STOCKTON — It’s the question that’s been on a lot of minds lately: How will the new tax law impact me? That question and others were answered Jan. 4 at a forecasting conference.
The San Joaquin County Hispanic Chamber of Commerce Business Forecast Conference highlighted the national and local economies, and took at look at how new laws can affect businesses throughout California in the year to come.
“Not every year has been good news … but this year I think you’ll be pleased to learn a lot of charts look a lot better this year,” said Scott Anderson, PhD, chief economist for Bank of the West.
Anderson took an informal poll by show of hands to see how many people felt good about their economic outlook for the year. A majority of the audience raised their hands. “That’s reflected in some of these charts you’re going to see today,” he said.
The national economy is showing less of an impact due to the political uncertainty in Washington, D.C., Anderson said. Last year proved to be a year of continued economic growth; the stock market was up by 20 percent; job growth was around 2.1 million (with an additional 1.9 million jobs forecasted to be added in 2018); and people, as previously shown, were feeling better about the future of the economy.
Though the outlook is positive, that’s mainly in the short-term. The tax reform will provide some relief for the next couple years, but, ultimately, will drive up interest rates, inflation and the national debt will increase by some $1.5 trillion.
“We are going to get a bit of a sugar high from this tax reform … in 2018,” Anderson said. “The potential downsides are higher interest rates, higher inflation and the possibility that if we do get into trouble, we won’t have as much leeway in terms of our fiscal situation.”
Jobless claims, Anderson showed, were at the lowest level since 1973. The jobs growth rate will continue to slow, as a cap of open positions is reached.
Anderson said the real change is coming from the goods producing side of the economy. Many of the jobs are coming from the manufacturing and construction industries.
But what goes up, must, eventually come down.
“We’re in rarefied air. We’ve only been in this situation two times before,” Anderson said of the booming economy. Those two times were followed by the Great Depression and the Great Recession.
Co-presenter Jeffrey Michael, PhD, director of the Center for Business and Policy Research, University of the Pacific, echoed Anderson’s sentiments of the impact of the tax reform.
Michael said that California’s growth rate has slowed down in part due to the Bay Area job market constraints.
“The Bay Area is running out of resources,” Michael said. Namely, people. The labor force is growing faster than the population, and how the Bay Area goes, so goes the rest of the state. Amazon’s distribution and fulfillment centers are changing the face of retail throughout the Central Valley and the rest of the state.
“By the end of 2019, I wouldn’t be surprised if we were facing another downturn in the economy. Luckily, this is only a 2018 outlook, so I don’t have to go that far out,” Anderson said.
Pick up the February issue of the Central Valley Business Journal to read more.