“I think we’re in the top of the ninth inning of the recovery from our recession to, you know, getting back on our feet,” economist Jim Glassman told a small gathering of business professionals Wednesday during an economic outlook luncheon sponsored by Chase and held at the Capital Hotel in Little Rock.
Glassman, managing director and head economist for Chase Commercial Banking, also said the equity market is doing better because “people are starting to recognize that, even though the U.S. economy has been very slow, we’re getting normal recovery. And we economists are beginning to say ‘forget about the slow growth; the economy has recovered.'”
The growth he is referring to is growth in GDP, which has been about 2 percent, whereas the pre-Recession norm was 3 percent or more. But all other indicators, such as employment, the labor market, stock market valuation, construction activity, fiscal budget trends and more “look pretty good,” Glassman said.
He also said economists have been slow to connect the dots and present the big picture because they aren’t used to considering the effect demographics has on the economy.
Glassman said the U.S. isn’t fully recovered because half of the approximately 3 million young people in their 20s and 30s who dropped out of the workforce to go back to the school during the recession haven’t re-entered it yet. They had family resources to help and decided that a four-year degree wasn’t sufficient, he said.
The result of that is that millennials are putting off life events like having children and buying houses, which is why the housing market was slow to recover, unlike in previous economic recoveries. And the official unemployment rate is not capturing the people who went back to school and aren’t actively looking for a job or people who are involuntarily working part time.
So the bar for how much the economy needs to grow to be on solid footing has been lowered, Glassman said.
He also acknowledged that the slow GDP growth has contributed to pessimism among economists, but he’s optimistic about the the coming years. Glassman expects the economy to continue expanding into “extra innings” and doesn’t see any “red flags” that indicate he should be cautious.
He said this is the country’s third-longest running period of economic expansion; and it’s on the right course to become the longest-running.
Glassman also balked at those who seem to think it’s about time for another downturn, based on previous economic cycles when the U.S. hit full employment and didn’t stay there.
He doesn’t think time is a factor in that, but things that traditionally happen, like inflation, are.
Glassman said inflation isn’t a problem now.
He also said the Fed must feel the same way about these trends as he does, since the Fed’s plan is to gradually get its balance sheet down over the next four years.
The economist also said there has been a lot of political rhetoric pitting globalism against nationalism and pushing for anti-trade and protectionism. But he doesn’t expect that rhetoric to go anywhere because the reality is that the U.S. economy wouldn’t benefit from shutting doors to opportunity.
Glassman explained that part of the reason for this rhetoric is people don’t understand the trade deficit. “A lot of people think that, when you have a trade deficit, it’s because others are taking advantage of you.” But what the trade deficit does is reflect a world out of balance; rich countries that trade with poor countries will buy more from the poor countries than the poor countries will buy from them, but that trade means poor countries are developing and that leads to growth in consumer markets.
Glassman added that another factor in looking at the economy is noting that some things that are happening may not yet be showing up in official figures. Those things include the effect of new kinds of companies like Amazon, Airbnb and Uber and even what people do with free apps on their phones that are making money from advertisements. The phone app activities, for instance, are not counted in GDP, he said.