The stock market’s recent pullback is not a sign of problems in the economy or that a recession looms around the corner, according to the chief economist at PNC Financial Services Group.
Far from it, said Gus Faucher, who spoke Tuesday at the Harrisburg Regional Chamber and Capital Region Economic Development Corp.’s annual economist forecast.
After soaring to record highs, the financial markets were due for a correction, he said. “It’s not a signal of broader problems.”
Other indicators, he said, such an improving labor market and greater consumer confidence, reflect a still-growing economy.
The stock market has remained volatile this week following big declines on Friday and Monday, including a more than 1,100-point drop Monday by the Dow Jones industrial average.
Faucher said the market is retreating to where it was in December. He expects economic expansion to continue at least through the end of this year and maybe well into 2019.
The recent federal tax reforms, which passed before the New Year and helped propel the higher stock prices, will be a major factor for the growth in the economy, he said.
Faucher told the Business Journal last week that tax cuts will provide support to business investments and consumer spending.
He expects to see businesses invest more in job and wage growth, at least in the near term, because of the tax cuts.
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.
In addition to higher consumer and business spending, Faucher said a growing global economy and a weaker U.S. dollar will help boost U.S. exports, which will help add more jobs.
The housing market also should see greater activity.
However, there is concern that top Trump priorities, including proposals to add new restrictions on immigration, could weaken population growth, Faucher said. That could hurt businesses looking to add workers.
Many companies, including those in construction-related fields, already are struggling to find enough skilled workers to expand operations and start replacing older workers who will be retiring in the coming years.