Outlook for 2019 mostly strong with political concerns
If economists were delivering a weather forecast for the new year, it would be “Mostly sunny with a chance of sudden storms.”
In our region, the state and the entire nation, almost all the numbers are not just solid but impressive.
Nationwide unemployment for December was at an absurdly low level (3.9 percent), just slightly above a 49-year low of 3.7 percent in November. Statewide levels are the lowest ever recorded (3.7 percent). That’s astounding. It’s well below the 5 percent or so that essentially defines full employment, because there will always be some people or positions in search of a connection. Employers added a whopping total of 312,000 jobs in December. If you can’t get some kind of job now, you’re just not trying.
Production of oil and gas, particularly in Texas, is rocking along — as are exports of those same commodities. In fact, drilling has been so good that supply has exceeded demand lately, bringing a barrel of oil down to around $50, the profit-tipping point for most producers. Yet just a few years ago we worried about being held hostage by Mideast oil suppliers. That today seems like being worried about a shortage of disposable ink pens.
The chemical and plastics sector in our region is healthy, too. Sometimes, that aspect of our economy is up while oil and natural gas are down. Both are churning along with full shifts and lots of production orders.
Consumer confidence, the real driver of the national economy, remains strong. We just had the best Christmas in years — or decades. Many a retailer made enough in last December to hang on until next December.
Much of this happened on President Donald Trump’s watch, and he and the Republican Congress must be given credit for it, even if there are a few asterisks to consider.
The stock market surged after Trump was elected, when some frankly predicted a recession. The GOP corporate tax cut of 2017 fueled a lot of this growth (and federal deficits), and that got a lot of attention. Almost as influential but much quieter was the new drive to slash regulations that built up under President Barack Obama.
People who got hired in this boom appreciate the end of nitpicking red tape that interfered with company planning. On the other hand, it’s hard to defend relaxing rules on mercury pollution from smokestacks. With this president or any other, you get both sides of the coin.
The president doesn’t control our economy, but he is the most powerful person on earth. By word and deed, he can do a lot to fill in the low points and prolong the highs.
The trade war with China and other countries is a good example. Some of those nations were taking advantage of us through their own tariffs or by closing our markets to their consumers. They needed pushback — years ago — but it should have been measured and thoughtful. Trump clearly hasn’t taken that approach, but he still has a chance to notch a clear win on this crucial issue. China is signaling it will relent on tariffs but still wants to force American companies to give up their technology for the right to enter the Chinese market.
One option the president should consider is re-entering the Trans-Pacific Partnership he quickly withdrew from. That treaty can unite us and our Asian allies against China’s economic bullying. It would give us leverage in the current tariff battles and reopen our lucrative soybean exports to China.
NAFTA, at least, was renegotiated, though the new Congress must approve it, and that is by no means certain. Under NAFTA, Mexico became the biggest single export market for Texas. Let’s hope that continues.
Investors see all this, which is why the stock market has been bouncing up and down. In one recent 21-day period, the S&P 500 swung up or down by more than 2 percent in 15 of those days. That’s a textbook definition of “volatility.”
Businesses need stability to plan expansions, hire more people or look for export markets. They want to have some reasonable assurance that their considerable upfront investment will be covered by sales later. They’re afraid of being burned by a downturn or a tariff war. Yet if they remain too stable and cautious, they could be overtaken by bolder competitors.
This is the mixed outlook for 2019 — strong indicators across the board, yet nagging fears that a political tweet or threat could undermine everything. The best guess is that we’ll muddle through OK. Your 401(k) will continue to grow and your paychecks will keep coming every two weeks. In 2020 we may have to worry about a recession, but that’s 12 months away.
Look for Thomas Taschinger’s business column every Thursday.