Page 7 - ISQ UK JANUARY 2020

JANUARY 2020

2020 Economic Outlook:

US Offers Stability with a Chance of Slowdown

Scott J. Brown, PhD, Chief Economist, Raymond James

The US economy is expected to expand moderately in
2020. Many of the 2019 uncertainties seem likely to Trade policy uncertainty and slower global growth,
continue into the first half of the year, but the downside the two negative factors most often cited across
risks to the growth outlook appear to be less worrisome manufacturing industries, may continue.
than they did in the summer. Consumer spending is likely
to grow at a moderate pace, supported by job gains and
wage growth, but limited by slower growth in the labour Tight labour markets have led to upward pressure on wages.
force. Business fixed investment is likely to be mixed and Over the years, reduced union membership and a greater
concentration of large firms have shifted wage bargaining
somewhat restrained, but we ought to see some general
power from workers to businesses. Skilled labour shortages
improvement. Federal Reserve (Fed) policy is expected to have boosted wage gains for key employees, but firms have
remain on hold until we get a material change in the also used non-wage incentives to attract and retain workers,
economic outlook. including signing bonuses and offering more vacation and
other perks. Cost containment remains a key theme for
Job growth, while uneven, slowed in 2019, reflecting a tighter job corporate America.
market. Firms continue to report difficulties in finding skilled
workers. The unemployment rate fell to a 50-year low. HEADWINDS ON THE HORIZON
Demographic changes (an aging population, slower growth in Business fixed investment weakened in 2019. Corporate tax
the working-age population, reduced immigration) imply that cuts failed to deliver as advertised, and economists were
the workforce will grow at about 0.5% per year over the next ten surprised by the degree of the shortfall in business investment.
years, slower than in previous decades. Workers are also A decrease in energy exploration and problems at Boeing
consumers, so the potential upside on consumer spending restrained capital spending in 2019 and the halt in the
growth is likely to be limited (labour force growth of 0.5% plus production of the 737 Max will be a drag in the first half of 2020.
productivity growth of 1.0-1.5% gets you a potential GDP growth Trade policy uncertainty and slower global growth, the two
rate of 1.5-2.0%).

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