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San Antonio 2018 Economic Forecast

I had the pleasure and honor of being on a panel at an event this past Friday hosted by Texas CEO Magazine in partnership with the Bill Greehey School of Business at St. Mary’s University in which I presented my economic forecast for the San Antonio economy in 2018.

The presentation can be found here.

Employment growth in San Antonio remains healthy but has been slowing a bit over the past twelve months, which follows a similar pattern to the other major metropolitan economies across the state through August. Given the length of the economic expansion, growth rates have regressed toward the long-term average. The unemployment rate in San Antonio is still quite low at 4.1% in August, but it has started to tick up over the past year.

Again, a similar pattern is occurring across the other major metropolitan areas, too. We are at the point in this phase of expansion where the economy is at or very near full employment, so growth is going to be driven by population growth and/or growth in productivity, so it is difficult to see that growth will be much greater than average, if it is at all in 2018. For next year, I believe we continue to see growth in San Antonio with employment increasing in the range 2.25-2.50%, which is around the historical average growth rate of 2.43%. I project that the unemployment rate in 2018 will probably be in the range of 4.00-4.25% in San Antonio in 2018.

You will also see in the slides that I think we need to consider the possibility of the U.S. economy going into recession in the next two to three years. This is simply due to the fact that the current expansion is already 100 months old, which makes it the third longest in history. If growth continues over the next two to three years, it will become the longest expansion in history.

If we learned anything in the last recession, it is that growth does not go on forever. The expansion is long in the tooth. As already mentioned, growth in the foreseeable future is going to come from population growth and/or higher levels of productivity. Given the trends in demographics with the aging baby boomer generation and limitations being put on immigration, it is difficult to see where the population growth is going to come from in the next few years. Boosts in productivity are, in part, going to be driven by technological change, and while that is exceedingly difficult to forecast, it is hard to envision from where the boost in productivity will come in the near future. With this in mind, it seems that the odds are pretty high that the economy will run out of steam within the next two to three years.

Of course, all of this is contingent on various risks, and the biggest risk I see at this point is political risk. The national and global political situation has injected a massive amount of uncertainty into the business and economic environment. This, in and of itself, can be a deterrent to economic growth, but it certainly makes economic forecasts more difficult.

Steve

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Economic Scholars Program

I was fortunate enough to be able to attend the Economic Scholars Program at the Federal Reserve Bank of Dallas a couple of weeks ago. It was such a wonderful conference that I felt compelled to post something on the blog about it.

The really cool thing about the conference is that it is run entirely by undergraduate students. This means that the students review the papers for acceptance into the conference, present their research in the sessions, serve as discussants of the papers, and chair each of the sessions. Of course, there are faculty in attendance, but we were there as much for moral support as anything (and also because of the small detail that our universities and colleges required a faculty member to attend with their respective students). The faculty would ask some questions, but probably 95% or more of the questions came from students. And the questions they asked were outstanding, as were the responses to their questions.

Since coming back to St. Mary’s University where I teach, I have told my students that this was the best academic conference I have attended. I have certainly been to professional conferences where the quality of some of the papers was not nearly as high, the discussants were not nearly as prepared, and it was not run as well as this one was.

I should also mention that there was also a poster session that was very highly attended. They served food during the session, so when I walked into the room, I expected to see most of the students hovering around the food because what college students doesn’t want to indulge in good food (and the food at the Fed is always exceptional). However, I saw just the opposite. The students surely ate well, but they were all engaged around the various posters talking about the research that was being presented. They were very, very engaged.  As a professor, it was awesome to observe.

It was such a great experience for the students, and if you are a college professor in economics or other social sciences, I would highly encourage you to consider taking your students to this conference.

The conference is co-hosted by the Federal Reserve Bank of Dallas and Austin College – my alma mater (he states with great pride). The hospitality provided by the Fed staff was amazing. I greatly appreciate all of the effort that the Fed staff and faculty at Austin College put forth to organize and host this conference.

On a personal note, the faculty member from Austin College who was responsible for their part of the organization effort, Danny Nuckols, was my mentor and main economics professor when I was at AC. It was his passion, keen insights, and encouragement, along with being one of the best professors I have ever had, that lead me to follow in his footsteps and become an economics professor.

As always, it was great to see him, but to add to that, I also got to meet two more of his former students who also went onto to become economics professors. One is at the University of Texas at Arlington and the other one is at the University of North Carolina at Greensboro. It is common for great coaches to develop a coaching “tree” as their assistant coaches branch off to assume head coaching positions at other teams. I guess the same is true with great professors like Danny Nuckols.

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Danny Nuckols, (second from left) and three branches of his professor tree. 
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Economic Growth by Presidential Administration

A couple of weeks ago I gave a speech in which I anticipated that the audience would like to have some discussion about the potential economic effects of the upcoming presidential election in the U.S.

To support the discussion, I worked with one of our economics students at St. Mary’s  University to create a chart showing the growth in gross domestic product for the U.S. by presidential administration.

growth-by-presidential-administration

As shown in the graph, GDP growth during Democratic administrations averaged 4.13% and during the Republican administrations, growth averaged 1.77% if you include the Great Depression and 2.72% if you do not include the Great Depression. Without going into more in-depth analysis, it is difficult to make too much of these numbers. I do not think it is correct to just attribute strong or weak growth only to the policies passed during any of these administrations. They can certainly have effects on the economy during their times in office, but the strength or weakness of the economy during most presidential administrations is often due to some extent to the policies implemented well before a president takes office.

For example, some of President Hoover’s policies certainly made the Great Depression worse, but I do not think one can attribute the entire Depression to him. President Roosevelt was the beneficiary of the growth after the Great Depression, the massive amount of spending during World War II, and the fact that he was in office for twelve years. President Obama took office as the economy was at or near the depths of the Great Recession, the cause of which I would attribute to policies implemented by Presidents Reagan, Clinton and Bush 43.

There are other studies that go into more depth on growth during the presidential administrations that I may write about in future blog posts. As previously mentioned, while it is difficult to say much about growth during specific presidential administrations based only on the data presented in this chart, there is one fact worth noting. I hear quite a bit that the economy slows or even goes into recession during Democratic administrations, but as shown in the graph, that is clearly not the case.

In fact, it is just the opposite.

 

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