President-elect Not Affecting Economic Outlook

President-elect Not Affecting Economic Outlook

Economists are not expecting a new president next year to have significant effects on the local or national economies and their outlook, according to presentations at the Little Rock Economic Briefing on Wednesday.

The event was hosted by the Little Rock branch of the Federal Reserve Bank of St. Louis and the Institute for Economic Advancement at the University of Arkansas at Little Rock.

“Next year, we will see what happens — it’s difficult to gauge economic effects of a new president before he is in office,” said Kevin Kliesen, business economist and research officer at the Federal Reserve Bank of St. Louis. “Our forecasts haven’t changed since the election.”

Michael Pakko, chief economist and state economic forecaster at the Institute for Economic Advancement at UALR, shared similar thoughts.

“I don’t think the outcome of the election is going to affect the economic outlook for the next few years in a serious way,” Pakko said.

Kliesen said that the country and Arkansas are “pretty much at full employment” and Pakko predicted a slight uptick in unemployment in Arkansas over the next few years, resulting in a 4.4 percent unemployment rate at the end of 2018. It currently sits at 4 percent.

Industries that have struggled to recover since the recession include housing, constructing and manufacturing.

Both Kliesen and Pakko also noted the likelihood of an interest rake hike in the near future. According to Kliesen, there is an estimated 94 percent probability of a rate increase in December.

However, Pakko said that it could be 2018 before the increase is significant enough to have a noticeable effect on the economy.

He said that over the last few years, home sales in Arkansas have been strong with an 8.7 percent increase in sales in 2016. He expects to see that trend continue in 2017 and drop off dramatically in 2018.

“We’ll have at least one more good year. But the future depends on interest and mortgage rates,” Pakko said.

He explained that impending higher rates would put pressure on homebuyers to act quickly in 2017 before rates begin to climb in 2018.

Overall, Kliesen predicted that the next three years would look very similar to the current U.S. economy: “more of the same unless something unexpected happens.”

He said the country’s unemployment rate would average around 4.75 percent and real GPD growth would average around 2 percent.

Pakko said in his presentation that he believes the Arkansas economy has an outlook similar to that of the entire U.S.

Charles Gascon, regional economist and senior research support coordinator at the Federal Reserve Bank of St. Louis, highlighted startups (0- to 5-year-old businesses) and how they propel the local economy.

In Arkansas, 10 percent of all jobs are at startups. He called them “the key to U.S. job creation and economic dynamism” because young businesses promote the most job growth.

According Gascon, startup firms are responsible for 73 percent of net job creation in Arkansas.