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Despite a wild and unpredictable campaign season, three top economists predict a stable — and potentially positive — economic outlook for 2017 under Donald Trump, who will be sworn in as president in January.
Unemployment and inflation will likely remain stable, and any policy changes wouldn't have big effects until 2018, according to experts at the annual Economic Forecast Luncheon on Monday, sponsored by the W. P Carey School of Business at Arizona State University and JPMorgan Chase and Co.
James Bullard, president and CEO of the Federal Reserve Bank of St. Louis, predicted that the most immediate economic changes could be seen with Trump’s promises to deregulate businesses, spend billions on infrastructure and reform taxes.
“If you think there’s been over-regulation of unwarranted regulations, you could see improvements in productivity, but regulation is a vast area that covers many different aspects of how businesses operate,” he said to the 700 people who attended the 53rd annual luncheon in Phoenix.
“The U.S. growth rate is low, but it could be influenced by those policy changes.”
But Bullard said that changes in trade agreements or immigration policy would likely take much longer to have an effect on the American economy.
He also said he was not concerned about remarks Trump made during the campaign that called into question the credibility of the U.S. Federal Reserve, which sets monetary policy.
“Trump’s transition team has said they’ll respect the Fed, and I take them at their word that ultimately they will endorse the current Fed structure and that we’ll be able to continue to deliver good monetary policy under a new administration,” he said.
Another economic expert predicted that if Trump decreases the corporate tax rate, as he’s promised, it could drastically increase profits — though not right away. Anthony Chan, the chief economist for JP Morgan Chase and Co., said the current corporate tax rate is 35 percent — although the average rate that corporations actually pay is closer to 27 percent.
“If the corporate tax rate is lowered to 15 percent, it has the potential to boost corporate profits by 19 to 20 percent,” he said. “But I’ll be the first to tell you that it won’t happen in 2017.”
Chan also said that Trump’s plan to allow corporations to repatriate profits made abroad could potentially raise $160 billion in revenues, which could pay for his infrastructure plan.
“As investors it’s not our job to say ‘this is good or this is bad.’ It’s our job to set our portfolios to benefit from these things,” he said.
The outlook in Arizona is positive for next year — with some ominous long-term economic issues, according to Lee McPheters, research professor of economics in the W. P. Carey School of Business and director of the school's JPMorgan Chase Economic Outlook Center, which specializes in economic forecasts for Arizona and the Western states.
McPheters showed that of five economic indicator forecasts he made a year ago, three were better than predicted. There were 76,000 new jobs, compared with 68,000 predicted. The employment increase was more than expected — 2.9 percent increase in jobs compared with 2.6 percent predicted. And the unemployment rate was better than forecast — 5.2 percent compared with 5.8 percent.
The two indicators that were not better than McPheters predicted were population, which increased by 1.6 percent compared with the forecast 1.7 percent, and single-family housing permits, which increased 10 percent, not the 30 percent he forecast.
“If you look at Arizona’s numbers, we’re pretty certain as we wrap up 2016, we will definitely be in the top 10, and maybe the top 5, nationally for private job creation, and we expect that to continue in 2017,” he said.
Even with the positive projections, Arizona is below the national average in other measures of economic prosperity. The state ranks 42nd in per-capita income and 45th in poverty. The state also ranks last in per-student funding for universities.
“We need to look at policies that propel Arizona to look more like Colorado or our neighbors who have made the transition to using technology to increase income,” he said.
Top photo: James Bullard, president and CEO of the Federal Reserve Bank of St. Louis, predicted that the most immediate economic changes could be seen with Trump’s promises to deregulate businesses, spend billions on infrastructure and reform taxes. He spoke at the Economic Forecast Luncheon on Monday, sponsored by the W. P Carey School of Business at Arizona State University and JPMorgan Chase and Co. Photo by Charlie Leight/ASU Now.