds like we need to keep cutting hay while the sun’s shining,” he said. “Clouds are on the horizon and it’s going to start raining in the next five years. It’s just a matter of how soon it’s going to happen.”

Workforce concerns, specifically worker shortage, is a common topic of discussion at various meetings and events attended by Robin Robeson, executive vice president and chief operating officer with Guaranty Bank. She was also in attendance at the chamber event and noted there aren’t currently enough new people coming into the workforce. She said that’s discouraging as someone with responsibility for hiring and retention.

Robeson said she was a little surprised that Navin listed current strong unemployment and income levels as a tailwind for economic growth.

“I guess I understand that, but it is a real concern to me because of what we’re seeing now with unemployment,” she said. “It’s just historically low and seems at an unsustainable level. If we can’t hire people, it’s going to be very hard to grow.”

She said the bank, like many employers, keeps its options open when it comes to hiring, be it interviewing people just out of college or those getting back into the workforce after a long break.

“At this point, we’ll talk to anyone,” Robeson said. “You just have to, there’s just not any choice.”

Navin, who holds bachelor’s and master’s degrees in economics from the University of Missouri-Columbia, has worked for Macroeconomic Advisers since 2010. In a Wall Street Journal survey of U.S. economists, Macroeconomic Advisers was ranked most accurate economic forecaster for 2017.

The chamber’s economic development subsidiary, Springfield Business Development Corp., organized the Economic Outlook event. It’s part of the chamber’s annual Outlook series, which continues Oct. 3 with the 2018 Education Outlook scheduled at White River Conference Center.

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