The state of the U.S. economy is solid and likely to get stronger this year because of the new federal tax law, which will reduce taxes on corporate profits and start boosting paychecks for many Americans this month.
But the current economic expansion, which has produced record highs in the stock market over the last year, did not start when President Donald Trump was elected in 2016, despite the president’s assertion.
The expansion actually started in 2009. And by this spring it could be the second-longest period of economic growth, said Gus Faucher, chief economist at PNC Financial Services Group.
“I don’t think we can say this is the Obama or Trump economy,” he said. “This is the economy. I see a balanced and stable economy.”
Faucher, who will be in the Harrisburg area next week to address the Harrisburg Regional Chamber and Capital Region Economic Development Corp.’s economist forecast, said it’s possible this period of economic expansion may actually end up breaking the record of 120 months by the middle of next year.
He is confident that growth will continue through at least the end of 2018. Real gross domestic product growth, which was 2.3 percent last year, is expected to accelerate to 2.7 percent this year, according to PNC’s most recent forecast. Real GDP grew by 1.6 percent in 2016.
“I think the growth from the boost of the tax cuts will provide support to business investments and consumer spending,” Faucher said.
Faucher and his team expect to see businesses invest more in job and wage growth, at least in the near term, because of the tax cuts.
Since the tax law was passed at the end of last year, many big corporations have been providing bonuses to employees. Companies also are using the tax cuts as a way to fund higher dividend payments and stock buybacks to boost share prices.
There is concern that top Trump priorities, including proposals to add new restrictions on immigration, could weaken population growth. That could hurt businesses looking to add more workers.
Many companies, including those in construction-related fields, already are struggling to find enough skilled workers to expand operations to meet current project demand and start replacing older workers who will be retiring in the coming years.
Faucher said a more aggressive stance by the U.S. on trade deals, another Trump agenda item, could also hurt local exports over the long run.
However, Central Pennsylvania should expect to continued growth in warehouse and distribution center development, he said. Because of its highway network and close proximity to many major metropolitan areas, the midstate has long benefited from industrial development to serve growing online sales.
The health care sector also should continue to expand here because of an aging population and growth of large regional health systems, Faucher said. And the housing market remains steady with low interest rates and rising home prices, which has spurred new construction.
The chamber’s economist forecast will be held Tuesday at the Sheraton Harrisburg-Hershey in Swatara Township.